<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 15, 1999
REGISTRATION STATEMENT NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
HERMES EUROPE RAILTEL B.V.
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
THE NETHERLANDS 4813 NONE
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
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TERHULPSESTEENWEG 6A
1560 HOEILAART,
BELGIUM
(32-2) 658-5200
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------------
CT CORPORATION SYSTEM
1633 BROADWAY
NEW YORK, NY 10019
(212) 664-1666
(Address, including zip code, and telephone number, including area code, of
agent for process)
---------------------
with copies to
JOHN D. MORRISON
SHEARMAN & STERLING
599 LEXINGTON AVENUE
NEW YORK, NY 10022
(212) 848-4000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------
10 3/8% Senior Notes due 2009... $200,000,000 100% $200,000,000 $55,600
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10 3/8% Senior Notes due 2006... E85,000,000 100% E85,000,000 $27,288
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</TABLE>
THIS REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THE PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT
SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION DATED JANUARY 15, 1999
[HERMES EUROPE RAILTEL LOGO]
[HERMES EUROPE RAILTEL LOGO]
OFFER TO EXCHANGE
ANY AND ALL OUTSTANDING
10 3/8% SENIOR NOTES DUE 2009
($200,000,000 AGGREGATE PRINCIPAL AMOUNT OUTSTANDING)
FOR
10 3/8% SENIOR NOTES DUE 2009
AND
10 3/8% SENIOR NOTES DUE 2006
(E85,000,000 AGGREGATE PRINCIPAL AMOUNT OUTSTANDING)
FOR
10 3/8% SENIOR NOTES DUE 2006
OF
HERMES EUROPE RAILTEL B.V.
TERMS OF EXCHANGE OFFER
- - Expires 5:00 p.m., New York City time, , 1999, unless
extended
- - Not subject to any other condition other than that the Exchange Offer does not
violate applicable law or any applicable interpretation of the Staff of the
Securities and Exchange Commission
- - All outstanding notes that are validly tendered and not validly withdrawn will
be exchanged
- - Tenders of outstanding notes may be withdrawn by you any time prior to 5:00
p.m., New York City time, in the case of dollar notes and 5:00 p.m., London
time, in the case of euro notes, on the date of the expiration of the Exchange
Offer
- - The exchange of notes will not be a taxable exchange for U.S. federal income
tax purposes
- - We will not receive any proceeds from the Exchange Offer
- - The terms of the exchange notes to be issued are substantially similar to the
outstanding notes, except for transfer restrictions and registration rights
relating to the outstanding notes
- - We intend to list the exchange notes on the Luxembourg Stock Exchange
---------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE NOTES TO BE DISTRIBUTED IN THE
EXCHANGE OFFER, NOR HAVE ANY OF THESE ORGANIZATIONS DETERMINED THAT THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is , 1999.
<PAGE> 3
The Exchange Offer is not being made to, nor will the Company accept
surrenders of or exchange from, holders of Outstanding Notes in any jurisdiction
in which the Exchange Offer or the acceptance thereof would not be in compliance
with the securities or blue sky laws of such jurisdiction.
No dealer, salesperson or other individual has been authorized to give any
information or make any representation not contained in this prospectus in
connection with the offering covered by this prospectus. If given or made, such
information or representation must not be relied upon as having been authorized
by the Company. This prospectus does not constitute an offer or a solicitation
in any jurisdiction where, or to any person to whom, it is unlawful to make such
offer or solicitation. Neither the delivery of this prospectus, nor any
distribution of securities made hereunder shall under any circumstances, create
any implication that there has not been any change in the facts set forth in
this prospectus or in the affairs of the Company since the date hereof.
The securities may not be offered or sold in or into the United Kingdom
except in circumstances that do not constitute an offer to the public within the
meaning of the Public Offers of Securities Regulation 1995. All applicable
provisions of the Financial Services Act 1986 must be complied with in respect
of anything done in relation to securities in, from or otherwise involving the
United Kingdom.
Exchange Notes may not be offered in the Netherlands or elsewhere to the
account of any person or entity other than to persons or entities who or which
trade or invest in notes in the conduct of a profession or business within the
meaning of the Securities Transactions Supervision Act 1995 (Wet Toezicht
Effectenverkeer 1995) and its implementing regulations (which includes banks,
investment banks, brokers, dealers, pension funds, insurance companies,
securities firms, investment institutions, other institutional investors, and
other parties including inter alia treasuries and finance companies of large
enterprises which regularly, as an ancillary activity, trade or invest in
securities).
The Company, having made all reasonable inquiries, confirms that this
prospectus contains all information which is material in the context of the
exchange of the Notes, that the information contained herein is true and
accurate in all material respects and is not misleading in any material respect,
that the opinions and intentions expressed herein are honestly held and that
there are no other facts the omission of which would make any of such
information or the expression of any such opinions or intentions misleading in
any material respect. The Company accepts responsibility accordingly.
iii
<PAGE> 4
TABLE OF CONTENTS
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PAGE
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<S> <C>
Where You Can Find More Information......................... iv
Incorporation of Certain Documents by Reference............. v
Service of Process and Enforceability of Civil
Liabilities............................................... vi
Disclosure Regarding Forward-Looking Statements............. vi
Certain Definitions and Presentation of Information......... vii
Summary..................................................... 1
Risk Factors................................................ 13
Use of Proceeds............................................. 23
The Exchange Offer.......................................... 23
Capitalization.............................................. 32
Selected Consolidated Financial Data........................ 33
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 34
Business.................................................... 39
Licenses and Regulatory Issues.............................. 48
Management.................................................. 53
Security Ownership of Principal Shareholders and
Management................................................ 61
Certain Relationships and Related Transactions.............. 62
Description of the Exchange Notes........................... 63
Certain Tax Considerations.................................. 95
Plan of Distribution........................................ 100
Legal Matters............................................... 101
Independent Auditors........................................ 101
General Listing Information................................. 101
Glossary.................................................... 103
Index to Financial Statements............................... F-1
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WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). As a result, we file periodic
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). You may read and copy reports, proxy statements
and other information we file at the public reference facilities maintained by
the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549 and at the regional offices of the Commission located at
7 World Trade Center, 13th Floor, New York, New York 10048 and Suite 1400,
Northwestern Atrium Center, 14th Floor, 500 West Madison Street, Chicago,
Illinois 60661. Please call the Commission at 1-800-SEC-0330 for further
information on the public reference facilities. Copies of documents we file can
also be obtained at prescribed rates by writing to the Commission, Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549. You may also
access this information electronically through the Commission's web page on the
Internet at http://www.sec.gov. This web cite contains reports, proxy statements
and other information regarding registrants such as ourselves that have filed
electronically with the Commission. Our Common Stock is listed on the Nasdaq
National Market. As a result, you can also read and copy information we file at
the offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.
This Prospectus constitutes a part of a registration statement (the
"Registration Statement") filed by us with the Commission under the Securities
Act of 1933, as amended (the "Securities Act"). As permitted by the rules and
regulations of the Commission, this Prospectus does not contain all of the
information contained in the Registration Statement and the exhibits and
schedules thereto. Therefore, we make in this Prospectus reference to the
Registration Statement and to the exhibits and schedules thereto. For further
information about us and about the securities we hereby offer, you should
consult the Registration Statement and the
iv
<PAGE> 5
exhibits and schedules thereto. You should be aware that statements contained in
this Prospectus concerning the provisions of any documents filed as an exhibit
to the Registration Statement or otherwise filed with the Commission are not
necessarily complete, and in each instance reference is made to the copy of such
document so filed. Each such statement is qualified in its entirety by such
reference.
The indentures governing the Outstanding Notes provide that we will furnish
to the holders of the notes copies of the periodic reports required to be filed
with the Commission under the Exchange Act. Even if we are not subject to the
periodic reporting and informational requirements of the Exchange Act, we will
make such filings to the extent that such filings are accepted by the
Commission. We will make these filings regardless of whether we have a class of
securities registered under the Exchange Act. Furthermore, we will provide the
Trustee for the notes and the holders of the notes within 15 days after such
filings with annual reports containing the information required to be contained
in Form 10-K, and quarterly reports containing the information required to be
contained in Form 10-Q promulgated by the Exchange Act. From time to time, we
will also provide such other information as is required to be contained in Form
8-K promulgated by the Exchange Act. If the filing of such information is not
accepted by the Commission or is prohibited by the Exchange Act, we will then
provide promptly upon written request, and at our cost, copies of such reports
to prospective purchasers of the notes.
---------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows us to incorporate by reference the information we
file with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this Prospectus, and information that we file later
with the Commission will automatically update and supersede this information. We
incorporate by reference into this Prospectus the following documents or
information filed with the Commission (File No. 333-37719):
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, filed with the Commission on March 15, 1998.
(b) the Company's Quarterly Reports on Form 10-Q for the fiscal
quarter ended March 31, 1998, filed with the Commission on June 15, 1998,
the quarter ended June 30, 1998, filed with the Commission on August 14,
1998, and the quarter ended September 30, 1998, filed with the Commission
on November 16, 1998, as amended by the amendment to the 3rd Quarter 10-Q
filed with the Commission on December 14, 1998.
(c) the Company's Current Report on Form 8-K filed on July 7, as
amended on September 8, 1998.
(d) all documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the
Registration Statement of which this Prospectus is part and prior to the
effectiveness thereof or subsequent to the date of this Prospectus and
prior to the termination of the offering made hereby.
As noted above, any statement contained in this Prospectus, or in any
documents incorporated or deemed to be incorporated by reference in this
Prospectus shall be deemed to be modified or superseded for the purpose of this
Prospectus to the extent that a subsequent statement contained in this
Prospectus or in any subsequently filed document which also is or is deemed to
be incorporated by reference in this Prospectus modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE UPON
WRITTEN OR ORAL REQUEST FROM FRANCOIS NOTE, CORPORATE FINANCIAL
DIRECTOR -- CHIEF FINANCIAL OFFICER OF THE COMPANY AT THE COMPANY'S PRINCIPAL
EXECUTIVE OFFICES LOCATED AT TERHULPSESTEENWEG 6A, 1560 HOEILAART, BELGIUM,
TELEPHONE NUMBER (011) (32-2) 658-5200.
v
<PAGE> 6
SERVICE OF PROCESS AND
ENFORCEABILITY OF CIVIL LIABILITIES
We are a Netherlands company and substantially all of our assets are
located outside the United States. In addition, certain members of our
Management and Supervisory Boards are residents of countries other than 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 to enforce
against such persons or us judgments of courts of the United States predicated
upon civil liabilities under the United States federal securities laws. We have
been advised by its Netherlands counsel, Loeff Clays Verbeke, that since there
is no treaty between the United States and the Netherlands providing for the
reciprocal recognition and enforcement of judgments, United States judgments are
not enforceable in the Netherlands. However, a final judgment for the payment of
money obtained in a United States court, which is not subject to appeal or any
other means of contestation and is enforceable in the United States, would in
principle be upheld by a Netherlands court of competent jurisdiction when asked
to render a judgment in accordance with such final judgment by a United States
court, without substantive re-examination of the merits of the subject matter
thereof; provided that such judgment has been rendered by a court of competent
jurisdiction, in accordance with rules of proper procedure, that it has not been
rendered in proceedings of a penal or revenue nature and that its content and
possible enforcement are not contrary to public policy or public order of the
Netherlands. Notwithstanding the foregoing, there can be no assurance that
United States investors will be able to enforce against us, or members of our
Management or Supervisory Boards, or certain experts named herein who are
residents of the Netherlands or other countries outside the United States, any
judgments in civil and commercial matters, including judgments under the federal
securities laws. In addition, there is doubt as to whether a Netherlands court
would impose civil liability on us or on the members of our Management or
Supervisory Boards in an original action predicated solely upon the federal
securities laws of the United States brought in a court of competent
jurisdiction in the Netherlands against us or such members.
---------------------
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties, and assumptions about us, including, among other things:
- Our anticipated expansion plans for our network and growth strategies,
- Our expectation of the impact of this expansion on our revenue potential,
cost basis and margins,
- Our expectation of the competitiveness of our services,
- Anticipated trends and conditions in our industry, and
- Our ability to compete, including internationally.
In light of these risks, uncertainties, and assumptions, the
forward-looking events discussed in this Prospectus might not occur. We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
vi
<PAGE> 7
CERTAIN DEFINITIONS AND PRESENTATION OF INFORMATION
As used in this Prospectus, "HER", the "Company" or "we" means Hermes
Europe Railtel B.V., a Netherlands corporation. References to "guilders" or
"NLG" are to Dutch guilders or any other substitute currency in the Netherlands,
references to "BF" are to Belgian Francs and references to "dollars," "US
dollars," "US$" or "$" are to United States dollars. References to "ECU" are to
the ECU referred to in Article 109g of the Treaty establishing the European
Communities ("EC"), as amended by the Treaty on European Union (the "Treaty")
and as defined in Council Regulation (EC) No. 3320/94, that is from time to time
used as the unit of account of the EC (changes to the ECU may be made by the EC,
in which event the ECU will change accordingly). References to "Euro" or "E" are
to the currency of the EC to be introduced at the start of the third stage of
European economic and monetary union, which occurred on January 1, 1999,
pursuant to the Treaty. Since January 1, 1999, all monetary rights and
obligations in respect of the Euro Notes are performed in ECU at the rate of one
ECU for every one Euro.
Solely for the convenience of the reader, this Prospectus contains
translations of certain ECU amounts into dollars and certain dollar amounts into
ECUs. These translations should not be construed as representations that the ECU
amounts actually represent such dollar amounts or vice versa, or could have been
or will be converted into dollars or ECUs, as the case may be, at the rate
indicated or at all. Unless otherwise indicated, the translations of dollars
into ECUs have been made at $1.1743 per ECU, the noon buying rate in The City of
New York for cable transfers in ECU as certified for customs purposes by the
Federal Reserve Bank of New York (the "Noon Buying Rate") on December 21, 1998.
Certain terms used in this Offering Memorandum are defined in the
"Glossary."
---------------------
THIS EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL WE ACCEPT SURRENDERS FOR
EXCHANGE FROM, HOLDERS OF OUTSTANDING NOTES IN ANY JURISDICTION IN WHICH THIS
EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
vii
<PAGE> 8
SUMMARY
This Summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the offer
fully and for a more complete description of the legal terms of the offer, you
should read carefully this entire document and the documents to which we have
referred you. See "Where You Can Find More Information" on page iv. We encourage
you to read this entire document and the documents incorporated by reference in
this document.
The Exchange Offer
On January 4, 1999, we completed a private offering consisting of:
- $200,000,000 10 3/8% Senior Notes due 2009
and
- E85,000,000 10 3/8% Senior Notes due 2006.
On the same day, we entered into a registration rights agreement relating
to the 10 3/8% Senior Notes due 2009 and a registration rights agreement
relating to the 10 3/8% Senior Notes due 2006 with the initial purchasers in the
private offering of these securities in which we agreed, among other things, to
deliver to you this prospectus and to complete this exchange offer within 90
days of the issuance of the 10 3/8% Senior Notes due 2009 and the 10 3/8% Senior
Notes due 2006. The 10 3/8% Senior Notes due 2009 and the 10 3/8% Senior Notes
due 2006 can now be tendered for exchange. You should read the discussion under
the heading "Summary Description of the Exchange Notes" and "Description of the
Exchange Notes" for further information regarding the registered notes.
We believe that the notes issued in the exchange offer may be resold by you
without compliance with the registration and prospectus delivery provisions of
the Securities Act of 1933, subject to certain conditions. You should read the
discussion under the headings "Summary of the Terms of Exchange Offer" and "The
Exchange Offer" for further information regarding the exchange offer and resale
of the notes.
The Company
We are a carriers' carrier company providing centrally managed cross-border
telecommunications transmission capacity in Europe. Our high capacity fiber
optic network, when completed by the end of 2000, will extend approximately
25,000 kilometers, with points of presence in approximately 50 cities in 20
European countries. Our customers include traditional public telecommunications
operators and new entrants, such as alternative carriers, global consortia of
telecommunications operations, international carriers, Internet backbone
networks, resellers, value-added networks and other service providers. We offer
these customers a superior transport system than is currently available in
Europe through public telecommunications operators with a higher and more
consistent level of transmission quality, redundancy, network functionality and
service at lower prices.
We were formed on July 6, 1993. GTS Carrier Services, Inc., which is a
wholly owned subsidiary of Global Telesystems Group, Inc., owns an 89.9% equity
interest in our company.
The Network Plan
We began commercial operations in November 1996 and currently operate in
Belgium, the Netherlands, the United Kingdom, France, Germany, Switzerland,
Italy, Denmark and Sweden. Our network presently links 17 cities: Brussels,
Antwerp, Rotterdam, Amsterdam, London, Paris, Frankfurt, Strasbourg, Zurich,
Geneva, Stuttgart, Dusseldorf, Munich, Milan, Berlin, Copenhagen and Stockholm.
In November 1998, we leased capacity on a transatlantic cable linking the
network with North America and are exploring various interconnectivity options
to Russia.
We intend to continue to build our network using an accessible and
cost-efficient infrastructure of railways, motorways, pipeline companies,
waterways and power companies. We have a flexible approach to the
1
<PAGE> 9
network buildout plan and intend to fine-tune the scope, route and design of the
network based upon evaluation of customer demand. We have entered into
agreements for the construction and/or lease of fiber optic routes for the
network in Belgium, the Netherlands, the United Kingdom, France, Germany,
Switzerland, Italy, Denmark, Sweden and Spain. We continue to negotiate
rights-of-way and other infrastructure arrangements in order to extend the
network in Western Europe and will need to negotiate similar agreements to
complete the network in four Central European countries.
Recent Developments
On June 24, 1998, we completed the acquisition of a 75% interest in Ebone
A/S for ECU 90 million (approximately $99.5 million based on the ECU/US dollar
exchange rate in effect on that date). Headquartered in Copenhagen, Denmark,
Ebone is a Tier 1 Internet backbone provider focused on connecting Internet
service providers in Europe to the Internet. As of September 30, 1998, Ebone
served 89 customers in 23 cities. As part of the transaction, Ebone purchased
under a transmission capacity agreement long-term capacity rights on our network
valued at ECU 90 million. The transmission capacity agreement is expected to
provide for the majority of Ebone's current and forecasted capacity
requirements.
We will provide Ebone with capacity of up to 622 megabits per second
between the majority of European cities that Ebone serves. In addition to the
majority interest held by us, Ebone's new ownership structure will continue to
include many of Ebone's existing customers, which own the balance of Ebone's
shares through an association.
Following the acquisition of Ebone and given the increased market demand
for transatlantic low-cost city-to-city services, we now plan to expand our
objectives to become a leading player in the provision of seamless transatlantic
city-to-city managed Internet protocol services. To meet this objective,
although in November 1998 we leased capacity on a transatlantic cable linking
the European network to North America, we now need to augment our transatlantic
capacity and invest further in extending and increasing the capacity of our
network.
2
<PAGE> 10
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
The exchange offer relates to the exchange of up to $200,000,000 aggregate
principal amount of the outstanding 10 3/8% Senior Notes due 2009 (dollar notes)
and up to E85,000,000 aggregate principal amount of outstanding 10 3/8% Senior
Notes due 2006 (euro notes) for an equal aggregate principal amount of exchange
notes. The exchange notes will be our obligations and are entitled to the
benefits of the indentures relating to the outstanding notes. The form and terms
of the exchange notes are identical in all material respects to the form and
terms of the outstanding notes, except that the exchange notes have been
registered under the Securities Act of 1933, and therefore contain no
restrictive legends thereon. Nor are the exchange notes entitled to the benefits
of the registration rights granted under the registration rights agreements,
executed as a part of the offering of the outstanding notes, dated as of January
4, 1999, among HER and the initial purchasers.
Registration Rights........ In January 1999, we and the initial purchasers
agreed that you, as a holder of the outstanding
notes, would be entitled to exchange your notes for
registered notes with substantially identical
terms. This exchange offer is intended to satisfy
these rights. After the exchange offer is complete,
you will no longer be entitled to any exchange or
registration rights with respect to your notes.
The Exchange Offer......... We are offering to exchange:
Outstanding Dollar
Notes...................... $1,000 principal amount of 10 3/8% Senior Notes due
2009 which have been registered under the
Securities Act of 1933 for each $1,000 principal
amount of our 10 3/8% Senior Notes due 2009, and
Outstanding Euro Notes... E1,000 principal amount of 10 3/8% Senior Notes due
2006 which have been registered under the
Securities Act of 1933 for each E1,000 principal
amount of our 10 3/8% Senior Notes due 2006
which were issued on January 4, 1999 in a private
offering.
In order to be exchanged, an outstanding note must
be properly tendered and accepted. All outstanding
notes that are validly tendered and not validly
withdrawn will be exchanged.
As of this date, there are $200 million in
aggregate principal amount of outstanding dollar
notes and E85 million in aggregate principal amount
of outstanding euro notes.
We will issue the exchange notes to you on or
promptly after the expiration of the exchange
offer.
Resale of the Exchange
Notes...................... Based on an interpretation by the staff of the
Securities and Exchange Commission set forth in
no-action letters issued to third parties,
including "Exxon Capital Holdings Corporation"
(available May 13, 1988), "Morgan Stanley & Co.
Incorporated" (available June 5, 1991), "Mary Kay
Cosmetics, Inc." (available June 5, 1991) and
"Warnaco, Inc." (available October 11, 1991), we
believe that the notes issued in the exchange offer
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 provided that:
- You are acquiring the notes issued in the
exchange offer in the ordinary course of
business;
- you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate, in
the distribution of the notes issued to you in
the exchange offer;
3
<PAGE> 11
- you are not a broker-dealer who purchased the
outstanding notes directly from us for resale
pursuant to Rule 144A or any other available
exemption under the Securities Act of 1933; and
- you are not an "affiliate" of ours.
If our belief is inaccurate and you transfer any
note issued to you in the exchange offer without
delivering a prospectus meeting the requirements of
the Securities Act of 1933 or without an exemption
from registration of your notes from such
requirements, you may incur liability under the
Securities Act of 1933. We do not assume or
indemnify you against such liability, but we do not
believe that any such liability should exist.
Each broker-dealer that is issued notes in the
exchange offer for its own account in exchange for
notes which were acquired by such broker-dealer as
a result of market-making or other trading
activities, must acknowledge that it will deliver a
prospectus meeting the requirements of the
Securities Act of 1933, in connection with any
resale of the notes issued in the exchange offer.
The letter of transmittal states that by so
acknowledging and by delivering a prospectus, such
broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the
Securities Act of 1933. A broker-dealer may use
this prospectus for an offer to resell or otherwise
retransfer of the notes issued to it in the
exchange offer. We have agreed that, for a period
of 180 days after the date of this prospectus, we
will make this prospectus and any amendment or
supplement to this prospectus available to any such
broker-dealer for use in connection with any such
resales. We do not believe that any registered
holder of the outstanding notes is an affiliate (as
such term is defined in Rule 405 of Securities Act
of 1933) of ours.
The exchange offer is not being made to, nor will
we accept surrenders for exchange from, holders of
outstanding notes in any jurisdiction in which this
exchange offer or the acceptance thereof would not
be in compliance with the securities or blue sky
laws of such jurisdiction.
Expiration of Exchange
Offer...................... The exchange offer will expire at (i) 5:00 p.m.,
New York City time, for the outstanding dollar
notes and (ii) 5:00 p.m., London time, for the
outstanding euro notes, on , 1999, unless
we decide to extend the expiration date.
Accrued Interest on the
Exchange Notes and the
Outstanding Notes........ The exchange notes will bear interest from January
4, 1999. Holders of outstanding notes whose notes
are accepted for exchange will be deemed to have
waived the right to receive any payment in respect
of interest on such outstanding notes accrued from
January 4, 1999 to the date of the issuance of the
exchange notes. Consequently, holders who exchange
their outstanding notes for exchange notes will
receive the same interest payment on July 15, 1999
(the first interest payment date with respect to
the outstanding notes and the exchange notes) that
they would have received had they not accepted the
exchange offer.
Termination of the Exchange
Offer.................... We may terminate the exchange offer if we determine
that our ability to proceed with the exchange offer
could be materially impaired due to any legal or
governmental action, new law, statute, rule or
regulation or any
4
<PAGE> 12
interpretation of the staff of the Securities and
Exchange Commission of any existing law, statute,
rule or regulation. We do not expect any of the
foregoing conditions to occur, although there can
be no assurance that such conditions will not
occur. Holders of outstanding notes will have
certain rights against our company under the
registration rights agreements executed as part of
the offering of the outstanding notes should we
fail to consummate the exchange offer.
Procedures for Tendering
Outstanding Dollar
Notes.................... If you are a holder of an outstanding dollar note
and you wish to tender your note for exchange
pursuant to the exchange offer, you must transmit
to The Bank of New York, in New York, as exchange
agent for the dollar notes, on or prior to the
expiration date:
either
- a properly completed and duly executed letter of
transmittal, which accompanies this prospectus,
or a facsimile of the letter of transmittal,
including all other documents required by the
letter of transmittal, to the exchange agent at
the address set forth on the cover page of the
letter of transmittal; or
- a computer-generated message transmitted by means
of The Depository Trust Company's Automated
Tender Offer Program system and received by the
exchange agent and forming a part of a
confirmation of book-entry transfer in which you
acknowledge and agree to be bound by the terms of
the letter of transmittal;
and, either
- a timely confirmation of book-entry transfer of
your outstanding dollar notes into the exchange
agent's account at The Depository Trust Company
pursuant to the procedure for book-entry
transfers described in this prospectus under the
heading "The Exchange Offer -- Procedure for
Tendering," must be received by the exchange
agent on or prior to the expiration date; or
- the documents necessary for compliance with the
guaranteed delivery procedures described below.
By executing the letter of transmittal, or by
agreeing to the terms of the letter of transmittal,
each holder will represent to us that, among other
things, (i) the dollar notes to be issued in 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, (ii) neither the holder nor any such other
person has an arrangement or understanding with any
person to participate in the distribution or such
exchange notes and (iii) neither the holder nor any
such other person is an "affiliate," as defined in
Rule 405 under the Securities Act of 1933, of ours.
Procedures for Tendering
Outstanding Euro Notes... If you are a holder of an outstanding euro note and
you wish to tender your note for exchange pursuant
to the exchange offer, you must transmit to The
Bank of New York, London branch, as exchange agent
for the euro notes, on or prior to the expiration
date:
5
<PAGE> 13
- a computer-generated message transmitted in
accordance with Euroclear's or CEDEL's, as the
case may be, standard operating procedures for
electronic tenders and received by Euroclear or
CEDEL and forming a part of a confirmation of
book-entry transfer in which you acknowledge and
agree to be bound by the terms of the letter of
transmittal; and
- a timely confirmation of book-entry transfer of
your outstanding euro notes to either Euroclear
or CEDEL, as the case may be, pursuant to the
procedure for book-entry transfers described in
this prospectus under the heading "The Exchange
Offer -- Procedure for Tendering," must be
received by the exchange agent in London on or
prior to the expiration date.
By agreeing to the terms of the letter of
transmittal, each holder will represent to us that,
among other things, (i) the euro notes to be issued
in 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, (ii) neither the holder nor any such
other person has an arrangement or understanding
with any person to participate in the distribution
or such exchange notes and (iii) neither the holder
nor any such other person is an "affiliate," as
defined in Rule 405 under the Securities Act of
1933, of ours.
Special Procedures for
Beneficial Owners........ If you are a beneficial owner of registered notes
that are registered in the name of a broker,
dealer, commercial bank, trust company or other
nominee and you wish to tender such notes or
registered notes in the exchange offer, you should
contact such person whose name your notes or
registered notes are registered promptly and
instruct such person to tender on your behalf. If
you, as such beneficial holder, wish to tender on
your own behalf you must, prior to completing and
executing the letter of transmittal and delivering
your outstanding notes, either make appropriate
arrangements to register ownership of the
outstanding notes in your name or obtain a properly
completed bond power from the registered holder.
The transfer of record ownership may take
considerable time.
Guaranteed Delivery
Procedures for Dollar
Notes.................... If you wish to tender your outstanding dollar notes
and time will not permit your required documents to
reach the exchange agent by the expiration date, or
the procedure for book-entry transfer cannot be
completed on time or certificates for registered
notes cannot be delivered on time, you may tender
your outstanding dollar notes pursuant to the
procedures described in this prospectus under the
heading "The Exchange Offer Guaranteed Delivery
Procedure."
Withdrawal Rights.......... You may withdraw the tender of your (i) outstanding
dollar notes at any time prior to 5:00 p.m., New
York City time, and (ii) outstanding euro notes at
any time prior to 12:00 p.m., London time, on
, 1999, the business day prior to
the expiration date, unless your notes were
previously accepted for exchange.
6
<PAGE> 14
Acceptance of Outstanding
Notes and Delivery of
Exchange Notes........... Subject to certain conditions (as summarized above
in "Termination of the Exchange Offer" and
described more fully under the "The Exchange
Offer -- Termination"), we will accept for exchange
any and all (i) outstanding dollar notes which are
properly tendered in the exchange offer prior to
5:00 p.m., New York City time, and (ii) outstanding
euro notes which are properly tendered in the
exchange offer prior to 5:00 p.m., London time, on
the expiration date. The notes issued pursuant to
the exchange offer will be delivered promptly
following the expiration date.
Certain U.S. Federal Income
Tax Consequences........... The exchange of the notes will generally not be a
taxable exchange for United States federal income
tax purposes. We believe you will not recognize any
taxable gain or loss or any interest income as a
result of such exchange.
Use of Proceeds............ We will not receive any proceeds from the issuance
of notes pursuant to the exchange offer. We will
pay all expenses incident to the exchange offer.
Exchange Agent for Dollar
Notes...................... The Bank of New York is serving as exchange agent
in connection with the dollar notes. The exchange
agent for the dollar notes can be reached at
Reorganization Section, 101 Barclay Street, 7 East,
New York, NY 10286. For more information with
respect to the exchange of outstanding dollar
notes, the telephone number for the exchange agent
in New York is (212) 815-2742 and the facsimile
number is (212) 815-6339.
Exchange Agent for Euro
Notes...................... The Bank of New York, London branch, is serving as
exchange agent in connection with the euro notes.
The exchange agent for the euro notes can be
reached at Corporate Trust Administration, 46
Berkeley Street, W1X6AA London, United Kingdom. For
more information with respect to the exchange of
outstanding euro notes, the telephone number of the
exchange agent in London is (44 171)322 7298 and
the facsimile number is (44 171)322 6399.
7
<PAGE> 15
DESCRIPTION OF THE EXCHANGE NOTES
Notes Offered:
Dollar Exchange Notes.... $200,000,000 aggregate principal amount of
10 3/8% Senior Notes due 2009.
Euro Exchange Notes...... E85,000,000 aggregate principal amount of 10 3/8%
Senior Notes due 2006.
Maturity................... Dollar Exchange Notes: January 15, 2009.
Euro Exchange Notes: January 15, 2006.
Interest Payment Dates..... January 15 and July 15, commencing July 15, 1999.
Ranking.................... The exchange notes will be unsecured obligations
and will be senior to all our future subordinated
indebtedness. The exchange notes will rank equally
with all our existing and future unsecured senior
indebtedness, including our currently outstanding
11 1/2% Senior Notes due 2007. The exchange notes
effectively will rank junior to our secured
liabilities to the extent of the assets securing
such liabilities. In addition, the exchange notes
will effectively rank junior to all liabilities
(including trade payables) of our subsidiaries.
On a pro forma basis, after giving effect to the
offering of the outstanding dollar and euro notes
and our use of the net proceeds, at September 30,
1998, we would have had total long-term debt of
$753.1 million (including the outstanding dollar
and euro notes and our 11 1/2% Senior Notes due
2007), and our subsidiaries would have had $320.4
million of total liabilities reflected on our
balance sheet.
Optional Redemption........ We may redeem the dollar exchange notes, in whole
or in part, at any time on or after January 15,
2004, at the redemption prices set forth in this
prospectus.
We may redeem the euro exchange notes, in whole or
in part, at any time on or after January 15, 2003,
at the redemption prices set forth in this
prospectus.
Public Equity Offering
Option Redemption.......... Before January 15, 2002, we may redeem the exchange
notes at a price equal to 110.375% of the principal
amount thereof, plus accrued and unpaid interest to
the date of redemption, with the net cash proceeds
of one or more public equity offerings or strategic
equity investments.
Optional Redemption for
Changes in Withholding
Taxes.................... We may redeem the exchange notes at a price equal
to 100% of the principal amount thereof, plus
accrued and unpaid interest to the date of
redemption, if we have to pay any additional
amounts as a result of change in law or in the
interpretation or administration thereof, if such
change is announced and becomes effective on or
after the date of original issuance of the notes.
Change of Control.......... Following the occurrence of certain change of
control events, each holder of exchange notes will
have the right to require us to purchase all or any
portion of such holder's notes at a price in cash
equal to 101% of the
8
<PAGE> 16
principal amount thereof, plus accrued and unpaid
interest to the date of purchase.
Certain Covenants.......... The indenture under which the dollar exchange notes
will be issued and the indenture under which the
euro exchange notes will be issued will each
contain certain covenants that limit our ability
and the ability of our restricted subsidiaries to:
- incur additional indebtedness,
- make certain restricted payments,
- create certain liens,
- sell certain assets,
- engage in certain transactions with affiliates,
- consolidate, merge or transfer all or
substantially all of our assets and the assets of
our subsidiaries on a consolidated basis, and
- sell or issue capital stock of restricted
subsidiaries.
These covenants are subject to a number of
important exceptions and qualifications, which are
described under the heading "Description of the
Exchange Notes -- Certain Covenants" in this
prospectus.
Exchange Offer;
Registration Rights...... Under a registration rights agreement between and
the initial purchasers relating to the outstanding
dollar notes and a registration rights agreement
between us and the initial purchasers relating to
the outstanding euro notes, we have agreed to:
- within 90 days after the original issue date of
the outstanding notes, file a registration
statement under the Securities Act of 1933
relating to an offer to exchange the outstanding
dollar notes and the outstanding euro notes, as
the case may be, for notes identical in all
material respects to such notes,
- use our reasonable best efforts to cause such
registration statement to become effective within
135 days after the original issue date of the
outstanding notes, and
- use our reasonable best efforts to cause to
become effective, a shelf registration statement
under the Securities Act of 1933 for the resales
of the notes if we cannot effect an exchange
offer within the time periods listed above and in
certain other circumstances.
The interest rate on the outstanding will increase
if we do not comply with our obligations under the
registration rights agreements. See "The Exchange
Offer."
Withholding Tax............ Unless required by law, all our payments with
respect to the exchange notes will be made without
withholding or deduction for any present or future
taxes or governmental charges of whatever nature
imposed or levied by any tax authority within the
Netherlands or any other relevant taxing
jurisdiction. We will pay any additional amounts so
that the net amounts receivable by the holders
after any payment, withholding or deduction in
respect of such tax or liability shall equal the
respective amounts which would have been receivable
in respect of the exchange
9
<PAGE> 17
notes in the absence of such payments, withholding
or deduction. See "Description of the Exchange
Notes -- Additional Amounts."
Trustee, Paying and
Transfer Agent and
Registrar................ The Bank of New York.
Luxembourg Paying and
Transfer Agent......... Banque Internationale a Luxembourg S.A.
Listing.................... We have applied to list the exchange notes on the
Luxembourg Stock Exchange.
Consequences of Failure
to Exchange................ Untendered outstanding dollar notes and outstanding
euro notes will remain restricted securities and
will continue to be subject to the following
restrictions on transfer:
(i) outstanding notes may be resold only if
registered pursuant to the Securities Act of 1933,
if an exemption from registration is available
thereunder, or if neither such registration nor
such exemption is required by law,
(ii) outstanding notes shall bear a legend
restricting transfer in the absence of registration
or an exemption therefrom, and
(iii) a holder of outstanding notes who
desires to sell or otherwise dispose of all or any
part of its outstanding notes under an exemption
from registration under the Securities Act of 1933,
if requested by us, must deliver to us an opinion
of independent counsel experienced in Securities
Act matters, reasonably satisfactory in form and
substance to us, that such exemption is available.
See "Risk Factors -- Consequences of Failure to
Exchange Your Notes for Exchange Notes."
Risk Factors............... See "Risk Factors" on page 13 for a discussion of
factors you should carefully consider before
investing in the exchange notes.
10
<PAGE> 18
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The following summary historical consolidated financial data for the years
ended December 31, 1995, 1996 and 1997 are derived from the Company's audited
consolidated financial statements. The following unaudited summary historical
consolidated financial data as of September 30, 1998 and for the nine months
ended September 30, 1997 and 1998 are derived from the Company's unaudited
consolidated financial statements. The summary historical consolidated financial
data presented below should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
consolidated financial statements and related notes thereto appearing elsewhere
in this Offering Memorandum.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ -------------------
1995 1996 1997 1997 1998
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.............................. $ -- $ 48 $ 5,373 $ 2,262 $ 42,933
Operating costs and expenses.......... 6,637 15,246 28,465 16,166 54,878
Loss from operations.................. (6,637) (15,198) (23,092) (13,904) (11,945)
Other (expense) income................ 135 (771) (6,597) (1,771) (20,802)
Net loss.............................. (6,502) (15,969) (29,689) (15,675) (35,170)
OTHER DATA:
EBITDA(1)............................. $(6,626) $(14,540) $ (19,337) $(12,259) $ 3,927
Net cash (used in) provided by
operating activities............... (2,655) (11,540) (4,417) (5,803) 20,527
Net cash used in investing
activities......................... (4,405) (20,781) (107,466) (74,176) (34,541)
Net cash provided by financing
activities......................... 11,644 28,924 317,500 320,973 493
Deficiency of earnings to fixed
charges(2)......................... (6,502) (15,969) (29,689) (15,675) (33,351)
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1998
-------------------------
ACTUAL AS ADJUSTED(3)
<S> <C> <C>
BALANCE SHEET DATA:
Total current assets...................................... $274,145 $563,816
Property and equipment, net............................... 362,322 362,322
Total assets.............................................. 681,518 981,334
Total current liabilities................................. 162,122 162,122
Total liabilities......................................... 635,996 935,812
Total shareholders' equity................................ 17,812 17,812
</TABLE>
- ---------------
(1) EBITDA is earnings (loss) from operations before foreign currency gains
(losses), interest, taxes, depreciation and amortization. EBITDA is a
measure of a company's performance commonly used in the telecommunications
industry, but should not be construed as an alternative to net income (loss)
determined in accordance with generally accepted accounting principles
("GAAP") as an indicator of operating performance or as an alternative to
cash from operating activities determined in accordance with GAAP as a
measure of liquidity.
(2) Because of the Company's historic losses, the Company has experienced a
deficiency of earnings to fixed charges throughout its existence. The
deficiency of earnings to fixed charges equals the loss from continuing
operations before income taxes minus fixed charges. Fixed charges consist of
interest on all indebtedness.
(3) Adjusted to reflect the Offering and the application of net proceeds
therefrom as described in "Use of Proceeds."
11
<PAGE> 19
SUPPLEMENTAL HISTORICAL CONSOLIDATED QUARTERLY FINANCIAL DATA
The following supplemental historical consolidated quarterly financial and
operating data as of and for the three months ended March 31, June 30, and
September 30, 1998 are derived from the Company's unaudited consolidated
financial statements and its operating records. It is intended to supplement the
aforementioned summary historical consolidated financial data.
The supplemental historical consolidated quarterly financial data presented
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the consolidated financial
statements and related notes thereto appearing elsewhere in this Offering
Memorandum.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30,
1998 1998 1998(1)
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................................. $ 4.7 $ 11.2 $ 27.0
Gross margin.............................................. (1.4) 0.4 7.3
Net income................................................ (11.3) (12.5) (11.4)
OTHER DATA:
EBITDA(2)................................................. $ (2.6) $ (0.6) $ 7.1
Cities on Network (at end of period)...................... 7 12 14
Kilometers operational (at end of period)................. 2,425 4,063 5,209
Number of contracted customers............................ 28 38 48
E1 Equivalents installed.................................. 232 576 1,209
E1 Equivalents sold....................................... 997 3,675 5,157
Backlog (at end of period)................................ $ 61 $168.4 $257.3
</TABLE>
- ---------------
(1) The September 30, 1998 financial data reflects the effects of the
acquisition of Ebone.
(2) EBITDA is earnings (loss) from operations before foreign currency gains
(losses), interest, taxes, depreciation and amortization. EBITDA is a
measure of a company's performance commonly used in the telecommunications
industry, but should not be construed as an alternative to net income (loss)
determined in accordance with GAAP as an indicator of operating performance
or as an alternative to cash from operating activities determined in
accordance with GAAP as a measure of liquidity.
12
<PAGE> 20
RISK FACTORS
Prospective participants in the Exchange Offer should consider carefully
the following factors in evaluating the Company and its business in addition to
the other information contained in this Prospectus.
RISKS RELATING TO THE EXPANSION OF OUR NETWORK
Our ability to achieve our strategic objectives will depend in large part
on our successful, timely and cost-effective completion of our network and the
continued market demand for Internet Protocol services. Although our network
currently links 17 cities, the development of the remainder of the network may
be adversely affected by a variety of factors. Many of these factors, such as
strikes, natural disasters and other casualties, are beyond our control. In
addition, we will need to negotiate and conclude additional agreements with
various parties. These agreements are necessary to establish rights-of-way and
to develop and maintain our network infrastructure and equipment.
For development of the network to be successful we need to obtain and
maintain a number of agreements, including:
- additional long-term leases of dark fiber;
- rights-of-way and other permits from railroads, utilities and
governmental authorities to install fiber optic cable; and
- transatlantic capacity.
In addition, we already depend on third parties for leases of dark fiber for
substantial portions of our network.
We cannot assure you that we will be able to maintain all of our existing
agreements, rights and permits or that we will be able to obtain and maintain
the additional agreements, rights and permits needed to implement our business
plan on acceptable terms. In addition, we may not be able to conclude such
agreements, rights or permits on time. Any delay in concluding or failure to
conclude or maintain these agreements could adversely affect the operation
and/or expansion of our network. This, in turn, could have a negative effect on
our financial condition, including our ability to make payments to you on the
notes.
The successful and timely completion of our network will also depend on,
among other things:
- the timely performance of independent contractors hired to engineer,
design and construct portions of our network; and
- our ability to obtain and maintain applicable government approvals to
build and operate our network (see "-- Extensive Government Regulation"
on page 16).
Further development of our network might cost more or take longer than our
current estimates. Although we believe that our cost estimates and schedule are
reasonable, we cannot assure you that the actual construction costs or time
required to complete the expansion of our network will not be greater than we
currently expect. Delays or increased costs in developing the network could have
a negative effect on our financial condition, including our ability to make
payments to you on the Notes.
OUR SIGNIFICANT INDEBTEDNESS COULD AFFECT OUR ABILITY TO MAKE PAYMENTS ON THE
NOTES
We have, and will continue to have, significant indebtedness. Taking into
account the debt we have assumed in connection with the offering of the
outstanding 10 3/8% senior notes due 2009 and 10 3/8% senior notes due 2006 and
the net proceeds of that offering, at September 30, 1998, we would have had
total long-term debt of $753.1 million. We had negative EBITDA of $19.3 million
for the year ended December 31, 1997 and positive EBITDA of $3.9 million for the
nine months ended September 30, 1998. EBITDA is earnings or loss from operations
before foreign currency gains or losses, interest, taxes, depreciation and
amortization. See "Capitalization" (page 32) and "Selected Consolidated
Financial Data" (page 33). Certain agreements to which we are a party will limit
but not prevent us from taking on additional debt. We expect to take on
substantial additional indebtedness in the future.
13
<PAGE> 21
Our ability to make principal and interest payments on our indebtedness,
including the notes, will depend upon, among other things, our future operating
performance. Our future operating performance depends on a variety of factors,
many of which are beyond our control. Because of this uncertainty, we cannot
assure you that we will generate sufficient cash flow. Insufficient future cash
flow could impair our ability to raise additional equity or debt financing or to
complete our network. It could also be insufficient to make principal and
interest payments on our indebtedness, including the principal and interest owed
to you as a holder of the notes. If this happens, we may be required to
renegotiate the terms of, or to refinance, our long-term debt. We cannot assure
you that we would be able to successfully refinance or renegotiate the terms of
our indebtedness when required.
Our high level of indebtedness could result in negative consequences to
you, as a holder of the notes, because:
- we will be more vulnerable to increases in interest rates if our future
borrowings are at variable rates of interest;
- we will be placed at a competitive disadvantage if we have significantly
more indebtedness than our competitors;
- we will be more vulnerable to the effects of general economic downturns
or to delays or increases in the costs of developing our network;
- it will be more difficult for us to take advantage of significant
business opportunities which arise; and
- it will be more difficult for us to respond to changes affecting our
financing, construction, development or operating plans.
Further, the covenants contained in the indentures relating to the notes
and the indenture relating to the 11 1/2% Senior Notes due 2007 limit us from:
- incurring certain additional indebtedness;
- creating certain liens on our assets;
- selling certain assets; and
- entering into certain transactions with our affiliates.
Our significant indebtedness, and the restrictive covenants contained in our
indentures, could adversely affect our ability to finance our future capital
needs or to engage in other business activities. Moreover, a failure to comply
with the obligations contained in the indentures or any other debt instrument to
which we are a party could result in an event of default under such agreements.
An event of default would permit the acceleration of the related debt and would
require us to pay the holders of such debt before holders of the notes, and also
may result in a default under future debt agreements that contain
cross-acceleration or cross-default provisions.
SUBSTANTIAL ADDITIONAL CAPITAL IS REQUIRED TO EXPAND OUR NETWORK
We will require significant amounts of capital to develop and expand our
network. We expect to incur approximately $835 million in additional capital
expenditures, including capital lease obligations through 2000 to expand our
network. We believe that the net proceeds that we received from the issuance of
the outstanding 10 3/8% Senior Notes due 2009 and 10 3/8% Senior Notes due 2006
and the outstanding 11 1/2% Senior Notes due 2007, combined with the funds we
expect to generate internally, will be sufficient to fund our these future
capital expenditures. However, the actual amount and timing of our future
capital requirements may differ from our estimates. Thus, additional financing
may be needed to construct our network. We cannot assure you that such
additional financing will be available on terms acceptable to us or at all. If
we fail to obtain this financing, we might have to delay or abandon our plans
for expanding the remainder of our network. Delaying
14
<PAGE> 22
or abandoning these plans could have a negative effect on our financial
condition, including our ability to make payments to you, as a holder of the
notes.
Our revenues and the costs of expanding our network and operating our
business depends upon a variety of factors, including:
- efficiently manage the expansion of our network and operations;
- negotiate favorable contracts with suppliers;
- obtain additional licenses, regulatory approvals, rights-of-way and
infrastructure contracts to complete and operate our network;
- access markets and attract a sufficient number of customers; and
- provide and develop services to which our customers will subscribe.
Our revenues and costs are also dependent upon factors that are not within our
control, including:
- regulatory changes;
- changes in technology;
- increased competition;
- strikes;
- weather; and
- performance by third-parties, including our vendors and customers, in
connection with the development of our network.
For a more detailed discussion of these factors see the sections entitled
"-- Extensive Government Regulation," (page 16), "-- Increased Competition Could
Reduce Demand for Our Services" (page 18), "-- Rapidly Changing Technology Could
Affect Our Ability to Provide Competitive Services" (page 20), and "-- Risks
Relating to the Expansion of our Network" (page 13). Due to the uncertainty of
these factors, our actual costs and revenues may vary from what we expect them
to be and our future capital requirements might increase. Accordingly, we cannot
assure you that the amount of funds required to complete our network will not be
greater than anticipated. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" (page 34) and "Use of Proceeds" (page 23).
OUR HISTORY OF OPERATING LOSSES
In the past, we have generated operating losses. We have insufficient cash
flow to make interest and principal payments on our outstanding debt while still
meeting our capital expenditures and other cash needs. At September 30, 1998, we
had a cumulative net loss of $87.6 million. We will have a higher net loss in
1998 than we did in 1997. Additionally, as of the date of this prospectus, our
net current assets were lower than our net current assets as of September 30,
1998. We cannot assure you that we will be able to achieve or sustain profits
from our operations, or generate sufficient cash flow to make payments to you on
the notes.
WE DEPEND UPON CASH FLOW OF OUR SUBSIDIARIES TO MAKE PAYMENTS ON THE NOTES
We are a holding company with limited assets and operate our business
through our subsidiaries. Accordingly, we rely entirely upon distributions from
our subsidiaries for the funds necessary to meet our obligations, including
payments on the notes and the 11 1/2% Senior Notes due 2007. You should be aware
that our subsidiaries are separate and distinct legal entities. Because they are
separate and distinct our subsidiaries have no obligation to make any payments
on the notes or to make any funds available for such payment. Therefore, our
operating cash flow and ability to meet our debt obligations, including payment
on your notes, will depend on the cash flow provided by our subsidiaries. Cash
flow from our subsidiaries comes to us in the form of loans, dividends or other
payments to us as a shareholder of our subsidiaries. The ability of our
15
<PAGE> 23
subsidiaries to make payments to us (in any form) will depend on their earnings,
tax considerations and legal restrictions.
THE NOTES ARE EFFECTIVELY JUNIOR IN RIGHT OF PAYMENT TO OBLIGATIONS OF OUR
SUBSIDIARIES
The notes will be general unsecured obligations of HER. This means that the
notes will rank senior in right of payment to all of our future indebtedness
that is expressly junior in right of payment to the notes. Otherwise, the notes
will rank equally in right of payment with all of our existing and future
unsecured debt. See "Capitalization" (page 32).
We and our subsidiaries may incur other debt in the future, including
secured debt. We expect that we may incur future indebtedness that will be
secured, particularly through equipment financings. As a result, any claims
against us by you, as a holder of the notes, will be effectively subordinated to
those who have claims secured by mortgages or other security interests or liens
on the assets of HER. All or substantially all of our fixed assets could become
security for our indebtedness. The value of much of these fixed assets is
derived from employing them in a telecommunications business. These assets are
highly specialized and, taken individually, can be expected to have limited
marketability. Consequently, in the event that the secured creditors seek to
realize their claim on our assets, they would likely seek to sell the business
as a going concern in order to maximize the proceeds realized by any such sale.
The price obtained upon any such sale might be less due to the necessity to
obtain approval of the sale or permits from the applicable regulatory
authorities and to comply with other applicable governmental regulations.
Because of this, there may not be sufficient assets left to pay our debt
obligations, including those payments owed to you as a holder of the notes.
In the event of the insolvency, liquidation, dissolution or reorganization
of any of our subsidiaries, the creditors of each subsidiary would be entitled
to payment in full from such subsidiary's assets. After paying their own
creditors, our subsidiaries may not have any remaining assets for distribution
to us as shareholder and, consequently, there may not be any assets available
for payment to you, as a holder of the notes. The notes, therefore, are
effectively subordinated to the obligations of our subsidiaries.
EXTENSIVE GOVERNMENT REGULATION
As a multinational telecommunications company, we are subject to varying
degrees of regulation in each of the jurisdictions in which we provide services.
Local laws and regulations, and their interpretation, differ significantly among
the jurisdictions in which we operate. It is possible that future regulatory,
judicial and legislative changes may further limit where and how we can provide
our telecommunications services. Regulators or third parties determine whether
or not we are in compliance with local laws or regulations. It is also possible
that there will be changes in applicable laws or regulations that are adverse to
our operations. Hence, a negative change or result in government regulation
could further limit the services we provide within the jurisdictions we choose
to operate.
A substantial portion of our strategy is based upon timely regulatory
liberalization of the European Union telecommunications market in accordance
with existing European Community directives. Although European Union member
states have had a legal obligation to liberalize their markets in accordance
with these directives since January 1, 1998, this legal obligation alone might
not be sufficient to make markets fully competitive. In addition, Ireland,
Portugal, Spain, Luxembourg and Greece have been granted extensions from the
January 1, 1998 deadline to liberalize their markets. We cannot assure you that
each European Union member state will proceed with the expected liberalization
on schedule, or at all, or that the trend toward liberalization will continue in
any of the countries where we operate our network.
National governments must pass legislation implementing the directives in
order to give effect to European Community directives in each member state.
The following could limit our ability to provide certain services in these
jurisdictions:
- Some European Union member states have not yet implemented existing
European Union directives fully.
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- Delays might occur when European Union member states implement any future
directives.
- We might encounter problems despite European Community directives aimed
at liberalizing the telecommunications industry.
- National governments may not pass legislation implementing a directive in
the form required, or at all, or may pass such legislation only after a
significant delay.
- Even if a European Union member state adopts liberalization measures in a
timely way, there may be significant resistance to the implementation of
such measures from public telecommunications operators, regulators, trade
unions and other sources.
- European Union member states might impose greater restrictions on
international services between the European Union and other countries
than on international services within the European Union.
These and other potential obstacles to liberalization could prevent us from
establishing our network as currently intended.
Our operations depend on the licenses, authorizations and registrations we
have obtained in Belgium, Denmark, France, Germany, Italy, the Netherlands,
Sweden, Switzerland, the United Kingdom and the United States. Our future
operations also depend upon the success of our applications for additional
licenses, authorizations and registrations in other countries (including
Austria, Croatia, Czech Republic, Hungary, Poland, Portugal, Slovakia and
Russia) into which we plan to extend our network. With the exception of Austria
and Portugal, whose laws must comply with European Community directives, these
other countries have not generally liberalized their telecommunications sectors.
For this reason, we cannot assure you that they will do so in a timely manner or
at all. In addition, the terms and conditions of the licenses, authorizations or
registrations granted to us may limit or otherwise affect our scope of
operations. We cannot assure you that:
- we will be able to maintain or renew licenses, authorizations or
registrations to provide the services we currently provide;
- such licenses, authorizations or registrations will be issued or renewed
on terms or with fees that are commercially viable; or
- we will obtain the licenses, authorizations or registrations required for
services we plan to provide in the future.
The loss of, failure to obtain, or a substantial limitation upon the terms of,
these licenses, authorizations or registrations could restrict how and where we
provide our services. See "Licenses and Regulatory Issues" (page 48).
Accordingly, we face the risk that we will establish our network and make
capital expenditures in a given country in anticipation of regulatory
liberalization which does not subsequently occur.
OUR NEED TO OBTAIN AND MAINTAIN INFRASTRUCTURE PROVIDER AND RIGHTS-OF-WAY
AGREEMENTS; OUR DEPENDENCE ON LEASED FIBER
Our future success is dependent upon our ability to build and maintain our
network. Specifically, we must obtain:
- additional infrastructure provider agreements for the long-term lease of
dark fiber;
- rights-of-way and other permits to install fiber optic cable from
railroads, utilities and governmental authorities; and
- additional transatlantic capacity.
We cannot assure you that we will be able to maintain all of our existing
agreements, rights and permits or obtain and maintain the additional agreements,
rights and permits needed to implement our business plan on acceptable terms. In
addition, we depend on third parties for leases of dark fiber for portions of
our network. There can be no assurance that we will be able to enter into and
maintain arrangements for leased portions of
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our network. Our failure to enter into and/or maintain required arrangements for
our network, including for leased fiber, could have a negative effect on the
operation and expansion of our network.
INCREASED COMPETITION COULD REDUCE DEMAND FOR OUR SERVICES
We compete with various telecommunications companies, including MCI
WorldCom, Inc., Viatel, Inc., KPN N.V., Deutsche Telekom AG and France Telecom
S.A., Global Crossing Ltd., British Telecommunications plc and Esprit Telecom
Group plc. These companies have announced plans to construct, have begun to
construct or are operating fiber optic networks across various European
countries. We also compete for customers of our "point-to-point" transborder
service against circuits currently provided by public telecommunications
operators through International Private Leased Circuits.
We believe that liberalization of the European telecommunications market is
likely to attract more competitors. In addition, many of our current or
potential competitors have technical, financial, marketing and other resources
substantially greater than ours. This competition could reduce the demand for
our services. This would, in turn, have a negative effect on our financial
condition, including our ability to make payments to you on the notes. See
"Business -- Competition" (page 46).
OUR RELATIONSHIP WITH OUR MAJORITY SHAREHOLDER COULD RESULT IN CONFLICTS OF
INTEREST
As of the date hereof, Global TeleSystems Group, Inc., through its wholly
owned subsidiary GTS Carrier Services, Inc., beneficially owns 89.9% of our
company. Global TeleSystems Group therefore has the ability to strongly
influence and/or control our affairs and our business. Circumstances may occur
in which the interests of Global TeleSystems Group could be in conflict with
your interests, as a holder of the notes. In addition, Global TeleSystems Group
may have an interest in pursuing transactions that may involve risks to you, as
a holder of the notes. We cannot assure you that any such conflicts of interest
will be resolved in your favor. We expect to enter into capacity arrangements on
an arms' length basis with other subsidiaries. See "Security Ownership of
Principal Shareholders and Management" (page 61).
Global TeleSystems Group plans to offer a broad range of integrated
telecommunications services to businesses and other high usage customers in
certain European metropolitan markets. These services could compete with the
services we offer to customers as an independent carriers' carrier. The
offerings of competing services by Global TeleSystems Group could affect the
perception that we are an independent operator and could negatively impact our
ability to attract and retain customers.
DECREASES IN OUR GROSS MARGINS COULD RESULT IN A REDUCTION OF OUR PRICES
Our gross margins have decreased over the past few years because prices in
the European long distance industry have declined over that period. Further, we
expect that prices will continue to decline as competition increases. This will
result in continuing price cuts in certain retail markets and will decrease the
gross margins of our customers. This, in turn, could create pressure on us to
reduce our prices. If there are not increases in volume and reductions in cost
in the services we provide to offset these lower prices our future gross margins
will decrease.
INTEGRATION OF EBONE ACQUISITION
In June 1998, we completed our acquisition of a 75% interest in Ebone A/S.
We cannot assure you that this acquisition or other acquisitions that we may
consummate in the future will achieve the benefits we expect. In order to
integrate the business, systems and culture of Ebone or such other acquired
businesses into ours, we must continue to develop our financial and management
controls and information systems and retrain existing personnel. If this diverts
significant resources or if we fail to achieve the benefits we expect from these
acquisitions, it could have a negative effect on our business.
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MANAGING RAPID GROWTH
We continue to construct segments of our network, expand its existing
operations and expand into additional geographic and service markets. In regards
to this expansion, we cannot assure you that we will be able to:
- construct and operate the entire network as currently planned;
- expand within the markets in which our ventures are currently operating;
- expand into additional markets at the rate we presently plan.
Nor can we assure you that any existing regulatory barriers to such expansion
will be reduced or eliminated.
As a result of continued growth and expansion, significant demands have
been placed on our management, operational and financial resources and on our
systems and controls. In order to manage our growth effectively, we must
continue to:
- implement and improve our operational and financial systems and controls;
- purchase and utilize additional telecommunications facilities; and
- expand, train and manage the employee base.
Inaccuracies in our forecasts of market demand could result in us providing
insufficient or excessive telecommunications facilities and, therefore,
disproportionate fixed expenses for certain of our operations. As we proceed
with our development and expansion, there will be additional demands on our
customer support, sales, marketing, administrative resources and network
infrastructure. We cannot assure you that our operating and financial control
systems and infrastructure will be adequate to manage future growth. If we fail
to continue to upgrade our systems or unexpected expansion difficulties arise,
there could be adverse effects to our business, results of operations and
financial condition.
OUR DEPENDENCE ON SIGNIFICANT CUSTOMERS
Our customers are, and will continue to be, telecommunications companies.
For that reason, we may become dependent on a small number of significant
customers. The loss of a significant customer could significantly decrease our
revenues and, hence, adversely affect our ability to make payments to you on the
notes.
CURRENCY AND EXCHANGE RISKS
Our functional and reporting currencies are the Belgian franc and the US
dollar, respectively. We adopted the Euro as our functional currency on January
1, 1999. Still, we conduct, and will continue to conduct, business transactions
in currencies other than our functional and reporting currencies; for this
reason, appreciation or depreciation in the value of other currencies as
compared to our functional or reporting currency could result in a material
transaction or translation gain or loss to us.
We have entered into hedging transactions to limit our exposure to foreign
currency fluctuations; however, we find it impractical to protect ourselves
against all of this exposure and as a result we will continue to experience
foreign currency gains and losses. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" (page 35).
RISK OF ERROR IN FORWARD LOOKING STATEMENTS
All statements in this prospectus that are not clearly historical in nature
are forward looking. Statements concerning the following areas of our business
are examples of forward looking statements:
- operations;
- prospects;
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- markets;
- technical capabilities;
- funding needs;
- financing sources;
- commercial operations schedule; and
- future regulatory approvals.
Information concerning expected characteristics of competing systems and
expected actions of third parties, such as equipment suppliers and partners, are
also examples of forward looking statements. These forward looking statements
are inherently speculative. Therefore, we cannot assure you that any of such
statements will prove to be correct. Actual results and developments may be
materially different from those expressed or implied by such statements. You, as
prospective investors, should carefully review the other risk factors set forth
in this section to see which factors could result in incorrect forward looking
statements.
POTENTIAL LACK OF CUSTOMER DEMAND
Although we have been delivering services to a number of customers and have
experienced demand for services in the past we cannot assure you that customer
demand for services over our network will continue to grow. Further, we cannot
assure you that there will be enough customer demand to realize the anticipated
cash flow, operating efficiencies and cost benefits of our network.
RAPIDLY CHANGING TECHNOLOGY COULD AFFECT OUR ABILITY TO PROVIDE COMPETITIVE
SERVICES
The telecommunications industry is in a period of rapid technological
change. Our success will depend on our ability to:
- predict the next technological changes in products, services and network
technology; and
- finance and develop these technological changes.
There also are certain technological risks in the development and operation
of our network. Our network is designed to utilize DWDM and SDH technology and
will be extended to support Internet Protocol services in 1999. While the
current operational network segment has performed at or above design
specifications since November 1996, we cannot assure you that our network will
achieve the technical specifications for which it was designed. Nor can we
assure you that we will be able to upgrade our network as technological
improvements in telecommunications equipment are introduced. Our failure to
achieve any of the foregoing could affect our ability to provide competitive
products and services.
LOSS OF KEY PERSONNEL COULD NEGATIVELY AFFECT OUR BUSINESS
Our operations are managed by a small number of key executive officers. The
loss of any of these officers could have a negative effect on our business. We
believe that our growth and future success will depend in large part on our
continued ability to attract and retain highly skilled and qualified personnel.
The competition for qualified personnel in the telecommunications industry is
intense. We cannot assure you that we will be able to hire or retain necessary
personnel. The loss of senior management or the failure to recruit additional
qualified personnel in the future could significantly impede our financial
plans, network development, marketing and other objectives. Although we have
designed incentive and compensation programs to retain key employees and have
entered into employment agreements with certain executive officers, we cannot
assure you as to the continued availability of qualified key executive officers.
See "Management" (page 53).
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COUNTRY AND EUROPEAN COMMUNITY ECONOMIC, POLITICAL AND LEGAL CONSIDERATIONS
The majority of our investments are, and will continue to be, in Europe.
Risks to these investments include the loss of or damage to property from
terrorism and other political risks (such as increased taxes or changes in law
or governmental regulation).
POTENTIAL DOWNGRADE IN RATING OF NOTES
On December 9, 1998, Standard & Poor's placed us on CreditWatch with
negative implications. Consequently, the rating of the notes may be downgraded
from their current rating.
ENFORCING JUDGMENTS AGAINST OUR ASSETS OUTSIDE U.S. COULD BE DIFFICULT
All of our assets are located outside the United States. As a result, it
will be necessary for you to comply with foreign laws in order for you to
enforce judgments against our assets obtained in a U.S. court. You will also
have to comply with foreign laws in order to foreclose upon our assets. In
addition, it may not be possible for you to: (i) effect service of process
within the United States upon us or (ii) enforce U.S. court judgements against
us that are predicated upon U.S. federal securities laws. See "Service of
Process and Enforceability of Civil Liabilities" (page vi).
LIQUID TRADING MARKET FOR THE NOTES MAY NOT DEVELOP
There is no established trading market for the notes. The initial
purchasers in the private offering informed us that they intended to make a
market in the outstanding notes and, if issued, these exchange notes. However,
the initial purchasers are under no obligation to do so and may discontinue
making a market at any time without notice.
The notes are expected to be listed on the Luxembourg Stock Exchange.
Nonetheless, the liquidity of any market for the notes will depend upon the
following:
- the number of holders of the notes;
- our performance;
- the market for similar securities; and
- the prospects for our industry generally.
Also, the market for non-investment grade debt like the notes has been subject
to substantial price swings. Therefore, it is not certain that an active trading
market will develop or, if a market develops, what the liquidity of that market
will be.
CONSEQUENCES OF FAILURE TO EXCHANGE YOUR NOTES FOR EXCHANGE NOTES
If you do not tender your outstanding notes to be exchanged in this
exchange offer, your notes will remain restricted securities and will be subject
to certain transfer restrictions. As restricted securities, your outstanding
notes:
- may be resold only if registered pursuant to the Securities Act of 1933,
if an exemption from registration is available thereunder, or if neither
such registration nor such exemption is required by law; and
- shall bear a legend restricting transfer in the absence of registration
or an exemption therefrom.
In addition, a holder of outstanding notes who desires to sell or otherwise
dispose of all or any part of its outstanding notes under an exemption from
registration under the Securities Act of 1933, if requested by us, must deliver
to us an opinion of independent counsel experienced in Securities Act matters,
reasonably satisfactory in form and substance to us, that such exemption is
available.
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POSSIBLE INABILITY TO PURCHASE NOTES UPON A CHANGE OF CONTROL
Upon certain change of control events, you, as a holder of the notes, can
require us to purchase all or a portion of your notes at the prices stated in
this prospectus. Our ability to repurchase your notes upon a change of control
event will be limited by our existing contractual obligations and those of our
subsidiaries. An inability to obtain adequate financial resources also might
prevent us from repurchasing the notes. Our failure to purchase all of the notes
tendered for purchase upon the occurrence of a change of control event will
constitute an event of default under the indentures relating to the notes.
The phrase "all or substantially all" is used to define a change of control
event where there has been a sale of assets. There has been no clearly
established meaning under the relevant law for this phrase and it is subject to
judicial interpretation. Accordingly, there may be uncertainty in ascertaining
whether a particular transaction would involve a disposition of "all or
substantially all" of the assets of a person. Therefore, it may be unclear
whether a change of control event has occurred and whether the notes are subject
to an offer to purchase.
The change of control provision might not afford you protection in the
event of our reorganization, restructuring, merger or other similar transaction
that may adversely affect you, as a holder of the notes. This is because these
transactions may not involve a shift in voting power or beneficial ownership of
the magnitude required to be a change of control event. A takeover,
recapitalization or similar transaction involving our Company does not permit
you, as a holder of the notes, to require us to purchase or redeem the notes
unless the transaction also constitutes a change of control as discussed above.
RISKS ASSOCIATED WITH POTENTIAL FAILURE OF OUR SYSTEMS TO RECOGNIZE YEAR 2000
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 failures,
miscalculations or errors causing disruptions of operations or other business
problems, including among others, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
We are undertaking a comprehensive program to address the Year 2000 issue
with respect to the following:
- Our information technology systems;
- Our non-information technology systems;
- Our business partners;
- The systems of our telecommunications, hardware and software vendors; and
- Our customers.
Our Year 2000 program involves four phases: (1) a wide ranging assessment
of Year 2000 problems that might affect us; (2) the development and
implementation of remedies to address discovered problems; (3) preventing future
Year 2000 problems from arising; and (4) the testing of our system. We completed
phase 1 at the end of the fourth quarter of 1998. We began phases 2, 3 and 4 of
this program during the first quarter of 1999. These phases are expected to be
completed during the second quarter of 1999.
The proper functioning of our systems also depends on the proper
functioning of systems of third parties, such as our telecommunications,
hardware and software vendors and our customers. In addition to currently
identifying our own applications that will not be Year 2000 compliant, we are
taking steps to determine whether third parties are doing the same. The failure
of third parties to remedy their own Year 2000 problems may cause business
interruptions or shutdown, financial loss, regulatory actions, reputational harm
and/or legal liability. We cannot assure you that our Year 2000 program or the
programs of third parties who do business with us will be effective or that our
estimates about the timing and cost of completing our program will be accurate.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Year 2000." (page 36)
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USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
exchange notes offered hereby (the "Exchange Notes"). In consideration for
issuing the Exchange Notes contemplated herein, the Company will receive in
exchange Outstanding Notes (as defined below) in like principal amount. The
Outstanding Notes surrendered in exchange for the Exchange Notes will be retired
and canceled and cannot be reissued. Accordingly, issuance of the Exchange Notes
will not result in any change in the Indebtedness (as defined on page 84) of the
Company.
The net proceeds from the January 4, 1999 private offering (the "Offering")
of $200,000,000 10 3/8% Senior Notes due 2009 (the "Outstanding Dollar Notes")
and E85,000,000 10 3/8% Senior Notes Due 2006 (the "Outstanding Euro Notes" and
together with the Outstanding Dollar Notes, the "Outstanding Notes") of the
Company were approximately $193.2 million and E82.1 million, respectively, after
deducting underwriting discounts and commissions and estimated fees and
expenses. We plan to use the net proceeds from the Offering to finance the cost
of network assets to permit the network expansion beyond the originally
contemplated scope, including transatlantic capacity, enhancing the capacity and
speed of our network and continuing the build-out of our network.
THE EXCHANGE OFFER
GENERAL
In connection with the Offering, the Company entered into a registration
rights agreement with Donaldson, Lufkin & Jenrette, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Bear, Stearns & Co. Inc., BT Alex. Brown
Incorporated, and Lehman Brothers Inc. (the "Initial US Purchasers") relating to
the Outstanding Dollar Notes (the "Dollar Registration Rights Agreement") and a
registration rights agreement with Donaldson Lufkin & Jenrette International,
Merrill Lynch International, Bear Stearns International Limited, BT Alex. Brown
International, a division of Bankers Trust International, PLC, and Lehman
Brothers International (Europe) (the "Initial Euro Purchasers," and together
with the Initial US Purchasers, the "Initial Purchasers") relating to the
Outstanding Euro Notes (the "Euro Registration Rights Agreement," and together
with the Dollar Registration Rights Agreement, the "Registration Rights
Agreements") and agreed to (i) file within 90 days, and use its reasonable best
efforts to cause to be declared effective within 135 days of the date of the
original issuance of the Outstanding Notes a registration statement (the
"Exchange Offer Registration Statement") of which this Prospectus is a part with
respect to a registered offer to exchange the Outstanding Notes for the Exchange
Notes with terms identical in all material respects to the Outstanding Notes
(the "Exchange Offer") and (ii) use its reasonable best efforts to cause the
Exchange Offer to be consummated on or before 30 days after the date on which
the Registration Statement is declared effective by the Commission.
If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the Commission, the Company is not permitted to
effect the Exchange Offer, (ii) the Exchange Offer is not commenced on or prior
to the date 135 days after the original issue date (January 4, 1999) of the
Outstanding Notes, (iii) the Exchange Offer is not, for any reason, consummated
on or prior to the 165th day after the original issue date (January 4, 1999) of
the Outstanding Notes, (iv) any Holder of Private Exchange Securities (as
defined in the Registration Rights Agreements) so requests, (v) in the case of
any Holder that participates in the Exchange Offer, such Holder does not receive
Exchange Notes on the date of the exchange that may be sold without restriction
under state and federal securities laws, or (vi) any Initial Purchaser or any
affiliate (as defined under the Securities Act of 1933) is required to deliver a
prospectus in connection with sales of Outstanding Notes (the occurrence of any
such event, a "Shelf Registration Event"), then, in the case of each of clauses
(i) to and including (v) of this sentence, the Company shall promptly deliver to
the Holders of such Outstanding Notes and the Trustee notice thereof and shall
thereafter file an Initial Shelf Registration Statement pursuant to the terms of
the applicable Registration Rights Agreement.
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The Company agrees to pay, as liquidated damages, additional interest on
the Outstanding Notes if:
(i) either the Exchange Offer Registration Statement or the Initial Shelf
Registration Statement with respect to such Notes has not been filed on or prior
to the 90th day after the original issue date (January 4, 1999) of the
Outstanding Notes (unless, with respect to the Exchange Offer Registration
Statement, a Shelf Registration Event described in clause (i) of the preceding
paragraph shall have occurred prior to the 90th day after the original issue
date (January 4, 1999) of the Outstanding Notes; or (ii) either the Exchange
Offer Registration Statement or the Initial Shelf Registration Statement with
respect to such Notes is not declared effective by the Commission on or prior to
the 135th day after the original issue date (January 4, 1999) of the Outstanding
Notes (unless, with respect to the Exchange Offer Registration Statement, a
Shelf Registration Event described in clause (i) of the preceding paragraph
shall have occurred); or (iii) (A) the Company has not exchanged Exchange Notes
for all the Outstanding Notes validly tendered and not withdrawn in accordance
with the terms of the Exchange Offer with respect to such Notes on or prior to
the fifth day after the Expiration Date (as defined below), or (B) the Exchange
Offer Registration Statement with respect to such Notes ceases to be effective
at any time prior to the Expiration Date, or (C) if applicable, any Shelf
Registration Statement with respect to such Notes has been declared effective
and such Shelf Registration Statement ceases to be effective at any time during
the Effectiveness Period (as defined in the Registration Rights Agreements);
provided, however, that the additional interest rate on the Outstanding Notes
may not exceed at any one time in the aggregate 150 basis points, provided,
further, that (1) upon the filing of the Exchange Offer Registration Statement
or a Shelf Registration Statement with respect to Notes as required hereunder
(in the case of clause (i) of this paragraph), (2) upon the effectiveness of the
Exchange Offer Registration Statement or the Shelf Registration Statement as
required hereunder (in the case of clause (ii) of this paragraph) or (3) upon
the exchange of Exchange Notes for all Outstanding Notes validly tendered and
not withdrawn (in the case of clause (iii)(A) of this paragraph), or upon the
effectiveness of the Exchange Offer Registration Statement which had ceased to
remain effective (in the case of (iii)(B) of this paragraph), or upon the
effectiveness of the Shelf Registration Statement which had ceased to remain
effective (in the case of (iii)(C) of paragraph), additional interest on the
Outstanding Notes as a result of such clause shall cease to accrue (but any
accrued amount shall be payable). For more information regarding registration
rights and payment of additional interest, see "Description of the Exchange
Notes -- Exchange Offer; Registration Rights; Additional Interest."
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying letter of transmittal (the "Letter of Transmittal"), the
Company will accept all Outstanding Notes validly tendered prior to 5:00 p.m.,
New York City time, in the case of Outstanding Dollar Notes, and 5:00 p.m.,
London time, in the case of Outstanding Euro Notes, on , 1999 (the
"Expiration Date"). The Company will issue $1,000 principal amount of Exchange
Notes in exchange for each $1,000 principal amount of Outstanding Dollar Notes
and E1,000 principal amount of Exchange Notes in exchange for each E1,000
principal amount of Outstanding Euro Notes accepted in the Exchange Offer.
Holders may tender some or all of their Outstanding Notes pursuant to the
Exchange Offer in denominations of $1,000 or E1,000, as the case may be, and
integral multiples thereof.
Based on no-action letters issued by the staff of the Commission to third
parties, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Outstanding Notes may be offered for resale,
resold and otherwise transferred by any holder thereof (other than (i) a
broker-dealer who purchased such Outstanding Notes directly from the Company to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act or (ii) a person that is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery requirements of the Securities Act,
provided that the holder is acquiring the Exchange Notes in its ordinary course
of business and is not participating and does not intend to participate, and has
no arrangements or understanding with any person to participate, in the
distribution of the Exchange Notes. Holders of Outstanding Notes wishing to
accept the Exchange Offer must represent to the Company that such conditions
have been met.
Each broker-dealer that receives Exchange Notes in exchange for Outstanding
Notes held for its own account, as a result of market-making or other trading
activities, must acknowledge that it will deliver a
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prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, such
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. The Prospectus, as it may be amended or
supplemented from time to time, may be used by such broker-dealer in connection
with resales of Exchange Notes received in exchange for Outstanding Notes. The
Company has agreed that, for a period of 180 days after the Expiration Date, it
will make this Prospectus and any amendment or supplement to this Prospectus
available to any such broker-dealer for use in connection with any such resale.
See "Plan of Distribution."
As of the date of this Prospectus, $200 million aggregate principal amount
of the Outstanding Dollar Notes and E85 million aggregate principal amount of
the Outstanding Euro Notes are outstanding. In connection with the issuance of
the Outstanding Notes, the Company arranged for the Outstanding Dollar Notes
initially purchased by Qualified Institutional Buyers to be issued and
transferable in book-entry form through the facilities of DTC, acting as
depositary for the Outstanding Dollar Notes. The Company arranged for the
Outstanding Euro Notes initially purchased by certain eligible persons in
"offshore transactions" (within the meaning of Regulation S under the Securities
Act) pursuant to Regulation S under the Securities Act to be issued and
transferable in book-entry form through the facilities of Euroclear or CEDEL,
acting as depositary for the Outstanding Euro Notes. The Exchange Notes will
also be issuable and transferable in book-entry form through DTC, Euroclear or
CEDEL, as the case may be.
This Prospectus, together with the accompanying Letter of Transmittal, is
being sent to all registered holders as of , 1999 (the "Record
Date").
The Company shall be deemed to have accepted validly tendered Outstanding
Notes when, as and if the Company has given oral or written notice thereof to
the relevant Exchange Agent. See "-- Exchange Agent." The relevant Exchange
Agent will act as agent for the tendering holders of Outstanding Notes for the
purpose of receiving Exchange Notes from the Company and delivering Exchange
Notes to such holders.
If any tendered Outstanding Notes are not accepted for exchange because of
an invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted Outstanding Notes will be returned, without
expenses, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
Holders of Outstanding Notes who tender in the Exchange Offer 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
Outstanding Notes pursuant to the Exchange Offer. The Company will pay all
charges and expenses, other than certain applicable taxes, in connection with
the Exchange Offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean , 1999 unless the
Company, in its sole discretion, extends the Exchange Offer, in which case the
term "Expiration Date" shall mean the latest date to which the Exchange Offer is
extended.
In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
record holders of Outstanding Notes an announcement thereof, each prior to 9:00
a.m., New York City time, in the case of Outstanding Dollar Notes, and prior to
9:00 a.m., London time, in the case of Outstanding Euro Notes, on the next
business day after the previously scheduled Expiration Date. Such announcement
may state that the Company is extending the Exchange Offer for a specified
period of time.
The Company reserves the right (i) to delay acceptance of any Outstanding
Notes, to extend the Exchange Offer or to terminate the Exchange Offer and to
refuse to accept Outstanding Notes not previously accepted, if any of the
conditions set forth herein under "-- Termination" shall have occurred and shall
not have been waived by the Company (if permitted to be waived by the Company),
by giving oral or written notice of such delay, extension or termination to the
Exchange Agent, and (ii) to amend the terms of the Exchange Offer in any manner
deemed by it to be advantageous to the holders of the Outstanding Notes. Any
25
<PAGE> 33
such delay in acceptance, extension, termination or amendment will be followed
as promptly as practicable by oral or written notice thereof. If the Exchange
Offer is amended in a manner determined by the Company to constitute a material
change, the Company will promptly disclose such amendment in a manner reasonably
calculated to inform the holders of the Outstanding Notes of such amendment.
Without limiting the manner by which the Company may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the Exchange Offer, the Company shall have no obligation to publish, advertise,
or otherwise communicate any such public announcement, other than by making a
timely release to the Dow Jones News Service.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from January 4, 1999, payable
semiannually in arrears on January 15 and July 15 of each year, commencing on
July 15, 1999, at the rate of 10 3/8% per annum. Holders of Outstanding Notes
whose Outstanding Notes are accepted for exchange will be deemed to have waived
the right to receive any payment in respect of interest on the Outstanding Notes
accrued from January 4, 1999 until the date of the issuance of the Exchange
Notes. Consequently, holders who exchange their Outstanding Notes for Exchange
Notes will receive the same interest payment on July 15, 1999 (the first
interest payment date with respect to the Outstanding Notes and the Exchange
Notes) that they would have received had they not accepted the Exchange Offer.
PROCEDURES FOR TENDERING
Dollar Notes
To tender Outstanding Dollar Notes in the Exchange Offer, a holder must
complete, sign and date the Letter of Transmittal, or a facsimile thereof, have
the signatures thereon guaranteed if required by the Letter of Transmittal, and
mail or otherwise deliver such Letter of Transmittal or such facsimile, together
with the Outstanding Dollar Notes (unless such tender is being effected pursuant
to the procedure for book-entry transfer described below) and any other required
documents, to the Exchange Agent in New York prior to 5:00 p.m., New York City
time, on the Expiration Date.
Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system, including Euroclear and CEDEL, may make book-entry
delivery of the Outstanding Notes by causing DTC to transfer such Outstanding
Notes into the Exchange Agent's account in accordance with DTC's procedure for
such transfer. Although delivery of Outstanding Dollar Notes may be effected
through book-entry transfer into the Exchange Agent's account at DTC, Euroclear
or CEDEL, as the case may be, the Letter of Transmittal (or facsimile thereof),
with any required signature guarantees and any other required documents, must,
in any case, be transmitted to and received or confirmed by the Exchange Agent
at its address set forth herein under "-- Exchange Agent" prior to 5:00 p.m.,
New York City time, on the Expiration Date.
DELIVERY OF ALL DOCUMENTS RELATING TO THE TENDER OF OUTSTANDING DOLLAR NOTES
MUST BE MADE TO THE EXCHANGE AGENT AT ITS ADDRESS SET FORTH HEREIN. DELIVERY OF
DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY
TO THE EXCHANGE AGENT.
Euro Notes
To tender Outstanding Euro Notes in the Exchange Offer, a holder must
effect such tender pursuant to the standard operating procedures of Euroclear or
CEDEL, as the case may be, for book-entry transfers, prior to 5:00 p.m., London
time, on the Expiration Date.
Any financial institution that is a participant in the Euroclear or CEDEL
system, as the case may be, may make book-entry delivery of the Outstanding Euro
Notes by causing Euroclear or CEDEL in accordance with Euroclear's or CEDEL's
standard procedures for such transfer. In lieu of delivering a letter of
transmittal to the Exchange Agent, a computer-generated message, in which the
holder of the Outstanding Euro Notes acknowledges and agrees to be bound by the
terms of the letter of transmittal, must be transmitted and received or
confirmed by Euroclear or CEDEL, as the case may be, prior to 5:00 p.m., London
time, on the Expiration Date.
26
<PAGE> 34
The tender by a holder of Outstanding Notes will constitute an agreement
between such holder and the Company in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal.
Holders may also request that their respective brokers, dealers, commercial
banks, trust companies or nominees effect such tender for such holders.
The method of delivery of Outstanding Notes and, in the case of Outstanding
Dollar Notes, the Letters of Transmittal and all other required documents, to
the relevant Exchange Agent is at the election and risk of the holders. Instead
of delivery by mail, it is recommended that holders use an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
timely delivery. No Letter of Transmittal or Outstanding Notes should be sent to
the Company.
Only a holder of Outstanding Notes may tender such Outstanding Notes in the
Exchange Offer. The term "holder" with respect to the Exchange Offer means any
person in whose name Outstanding Notes are registered on the books of the
Company or any other person who has obtained a properly completed bond power
from the registered holder, or any person whose Outstanding Dollar Notes are
held of record by DTC who desires to deliver such Outstanding Dollar Notes by
book-entry transfer at DTC or any person whose Outstanding Euro Notes are held
of record by Euroclear or CEDEL, who desires to deliver such Outstanding Euro
Notes by book-entry transfer at Euroclear or CEDEL, as the case may be.
Any beneficial holder whose Outstanding Notes are registered in the name of
his broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact such registered holder promptly and instruct
such registered holder to tender on his behalf. If such beneficial holder wishes
to tender on his own behalf, such beneficial holder must, prior to completing
and executing the Letter of Transmittal and delivering his Outstanding Notes,
either make appropriate arrangements to register ownership of the Outstanding
Notes in such holder's name or obtain a properly completed bond power from the
registered holder. The transfer of record ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" (an "Eligible Institution")
within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), unless the Outstanding Notes tendered pursuant
thereto are tendered (i) by a registered holder who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" on
the Letter of Transmittal or (ii) for the account of an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Outstanding Notes listed therein, such Outstanding
Notes must be endorsed or accompanied by appropriate bond powers which authorize
such person to tender the Outstanding Notes on behalf of the registered holder,
in either case signed as the name of the registered holder or holders appears on
the Outstanding Notes.
If the Letter of Transmittal or any Outstanding Notes or bond powers are
signed by trustees, 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, unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
All the questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Outstanding Notes will be
determined by the Company in its sole discretion, which determinations will be
final and binding. The Company reserves the absolute right to reject any and all
Outstanding Notes not validly tendered or any Outstanding Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the absolute right to waive any
irregularities or conditions of tender as to particular Outstanding Notes. The
Company's 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
27
<PAGE> 35
with tenders of Outstanding Notes must be cured within such time as the Company
shall determine. Neither the Company, the Exchange Agent nor any other person
shall be under any duty to give notification of defects or irregularities with
respect to tenders of Outstanding Notes nor shall any of them incur any
liability for failure to give such notification. Tenders of Outstanding Notes
will not be deemed to have been made until such irregularities have been cured
or waived. Any Outstanding 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 without cost by the Exchange Agent to the
tendering holder of such Outstanding Notes unless otherwise provided in the
Letter of Transmittal, as soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to (a)
purchase or make offers for any Outstanding Notes that remain outstanding
subsequent to the Expiration Date, or, as set forth under "Termination," to
terminate the Exchange Offer and (b) to the extent permitted by applicable law,
purchase Outstanding Notes in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or offers may differ
from the terms of the Exchange Offer.
By tendering, each holder of Outstanding Notes will represent to the
Company that, among other things, 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,
that neither the holder nor any other person has an arrangement or understanding
with any person to participate in the distribution of the Exchange Notes and
that neither the holder nor any such other person is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act.
GUARANTEED DELIVERY PROCEDURES FOR DOLLAR NOTES
Holders who wish to tender their Outstanding Dollar Notes and (i) whose
Outstanding Dollar Notes are not immediately available, or (ii) who cannot
deliver their Outstanding Dollar Notes, the Letter of Transmittal, or any other
required documents to the Exchange Agent prior to the Expiration Date, or if
such holder cannot complete the procedure for book-entry transfer on a timely
basis, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed "notice of
guaranteed delivery" in the form accompanying this Prospectus (by facsimile
transmission, mail or hand delivery) setting forth the name and address of
the holder of the Outstanding Dollar Notes, the certificate number or
numbers of such Outstanding Dollar Notes and the principal amount of
Outstanding Dollar Notes tendered, stating that the tender is being made
thereby, and guaranteeing that, within five business days after the
Expiration Date, the Letter of Transmittal (or facsimile thereof), together
with the certificate(s) representing the Outstanding Dollar Notes to be
tendered in proper form for transfer and any other documents required by
the Letter of Transmittal, will be deposited by the Eligible Institution
with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), together with the certificate(s) representing all
tendered Outstanding Dollar Notes in proper form for transfer (or
confirmation of a book-entry transfer into the Exchange Agent's account at
DTC, Euroclear or CEDEL, as the case may be, of Outstanding Dollar Notes
delivered electronically) and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within five business days
after the Expiration Date.
These guaranteed delivery procedures are not available to holders of
Outstanding Euro Notes.
28
<PAGE> 36
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Outstanding Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, in the case of
Outstanding Dollar Notes, and 5:00 p.m., London time, in the case of Outstanding
Euro Notes, on the Expiration Date unless previously accepted for exchange.
To withdraw a tender of Outstanding Dollar Notes in the Exchange Offer, a
written or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the business day prior to the Expiration Date and prior to acceptance
for exchange thereof by the Company. To withdraw a tender of Outstanding Euro
Notes in the Exchange Offer, a notice of withdrawal must be transmitted to
Euroclear and CEDEL, as the case may be, in accordance with the standard
operating procedures of Euroclear or CEDEL, as the case may be, prior to 5:00
p.m., London time, on the business day prior to the Expiration Date and prior to
acceptance for exchange thereof by the Company. Any such notice of withdrawal
must (i) specify the name of the person having deposited the Outstanding Notes
to be withdrawn (the "Depositor"), (ii) identify the Outstanding Notes to be
withdrawn (including the certificate number or numbers and principal amount of
such Outstanding Notes), (iii) be signed by the Depositor in the same manner as
the original signature on the Letter of Transmittal by which such Outstanding
Notes were tendered (including any required signature guarantees) or be
accompanied by documents of transfers sufficient to permit the Trustee with
respect to the Outstanding Notes to register the transfer of such Outstanding
Notes into the name of the Depositor withdrawing the tender and (iv) specify the
name in which any such Outstanding 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) for such withdrawal notices will be determined by
the Company, whose determination shall be final and binding on all parties. Any
Outstanding Notes so withdrawn will be deemed not to have been validly tendered
for purposes of the Exchange Offer and no Exchange Notes will be issued with
respect thereto unless the Outstanding Notes so withdrawn are validly tendered.
Any Outstanding Notes which have been tendered but which are not accepted for
exchange 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 Outstanding Notes may be tendered by
following one of the procedures described above under "-- Procedures for
Tendering" at any time prior to the Expiration Date.
TERMINATION
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or Exchange Notes for, any Outstanding Notes
not therefore accepted for exchange, and may terminate or amend the Exchange
Offer as provided herein before the acceptance of such Outstanding Notes if: (i)
any action or proceeding is instituted or threatened in any court or by or
before any governmental agency with respect to the Exchange Offer, which, in the
reasonable judgment of the Company, might materially impair the Company's
ability to proceed with the Exchange Offer or (ii) any law, statute, rule or
regulation is proposed, adopted or enacted, or any existing law, statute, rule
or regulation is interpreted by the staff of the Commission or court of
competent jurisdiction in a manner, which, in the reasonable judgment of the
Company, might materially impair the Company's ability to proceed with the
Exchange Offer.
If the Company determines that it may terminate the Exchange Offer, as set
forth above, the Company may (i) refuse to accept any Outstanding Notes and
return any Outstanding Notes that have been tendered to the holders thereof,
(ii) extend the Exchange Offer and retain all Outstanding Notes tendered prior
to the Expiration of the Exchange Offer, subject to the rights of such holders
of tendered Outstanding Notes to withdraw their tendered Outstanding Notes, or
(iii) waive such termination event with respect to the Exchange Offer and accept
all properly tendered Outstanding Notes that have not been withdrawn. If such
waiver constitutes a material change in the Exchange Offer, the Company will
disclose such change by means of a supplement to this Prospectus that will be
distributed to each registered holder of Outstanding Notes, and the Company will
extend the Exchange Offer for a period of five to ten business days, depending
upon the significance of the waiver and the manner of disclosure to the
registered holders of the Outstanding Notes, if the Exchange Offer would
otherwise expire during such period.
29
<PAGE> 37
EXCHANGE AGENT FOR DOLLAR NOTES
The Bank of New York, the Trustee under the Indentures, has been appointed
as Exchange Agent for the exchange of the Outstanding Dollar Notes. Questions
and requests for assistance relating to the exchange of the Outstanding Dollar
Notes and requests for additional copies of this Prospectus or of the Letter of
Transmittal should be directed to the Exchange Agent addressed as follows:
<TABLE>
<S> <C>
By Registered or Certified Mail: The Bank of New York
101 Barclay Street
7 East
New York, New York 10286
Attention: Enrique Lopez
Reorganization Section
By Hand or Overnight Delivery: The Bank of New York
101 Barclay Street
Corporate Trust Services Window
Ground Level
New York, New York 10286
Attention: Enrique Lopez
Reorganization Section, 7 East
Facsimile Transmission: (212) 815-6339
Confirm by Telephone: (212) 815-2742
</TABLE>
EXCHANGE AGENT FOR EURO NOTES
The Bank of New York, London branch, has been appointed as Exchange Agent
for the exchange of the Outstanding Euro Notes. Questions and requests for
assistance relating to the exchange of the Outstanding Euro Notes should be
directed to the Exchange Agent in London as addressed as follows:
<TABLE>
<S> <C>
By Mail or Hand Delivery: The Bank of New York
London Branch
46 Berkeley Street
W1X 6AA London
United Kingdom
Attention: Trevor Blewer
Corporate Trust Administration
Facsimile Transmission: (44 171) 322 6399
Confirm by Telephone: (44 171) 322 7298
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Company and its affiliates in person, by
telegraph or telephone.
The Company will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
the Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. The Company may also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of this Prospectus, Letters of Transmittal and related
documents to the beneficial owners of the Outstanding Notes and in handling or
forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer,
including fees and expenses of the Exchange Agent and Trustee and accounting and
legal fees, will be paid by the Company.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Outstanding Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or Outstanding Notes
30
<PAGE> 38
for principal amounts not tendered or accepted for exchange are to be delivered
to, or are to be registered or issued in the name of, any person other than the
registered holder of the Outstanding Notes tendered, or if tendered Outstanding
Notes are registered in the name of any person other than the person signing the
Letter of Transmittal, or if a transfer tax is imposed for any reason other than
the exchange of Outstanding Notes pursuant to the Exchange Offer, then the
amount of any such transfer taxes (whether imposed on the registered holder or
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 Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering holder.
31
<PAGE> 39
CAPITALIZATION
The following table sets forth the historical and as adjusted
capitalization of the Company as of September 30, 1998. This table should be
read in conjunction with the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Company's consolidated financial
statements and notes thereto included elsewhere in this Offering Memorandum.
There has been no material change in the capitalization of the Company since
September 30, 1998.
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1998
----------------------
AS
ACTUAL ADJUSTED
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................... $185,034 $474,705
======== ========
Restricted cash............................................. $ 29,467 $ 29,467
======== ========
Long-term debt:
11 1/2% Senior Notes due 2007............................. $265,000 $265,000
10 3/8% Senior Notes due 2009............................. -- 200,000
10 3/8% Senior Notes due 2006............................. -- 99,816(1)
Capital lease obligations................................. 187,900 187,900
Other..................................................... 367 367
-------- --------
Total long-term debt.............................. 453,267 753,083
-------- --------
Minority interest........................................... 27,710 27,710
Shareholders' Equity:
Common stock, 1,000 Dutch guilders par value (297,000
shares authorized and 190,468 shares issued and
outstanding)........................................... 96,757 96,757
Additional paid-in capital................................ 11,093 11,093
Accumulated other comprehensive loss...................... (2,488) (2,488)
Accumulated deficit....................................... (87,550) (87,550)
-------- --------
Total shareholders' equity........................ 17,812 17,812
-------- --------
Total capitalization.............................. $498,789 $798,605
======== ========
</TABLE>
- ---------------
(1) Assumes Euro conversion rate of 1.1743.
32
<PAGE> 40
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data of the Company presented below
under the captions Statement of Operations Data for the years ended December 31,
1995, 1996 and 1997 and Balance Sheet Data as of December 31, 1995, 1996 and
1997 has been derived from consolidated financial statements of the Company
audited by Ernst & Young Reviseurs d'Enterprises S.C.C. The selected
consolidated financial data of the Company as of September 30, 1998 and for the
nine months ended September 30, 1997 and 1998 has been derived from unaudited
financial statements which, in the opinion of management, include all
adjustments, consisting of only normal recurring accruals, necessary for a fair
presentation of such information for the unaudited interim periods. The
operating results for the nine months ended September 30, 1997 and 1998 are not
necessarily indicative of results for the full fiscal year. The Company did not
declare or pay any cash dividends during the periods indicated. The following
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
consolidated financial statements and notes thereto included elsewhere in this
Offering Memorandum.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ -------------------
1995 1996 1997 1997 1998(1)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................................ $ -- $ 48 $ 5,373 $ 2,262 $ 42,933
Operating costs and expenses:
Cost of revenues.............................. -- 4,694 9,972 5,989 36,677
Selling, general and administrative........... 6,637 10,552 18,493 10,177 18,201
Loss from operations............................ (6,637) (15,198) (23,092) (13,904) (11,945)
Other income/(expense):
Interest income............................... 125 508 6,596 2,729 7,844
Interest expense.............................. (9) (153) (12,826) (4,593) (23,419)
Foreign currency (losses) gains............... 19 (1,126) (367) 93 (5,227)
Net loss................................. (6,502) (15,969) (29,689) (15,675) (35,170)
OTHER DATA:
EBITDA(2)....................................... $(6,626) $(14,540) $ (19,337) $(12,259) $ 3,927
Net cash (used in) provided by operating
activities.................................... (2,655) (11,540) (4,417) (5,803) 20,527
Net cash used in investing activities........... (4,405) (20,781) (107,466) (74,176) (34,541)
Net cash provided by............................ 11,644 28,924 317,500 320,973 493
Deficiency of earnings to fixed charges(3)...... (6,502) (15,969) (29,689) (15,675) (33,351)
</TABLE>
<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31, SEPTEMBER 30, 1998
----------------------------- -------------------------
1995 1996 1997 ACTUAL AS ADJUSTED(4)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total current assets......................... $ 6,430 $ 7,528 $249,325 $274,145 $563,816
Property and equipment, net.................. 4,671 20,303 204,944 362,322 362,322
Total assets................................. 11,101 27,831 495,850 681,518 981,334
Total current liabilities.................... 6,785 11,915 61,980 162,122 162,122
Long-term debt............................... 10 499 383,028 453,267 753,083
Total liabilities............................ 6,795 12,414 445,008 635,996 935,812
Shareholders' loans.......................... 8,353 34,863 -- -- --
Shareholders' equity (deficit)............... (4,047) (19,446) 50,842 17,812 17,812
</TABLE>
- ---------------
(1) The September 30, 1998 financial data reflects the effects of the
acquisition of Ebone.
(2) EBITDA is earnings (loss) from operations before foreign currency gains
(losses), interest, taxes, depreciation and amortization. EBITDA is a
measure of a company's performance commonly used in the telecommunications
industry, but should not be construed as an alternative to net income
(loss) determined in accordance with GAAP as an indicator of operating
performance or as an alternative to cash from operating activities
determined in accordance with GAAP as a measure of liquidity.
(3) Because of the Company's historic losses, the Company has experienced a
deficiency of earnings to fixed charges throughout its existence. The
deficiency of earnings to fixed charges equals the loss from continuing
operations before income taxes minus fixed charges. Fixed charges consist
of interest on all indebtedness.
(4) Adjusted to reflect the Offering and the application of net proceeds as
described in "Use of Proceeds."
33
<PAGE> 41
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the financial condition and results of
operations of the Company as of September 30, 1998 and 1997, December 31, 1997,
1996 and 1995 and for the three and nine months ended September 30, 1998 and
1997 and for the years ended December 31, 1997, 1996 and 1995. The following
discussion should be read in conjunction with the Company's audited consolidated
financial statements, the notes related thereto and the other financial data
included elsewhere in this Offering Memorandum. Certain statements contained in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" including, without limitation, those concerning (i) projected
traffic volume, (ii) future revenue and costs and (iii) changes in the Company's
competitive environment, contain forward-looking statements concerning the
Company's operations, economic performance and financial condition. Because such
statements involve risks and uncertainties, actual results may differ materially
from those expressed or implied by such forward-looking statements. Factors that
could cause such differences include, but are not limited to, those discussed
under "Risk Factors."
OVERVIEW
The Company is continuing to develop and operate segments of a pan-European
high capacity fiber optic network. The Company began delivering services to
customers in November 1996 when the Brussels-Amsterdam route came into
operation. The cities of London and Paris came into commercial operation during
the last quarter of 1997 and in the first and second quarters of 1998,
Frankfurt, Zurich, Geneva, Stuttgart, Duesseldorf and Munich were added to the
Network. Milan was added to the Network during the third quarter of 1998. On
June 24, 1998, the Company acquired a 75% interest in Ebone, a Tier 1 Internet
backbone provider that principally serves as a carriers' carrier for European
Internet service providers. The results of Ebone have been included in the
accompanying consolidated financial statements from the date of the acquisition.
RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 1998
Revenues. The Company's consolidated revenues for the three and nine months
ended September 30, 1998 were $27.0 million and $42.9 million, respectively,
compared to $1.7 million and $2.3 million for the comparable periods in 1997.
The growth in revenue is attributable to the continued deployment of the
Company's Network and the inclusion of revenues from Ebone from the date of
acquisition, whose revenues were $7.4 million for the three months ended
September 30, 1998.
Cost of Revenues. The Company's cost of revenues for the three and nine
months ended September 30, 1998 was $19.7 million and $36.7 million,
respectively, compared to $2.7 million and $6.0 million for the comparable
periods in 1997. The increase was associated with the costs related to operating
and maintaining the Network, local access costs and the depreciation of the
Network.
Gross Margin. The Company had favorable gross margins of $7.3 million and
$6.3 million for the three and nine months ended September 30, 1998. The Company
had negative gross margins of $(1.0) million and $(3.7) million for the three
and nine months ended September 30, 1997. The improvement in gross margins
reflects the increased utilization of the Network and gross margin from Ebone
whose gross margin was $3.9 million for the three months ended September 30,
1998.
Operating Expenses. Operating expenses for the three and nine months ended
September 30, 1998 were $7.8 million and $18.2 million, respectively, as
compared to $3.8 million and $10.2 million for the comparable periods in 1997.
The increase in operating expenses is related to increased costs associated with
the growth of the Company's business operations and support personnel.
Interest. Interest expense for the three and nine months ended September
30, 1998 was $7.9 million and $23.4 million, respectively, as compared to $3.9
million and $4.6 million for the comparable periods in 1997.
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The increase was primarily attributable to the interest and related costs
associated with the issuance by the Company in August 1997 of the Existing
Notes.
Interest income for the three and nine months ended September 30, 1998 was
$1.9 million and $7.8 million, respectively as compared to $2.6 million and $2.7
million for the comparable periods in 1997. The increase in interest income was
the result of investing the excess cash generated from the issuance of the
Existing Notes in various highly liquid investments.
Foreign Currency Losses. Foreign currency losses were $2.6 million and $5.2
million for the three months and nine months ended September 30, 1998,
respectively, as compared to foreign currency gains of $0.5 million and $0.1
million for the comparable periods in 1997. The losses in 1998 were primarily
the result of foreign currency exposure relating to the Existing Notes in U.S.
dollars, other U.S. dollar cash and payables balances, losses on several forward
exchange contracts and the weakening of the dollar versus European currencies in
the third quarter of 1998.
Income Taxes. Income taxes of $1.8 million and $1.8 million for the three
and nine months ended September 30, 1998, respectively, is primarily Ebone's
income tax provision.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996 COMPARED
TO YEAR ENDED DECEMBER 31, 1995
Revenues. The Company's consolidated revenues for the year ended December
31, 1997 were $5.4 million. The revenues for the year ended December 31, 1996
were minimal and there were no revenues for the year ended December 31, 1995.
The Company's first route, Brussels-Amsterdam, began to generate revenues in the
fourth quarter of 1996 and in the fourth quarter of 1997, the
Amsterdam-London-Paris routes came into operation and began to generate
revenues.
Cost of Revenues. The Company's cost of revenues for the years ended
December 31, 1997 and 1996 were $10.0 million and $4.7 million, respectively. In
1995, the Company had no cost of revenue. The increase in cost of revenues in
1997 as compared with 1996 was associated with the costs related to operating
and maintaining the Network routes, local access costs, and the depreciation of
the Network.
Gross Margin. The Company had a negative gross margin of $(4.6) million for
both of the years ended December 31, 1997 and 1996. There were no gross margins
for the year ended December 31, 1995. The growth in the Company's revenues in
1997 as compared to 1996 was fully offset by its increase in cost of revenues
during the same period.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the years ended December 31, 1997, 1996, and 1995
were $18.5 million, $10.6 million and $6.6 million, respectively. The increase
since 1995 is reflective of the growth of the Company's business operations and
support personnel. The Company had 130 employees as of December 31, 1997 as
compared to 101 employees as of December 31, 1996 and 29 employees as of
December 31, 1995.
Interest. Interest expense for the years ended December 31, 1997 and 1996
was $12.8 million and $0.2 million, respectively. Interest expense was minimal
for the year ended December 31, 1995. The increase in interest expense in 1997
is attributable to the interest and related costs associated with the issuance
of the Existing Notes.
Interest income for the years ended December 31, 1997, 1996 and 1995 was
$6.6 million, $0.5 million and $0.1 million, respectively. The increase in 1997
was the result of investing the excess cash generated from the issuance of the
Existing Notes in various highly liquid investments.
LIQUIDITY AND CAPITAL RESOURCES
The primary sources of Company funding through September 30, 1998 have been
net proceeds of $251.3 million from the issuance of the Existing Notes, which
are general unsecured obligations, and cash equity contributions of $103.2
million in 1997.
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Development of the Company's fiber optic network is capital intensive. The
Company has spent approximately $136 million in cash on network capital
expenditures through September 30, 1998 and expects to incur an additional $654
million in cash through 2000 in order to complete the buildout of the Network.
Additionally, as of September 30, 1998, the Company has capitalized $242 million
in connection with long-term fiber lease arrangements and expects to capitalize
an additional $181 million through 2000 in order to complete the build-out of
the Network. Moreover, subsequent to September 30, 1998, the Company entered
into a contractual commitment for approximately $36.8 million, payable within
twelve months, to lease an indefeasible right of use to transatlantic capacity
for 25 years. The Company believes that the net proceeds from the issuance of
the Notes and the Existing Notes, combined with the Company's projected
internally generated funds, should be sufficient to fund such expected capital
expenditures as well as payments on the long-term fiber lease arrangements and
other cash needs. However, the actual amount and timing of the Company's future
requirements may differ materially from management's estimates. Any failure to
obtain necessary financing may require the Company to delay or abandon its plans
for deploying the remainder of the Network and would jeopardize the viability of
the Company.
The Company had working capital of $112.0 million and $187.6 million as of
September 30, 1998 and December 31, 1997, respectively. The Company had cash and
cash equivalents of $185.0 million and $204.3 million at September 30, 1998 and
December 31, 1997 respectively. The Company had $29.5 million and $57.8 million
of restricted cash at September 30, 1998 and December 31, 1997, respectively.
During the three and nine months ended September 30, 1998, operating
activities provided cash of $33.5 million and $20.5 million, respectively, and
provided cash of $7.5 million and used cash of $5.8 million for the comparable
periods in 1997. Investing activities used cash of $30.7 million and $34.5
million for the three and nine months ended September 30, 1998, respectively, as
compared to using cash of $72.4 million and $74.2 million for the comparable
periods in 1997.
The Company has developed risk management policies that establish
guidelines for managing foreign exchange risk. The Company is currently
evaluating the materiality of foreign exchange exposures in different countries
and the financial instruments available to mitigate this exposure. The Company
is designing reporting processes to monitor the potential exposure on an ongoing
basis and expects to implement this process by the end of 1998. The Company has
limited its foreign currency exposure by entering into a foreign currency swap
agreement and several forward foreign exchange contracts. The Company finds it
impractical to hedge all foreign currency exposure and, as a result, will
continue to experience foreign currency gains and losses.
YEAR 2000
The "Year 2000" issue is the result of computer programs using two digits
rather than four to define the applicable year (the "Year 2000 Issue"). Because
of this programming convention, software, hardware or firmware may recognize a
date using "00" as the year 1900 rather than the year 2000. Use of non-Year 2000
compliant programs could result in system failures, miscalculations or errors
causing disruptions of operations or other business problems, including, among
others, a temporary inability to process transactions and invoices or engage in
similar normal business activities.
Issues Posed by the Year 2000 Issue. The Company is exposed to the Year
2000 Issue in a number of ways. Among other things, the Year 2000 Issue might
affect the Company's: (i) computer hardware and software; (ii)
telecommunications equipment and other systems with embedded logic (among other
things, this includes the Company's fire detection, access control systems,
heating, ventilation and air conditioning, and uninterruptible power supply);
(iii) operating partners and organizations upon which the Company is dependent;
(iv) local access connections, upon which the Company is dependent; and (v)
supply chain.
Hermes Europe Railtel Year 2000 Compliance Program. The Company has
initiated a Year 2000 compliance program to address the aforementioned risks
which the Year 2000 Issue poses and to avoid any material loss or impact to HER
or its customers due to these risks (the "Year 2000 Compliance Program"). The
object of the Year 2000 Compliance Program is to ensure that neither the
performance nor functionality of the Company's operations are affected by dates,
prior to, during and after 2000. The scope of the Year 2000
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Compliance Program includes all of the business functions, locations and
resources which are essential to the Company. The resources which are within the
scope of the Year 2000 Compliance Program are, among other things, the Company's
computer systems, software, vendor supplied software, telecommunications
equipment, third party telecommunications partners and other Network service
suppliers, environmental and building control systems, internal communication
systems and other interfaces with third party services. As explained below, the
Company's efforts to assess its systems as well as non-system areas related to
Year 2000 compliance involve (i) a wide-ranging assessment of the Year 2000
problems that may affect the Company, (ii) the development of remedies to
address the problems discovered in the assessment phase and (iii) testing of the
remedies.
Assessment Phase. The assessment phase includes internal and third party
review of potential risks associated with the availability, integrity and
reliability of operational systems necessary to conduct business. During the
assessment phase the Company has identified substantially all of its major
hardware and software platforms, applications, telecommunications equipment and
other non-IT resources that support the business functions. The assessment phase
of the Year 2000 Compliance Program further identified the internal and external
technical interfaces, third party business relationships and internally
developed systems which might be materially impacted by Year 2000 issues. The
Company's observations from the assessment phase during the third and fourth
quarters of 1998 is that most of the Company's telecommunications equipment and
software has been purchased within the past three years and the majority is
already compliant or can be made compliant with minor upgrades. The Company
completed the assessment phase of its Year 2000 readiness in the fourth quarter
of 1998.
Remediation, Prevention and Testing Phases. Based on those resources
identified in the assessment phase, the Company developed a detailed plan in the
fourth quarter of 1998, that will then be followed by an upgrade, a remediation,
a prevention and a testing phase in early 1999. These phases are expected to be
completed during the second quarter of 1999.
Assessment of Third Party Compliance. As noted above, HER has also
undertaken under its Year 2000 Compliance Program to assess and monitor the
progress of third party vendors in resolving Year 2000 issues. To ensure the
compliance of vendors of hardware and software applications used by the Company,
the Company is obtaining confirmations from the Company's primary
telecommunication vendors, business partners and hardware and software vendors
as to what plans, if any, are being developed or are already in place to address
their ability to process transactions in the Year 2000. The Company intends to
continue follow up with any vendors who indicate any material problems in their
replies. The Company expects to receive statements of intended compliance by
mid-1999.
Worst Case Scenario for the Company. The worst case scenario for the
Company would be the failing of its telecommunications equipment, power
providers and/or interfaces with other telecommunication vendors. These cases
would create business interruption at some of the Company's operations and would
adversely affect the Company's revenues. However, the Company has operations
that are geographically diversified; therefore, it is not anticipated that the
worst case scenario would affect all operations at the same time. Additionally,
if power failures occur, the Company currently has diesel generators at almost
all of its sites and expects to install diesel generators in the remaining sites
in 1999. Based on its assessment during the third and fourth quarters of 1998,
the Company does not foresee a material loss due to these conditions and
management is hopeful that its remediation and testing efforts will ensure that
it has addressed its Year 2000 readiness. However, there can be no assurance
that Year 2000 non-compliance by the Company's systems or the systems of
vendors, customers, partners or others will not result in a material adverse
effect.
Contingency Plans. The Company is considering a contingency plan to address
its worst case scenario; however, certain of the initiatives are subject to
execution risk. This risk would include the ability to have access to diesel
fuel should power failures occur, the ability to quickly replace
telecommunications equipment and the ability to contract with alternative
telecommunication and maintenance providers at reasonable terms.
Costs Related to the Year 2000 Issue. The Company expects that it will
incur approximately $0.7 million to complete the assessment, detailed planning,
remediation, prevention and testing phases, of which approximately $0.2 million
had been incurred for the nine months ended September 30, 1998. These costs will
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be funded from operating cash flows and expensed as incurred. In addition, the
preceding cost estimate does not include amounts associated with the accelerated
acquisition of replacement systems as none are included in the initial
assessment during the third and fourth quarters of 1998. The Company does not
expect that the costs of addressing its Year 2000 readiness will have a material
effect on the Company's financial condition or results of operations. However,
there can be no assurance that Year 2000 non-compliance by the Company's systems
or the systems of vendors, customers, partners or others will not result in a
material adverse effect on the Company.
Risks Related to the Year 2000 Issue. Although the Company's efforts to be
Year 2000 compliant are intended to minimize the adverse effects of the Year
2000 issue on the Company's business and operations, the actual effects of the
issue will not be known until 2000. Difficulties in implementing the remediation
or prevention phases or failure by the Company to fully implement the planning
or remediation phases or the failure of its major vendors, third party network
service providers, and other material service providers and customers to
adequately address their respective Year 2000 issues in a timely manner would
have a material adverse effect on the Company's business, results of operations,
and financial condition. See "Risk Factors -- Risks Associated with Potential
Failure of Our Systems to Recognize Year 2000."
INTRODUCTION OF THE EURO
On January 1, 1999, eleven of the fifteen member countries of the European
Union, including Belgium, The Netherlands, Ireland, France, Germany, Italy and
Spain, in which countries the Company has its headquarters and the majority of
its subsidiaries and operations, established fixed conversion rates between
their existing sovereign currencies and a new currency called the "Euro." These
countries adopted the Euro as their common legal currency on that date. The Euro
now trades on currency exchanges and is available for non-cash transactions.
Hereafter and until January 1, 2002, the existing sovereign currencies will
remain legal tender in these countries. On January 1, 2002, the Euro is
scheduled to replace the sovereign legal currencies of these countries.
The Company is currently evaluating the impact the implementation of the
Euro will have on its continuing business operations and no assurances can be
given that the implementation of the Euro will not have material adverse affect
on the Company. However, the Company does not expect the Euro to have a material
effect on its competitive position as a result of price transparency within the
European Union because it has always operated as a pan-European business with
prices in the European Currency Unit (the "ECU"), the predecessor of the Euro,
for the majority of its customers. Moreover, the Company is evaluating its
ability to update its information systems to accommodate the adoption of the
Euro but it does not expect to incur material costs in either the evaluating or
the updating of such systems. In addition, the Company cannot accurately predict
the impact the Euro will have on currency exchange rates or the Company's
currency exchange risk.
The Company adopted the Euro as its functional currency on January 1, 1999.
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BUSINESS
OVERVIEW
HER is one of the leading carriers' carriers providing centrally managed
cross-border telecommunications transmission capacity in Europe. The high
capacity fiber optic network (the "HER Network" or the "Network"), when
completed by the end of 2000, will extend approximately 25,000 kilometers, with
points of presence in approximately 50 cities in 20 European countries. The
Company's customers include traditional Public Telecommunications Operators
("PTOs") and New Entrants, such as alternative carriers, global consortia of
telecommunications operators, international carriers, Internet backbone
networks, resellers, value-added networks and other service providers ("New
Entrant's"). HER offers these customers a superior transport system than is
currently available in Europe through PTOs with a higher and more consistent
level of transmission quality, redundancy, network functionality and service at
lower prices.
The Company began commercial operations in November 1996 and currently
operates in Belgium, the Netherlands, the United Kingdom, France, Germany,
Switzerland, Italy, Denmark and Sweden. At present, the Network links 17 cities:
Brussels, Antwerp, Rotterdam, Amsterdam, London, Paris, Frankfurt, Strasbourg,
Zurich, Geneva, Stuttgart, Dusseldorf, Munich, Milan, Berlin, Copenhagen and
Stockholm. In November 1998, the Company leased capacity on a transatlantic
cable linking the Network with North America and is exploring various
interconnectivity options to Russia. For the three-month period ended September
30, 1998, the Company had revenues and EBITDA of $27.0 million and $7.1 million,
respectively. As of September 30, 1998, 48 customers were under contract for
service on the Network, and the HER backlog -- cumulative contractually
obligated future revenues -- was $257.3 million. For the three-month period
ended September 30, 1998, the Company installed and sold capacity of
approximately 1,209 and 5,157 E1 equivalents, respectively.
The Company intends to continue to build the Network using an accessible
and cost-efficient infrastructure of railways, motorways, pipeline companies,
waterways and power companies. The Company has a flexible approach to the
Network buildout plan and intends to fine-tune the scope, route and design of
the Network based upon evaluation of customer demand. The Company has entered
into agreements for the construction and/or lease of fiber optic routes for the
Network in Belgium, the Netherlands, the United Kingdom, France, Germany,
Switzerland, Italy, Denmark, Sweden and Spain. The Company continues to
negotiate rights-of-way and other infrastructure arrangements in order to extend
its Network in Western Europe and will need to negotiate similar agreements to
complete the Network in four Central European countries. Buildout of the Network
is subject to numerous risks and uncertainties that could delay deployment or
increase the costs of the Network, or make the Network commercially infeasible.
See "Risk Factors -- Risks Relating to Expansion of Our Network."
On June 24, 1998, the Company completed the acquisition of a 75% interest
in Ebone A/S ("Ebone") for ECU 90 million (approximately $99.5 million based on
the ECU/US dollar exchange rate in effect on that date). Headquartered in
Copenhagen, Denmark, Ebone is a Tier 1 Internet backbone provider focused on
connecting Internet service providers ("ISPs") in Europe to the Internet. As of
September 30, 1998, Ebone served 89 customers in 23 cities. As part of the
transaction, Ebone purchased under a transmission capacity agreement long-term
capacity rights on the Network valued at ECU 90 million. The transmission
capacity agreement is expected to provide for the majority of Ebone's current
and forecasted capacity requirements. The Company will provide Ebone with
capacity of up to 622 megabits per second between the majority of European
cities that Ebone serves. In addition to the majority interest held by the
Company, Ebone's new ownership structure will continue to include many of
Ebone's existing customers, which own the balance of Ebone's shares through an
association.
Global TeleSystems Group, Inc. ("GTS") recently announced its planned
acquisition of Esprit Telecom, a facilities-based provider of international and
national telecommunications services in Europe. A subsidiary of Esprit Telecom
is currently building a 9,000 kilometer synchronous digital hierarchy ("SDH")
and dense wavelength division multiplexing ("DWDM") fiber optic network through
six European countries. GTS is in the process of developing its business plan
and strategy for integrating Esprit Telecom into the overall GTS
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business and corporate structure. As part of its strategy GTS may have one or
more of its affiliates (including the Company) purchase assets from Esprit
Telecom. Any such transactions would be effected in compliance with existing
agreements.
The Company was formed on July 6, 1993. GTS Carrier Services, Inc. ("GTS
Carrier Services") which is a wholly owned subsidiary of GTS, owns an 89.9%
equity interest in the Company.
BUSINESS AND MARKETING STRATEGY
The overall strategy of the Company is to offer PTOs and New Entrants
pan-European cross-border telecommunications transport services to help them, in
turn, more successfully meet the needs of their end-user customers. The Network
also provides a vehicle through which a carrier can compete in markets where it
does not own infrastructure. The Company's primary service offerings are
large-capacity circuits for "wholesale" customers such as PTOs and New Entrants.
The Company's focus on carriers is designed to complement and not compete with
carriers' own business objectives in providing services to end-users.
Following the acquisition of Ebone and given the increased market demand
for transatlantic low cost city-to-city services, the Company now plans to
expand its objective to become a leading player in the provision of seamless
transatlantic city-to-city services. To meet this objective, in November 1998
HER leased capacity on a transatlantic cable linking the European network to
North America. In addition, it intends to further augment its transatlantic
capacity and invest further in extending, as well as increasing the capacity of,
the Network.
To establish the Company as the leading carriers' carrier for international
telecommunications within Europe, the Company offers its customers significantly
higher quality transmission and extended/advanced network capabilities at a
competitive price by focusing on the following:
- High Capacity Cross-Border Network Facilities. The Network is designed to
offer its customers access to high capacity network facilities outside
their domestic markets, providing cross-border capabilities without
requiring customers to invest in network infrastructure or being
constrained by a narrow range of capacity offerings. With DWDM upgrades,
the Company's fiber deployment plan provides for a minimum of 800
Gigabits on all major routes. Options are in place to expand fiber
capacity further on a number of routes.
- Uniform Network Architecture. The Network is designed to offer managed
transport services from country to country and across multiple countries
utilizing a single uniform network, in contrast to services currently
available that use multiple providers over several networks with varying
technologies and each under the control of separate, not necessarily
compatible, network control systems. The Network's uniform technology
enhances service by providing quality and reliability as well as
uniformity of features throughout the Network.
- Diverse Routing. The Network architecture includes diverse, redundant
routes that are designed to provide high levels of reliability. The
Network is designed to provide availability of over 99.9% for most routes
and to provide customers with a wide range of telecommunications
transmission capacity. To achieve this level of reliability without the
use of a network similar to the Network, the Company believes that
carrier customers would need to purchase additional dedicated circuits to
provide for redundancy.
- Rapid Provisioning. Customers can quickly obtain additional capacity on
the Network. This access provides a level of capabilities that the
Company believes is unavailable in Europe today. This ability to rapidly
provide service is largely due to the Company's development of capacity
substantially in excess of the Company's forecasted requirements.
- Flexibility. The Company services are focused on providing customers
flexibility across the Network through which the customer may minimize
risk by enabling Network rerouting, eventually even under customer direct
control.
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- Advanced Technology. The Company is deploying DWDM and SDH technology
which is upgradeable and will permit significant expansion of
transmission capacity without increasing the number of fiber pairs in the
Network. This technology also provides the basis for structuring advanced
operating features, such as virtual private network service and IP
Services.
- Innovative Pricing. Currently the price of high-bandwidth circuits on
transborder European routes is artificially high and not necessarily
related to the cost of such circuits. The Company offers competitive
pricing. The Company also offers highly tailored contract terms and
volume discounts, which allow carrier customers to plan more efficiently
the fixed costs of their service portfolio. Customers can select varying
capacity, access, guaranteed availability and contract terms at
competitive prices. Customers sourcing from PTOs are generally limited to
order from a very narrow set of capabilities offered under inflexible
pricing plans.
MANAGED BANDWIDTH SERVICES
The Company's primary service is large capacity cross-border European
circuits and transatlantic services provided to carriers and service providers
over an integrated, managed pan-European network structure for wholesale
customers such as PTOs and New Entrants. The Network, based on DWDM and SDH
technology, provides digital transmission capability upon which a broad range of
advanced functionality may be built and which offers network availability,
flexibility, bandwidth speeds and error performance not otherwise available to
carriers for transport of telecommunications traffic across national borders in
Western and Central Europe. The Network is designed to provide customers with a
wide variety of bandwidth speeds, ranging from VC12/E1 Standard (equivalent to
2.048 Mbps) to STM-16 Standard (2-S Gigabits) (equivalent to 155 Mbps).
Point-to-Point Transmission Capacity. The current market for cross-border
transport is served by IPLCs provided by PTOs. Traditionally, IPLCs are formed
by combining half-circuits from two PTOs between customer locations, often with
additional PTOs providing transit segments. Under the IPLC service, overall
service quality guarantees generally are not provided and only a limited range
of bandwidth is available, usually only E1 and in certain instances, E3. The
Company believes that its Point-to-Point Transmission Capacity is a major
improvement to the PTO-based approach because it provides a greater range of
bandwidths (from 2 Mbps (E1 or VC-12) to multiple 140/155 Mbps (E4 or VC-4)) and
allows customers to choose a service level agreement with guarantees appropriate
for their applications, including guarantees for on-time service delivery and
service availability.
Point-to-Point Transmission Capacity consists of two services, "Integrated"
and "Node-to-Node." The HER "Integrated" service provides an end-to-end service
between customer-specified locations where the customer can request for the
Company to arrange for "last mile" services from the HER node location to the
customer's location. The "Node-to-Node" service can be selected when the
customer prefers to provide its own services to reach the local HER node
location. In Node-to-Node Service, the Company guarantees service only on its
portion of the Network between HER nodes. Both services are competitively priced
relative to current service offerings. The customer can choose flexible contract
terms from one to ten or more years' duration, with discount schemes designed to
ensure that the Company remains a cost-effective solution.
Virtual Network Transmission Services. Carriers and operators that plan to
expand their operations to become pan-European service providers as the European
marketplace is liberalized require a flexible and cost-effective means of
telecommunications transport. Such service providers have traditionally obtained
international transport service by leasing IPLCs. Leasing IPLCs requires a
carrier to lease channels on a segment-by-segment basis from multiple PTOs,
linking the target cities under arrangements having fixed capacity and pricing
structure for each segment of the carrier's network. Leasing IPLCs has several
disadvantages, including (i) difficulty in obtaining discount/volume pricing
schemes since there is no single provider of pan-European coverage, (ii) delays
in implementation due to numerous contractual negotiations and having to
interconnect numerous IPLCs, (iii) limited availability of pan-European leased
capacity at high bandwidth and (iv) variability of quality due to multiple
operators and the absence of a single uniform network. Operators could also
construct their own network, which is expensive, time-consuming and complex and
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which may not be justified by such operators' traffic volume. See "Risk
Factors -- Increased Competition Could Reduce Demand for Our Services."
HER's Network Transmission Service provides a new solution and an
attractive alternative to leasing IPLCs or building infrastructure. This service
enables the Company's customers to obtain a uniform pan-European or cross-border
network under one service agreement by allowing the customer to select any
number of cities along the Network at a pricing structure based on the overall
amount of leased capacity for the customer's entire network.
Ring Service. Most medium to large carriers and operators purchase network
capacity in excess of actual requirements and prefer to have physical
configuration control over their networks. The HER Ring Service connects
multiple customer locations with multiple VC-4 paths in a ring configuration.
All VC-4 paths within a ring are routed via physically diverse fibers to allow
the customer to have reliable and direct control over the configuration of its
VC-3 and VC-12 paths within the ring and have exclusive control over the
routing. Additional ring capacity can be added with no service interruption and
additional customer locations may be added to the ring with minimal service
interruption. Because the Company is not required to configure "idle" bandwidth
or to manage the "SDH subnet" this service can be provided at a very competitive
rate vis-a-vis other point-to-point services.
INTERNET-BASED SERVICES
Ebone Internet Services. ISPs have been buying Internet access from Ebone
since 1991. Building on the expertise developed since these early days of the
Internet in Europe, Ebone now offers ISPs a carriers'-grade Internet access
service with the following significant features:
- Reliable access to Internet service throughout the European and American
backbone of Ebone, which is made possible by always oversizing the
bandwidth capacity on the Company's backbone that is allocated to Ebone's
Internet network;
- Access to one of the largest installed bases of ISP customers in Europe;
- Access to the other Internet networks with multi-point high speed
peerings with major Tier 1 backbone Internet backbone providers in Europe
and in the US; and
- Access speeds ranging up to 140 Mbps.
IP Services. This new line of HER services is being developed for service
providers that focus on Internet, Intranet or voice over Internet Protocol
services ("IP Services"). This Internet Protocol traffic has been traditionally
supported by a combination of managed bandwidth services (like the ring or the
point-to-point services of HER) and Internet backbone services (like the Ebone
Internet services).
Today, large service providers building their Internet backbones demand the
speed offered by fiber infrastructure, the reliability of HER managed bandwidth
services and the flexibility of Internet backbone services.
The IP Services will carry the international Internet traffic of service
providers between their private points of presence and/or Internet exchange
points. These services will combine the quality of a carrier class transmission
service with the easy bandwidth upgrades that are the strength of large Internet
backbone providers.
PRICING AND DISTRIBUTION
Sales of HER's services are conducted through its subsidiary Hermes Europe
Railtel (Ireland) Limited. The Company accesses additional distribution channels
using local or regional network access providers.
Currently, the price of cross-border pan-European calls are often
significantly higher than the underlying cost of transport and terminating such
calls and higher than the price of intra-country calls or transborder calls to
and from liberalized markets. The low cost of operating the Network enables the
Company to attractively
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and competitively price services in the face of declining overall tariffs for
telecommunication services. The Company's low-cost basis is due to, among other
things, its use of up-to-date technology without the burden of legacy networks,
which requires fewer employees to operate.
The term of a typical customer agreement currently ranges from one to three
years in length. The customer agrees to purchase, and the Company agrees to
provide, cross-border transmission services. In general the customer agrees to
pay certain non-recurring charges upfront and recurring charges on an annual
basis, payable in twelve monthly installments. If the customer terminates the
service order prior to the end of the contract term, it is generally required to
pay the Company a cancellation charge equal to three months service for each of
the twelve months remaining in the contract term. The Company guarantees
transmission services to a certain service level. If such levels are not met or
the Company fails to deliver service by the committed delivery date, the
customer is eligible for a credit against charges otherwise payable in respect
of the relevant link.
CUSTOMERS
The Company's high capacity, DWDM and SDH-based fiber optic network is
designed to enable PTOs and New Entrants to integrate high quality, cross-border
capacity into their end user offerings. As of September 30, 1998, 48 customers
were under contract for service on the Network, including PTOs, global consortia
of PTOs, ISPs, alternative carriers, an international carrier, value added
networks ("VANs") and resellers. For the three-month period ended September 30,
1998, the Company installed and sold capacity of approximately 1,209 and 5,157
E1 equivalents, respectively. As of September 30, 1998, the HER backlog --
cumulative contractually obligated future revenues -- was $257.3 million. The
type and quality of the Company's customers validates the concept of the Network
and illustrates the type of customers who will be attracted to the full Network.
The success of the existing Network also demonstrates the demand for cross-
border transport services. In total, the Company is targeting seven major market
segments or customer groups, which can be characterized as follows:
- Existing PTOs. This customer segment consists of the traditional European
PTOs that generally participate in the standard bilateral agreements for
cross-border connectivity. HER provides a vehicle for PTOs to compete in
non-domestic markets. As of January 1, 1998, both reserved and
non-reserved traffic can be transported by alternative infrastructure
providers, thus vastly expanding the available PTO market for the
Company.
- Global Consortia of Telecommunications Operators. Many of the largest
PTOs and international carriers have pooled resources and formed
consortia in order to compete more effectively in important
telecommunications markets such as those in Western Europe, particularly
outside their home markets. Prior to liberalization of the provision of
switched voice services in Western European markets, one of the primary
objectives of these consortia is to provide pan-European services to
multinational business customers, including X.25/frame relay (high speed
data network) service and closed-user group voice services. The Company
believes that it provides an attractive alternative at better pricing in
those environments where such a consortium does not already own its
infrastructure. Furthermore, the Company believes that it is
well-positioned to provide cross-border connectivity between different
domestic infrastructures of these alliances.
- International Carriers. This customer segment consists of non-European
carriers with traffic between European and other international gateways.
Existing customers in this segment include Teleglobe and GTS-Monaco
Access and targeted future customers include the U.S. Regional Bell
Operating Companies. The Company can provide these customers a
pan-European distribution network to gather and deliver traffic to and
from their own and other hubs.
- Alternative Carriers. This segment consists of second carriers, cable TV
and mobile carriers and competitive access providers. These new carriers
have chosen to compete with the incumbent PTOs in their respective
countries, and the Company believes that they would look favorably to an
alternative such as the Company. The Company also believes that non-PTO
competitors in Europe will prefer to
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use a non-PTO alternative like the Company to meet their cross-border
telecommunication transport needs.
- Internet Backbone Networks. Internet backbone networks are a fast
emerging segment and are expected to generate significant requirements
for the services the Company offers. These require large capacity
international connectivity services between Internet nodes (point of
interconnection between local ISPs) in all local European markets. The
Internet segment is experiencing significant growth in demand for
transmission capacity. On June 24, 1998, the Company entered into an
agreement with Ebone, a Tier 1 Internet backbone provider which at
September 30, 1998, served 89 ISPs in 23 European countries, to provide
long-term transmission capacity of up to 622 megabits per second across
the majority of European cities that Ebone serves. As part of the
transaction, the Company purchased a majority interest in Ebone.
- Resellers. Resellers are carriers that do not own transmission
facilities, but obtain communications services from another carrier for
resale to the public. Resellers are also a growing segment of the market
and are expected to increase in conjunction with the liberalization of
the European telecommunications market. In the U.S., for example,
resellers were a significant factor in the expansion of competition.
- VANs and other Service Providers. VANs are data communications systems in
which special service features enhance the basic data transmission
facilities offered to customers. Many of these networks are targeted to
the data transfer requirements of specific international customer
segments such as airlines and financial institutions. VANs' basic network
transmission requirement is to connect data switches or processors. VANs
currently purchase their own international circuits and build additional
resiliency into their network infrastructure. The Company will allow them
to meet these needs cost-effectively and to extend their services to new
markets or customers without substantial capital investment.
The Company expects that additional demand for alternative service
providers will come from increased usage of dedicated circuits for Internet
access, private lines for the deployment of wide-area networks by large
corporations, "single source" local and long distance services by small and
medium-sized businesses and emerging broad band applications such as cable TV
programming distribution (other than broadcast) to the end user.
NETWORK DESIGN
The Network design is based on a layered architecture separating physical,
optical and telecoms layers of the Network with standard interfaces in order to
optimize design and operation and provide flexibility for introducing new
technologies such as Internet Protocol.
The physical layer of the Network is based on a mesh of dark fiber routes
interconnecting cities on the network via at least two or three physically
diverse paths for maximum resilience against fiber or facilities failures. In
each major city there will additionally be two customer access sites for
resilience.
The optical layer of the Network, which is expected to be extended during
1999 to cover ten countries, representing the core of the Network, is based on
DWDM. This layer supports the provision of optical services direct to customers
at 2.5 Gbps and provides for the operation of multiple SDH and/or Internet
Protocol systems to run concurrently on a single fiber pair in a highly cost
efficient manner. The initial Network currently in five countries is based on
Ciena 40 wavelength systems with a capacity of 100 Gbps on a fiber pair.
The SDH layer of the Network, running via DWDM channels in the core of the
Network, and directly on fiber elsewhere, supports the provision of
point-to-point services to customers at speeds of E1/VC-12 (2 Mbps) up to STM-1
(155 Mbps). The SDH layer is itself a multilayered architecture consisting of
multiple SDH rings optimised for different traffic characteristics. Each SDH
ring supports full automatic re-routing of traffic in the case of a break in the
ring. This layer is based on Alcatel STM-16 (2.5 Gbps) systems, which are
installed throughout the operational Network.
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An Internet Protocol layer is expected to be added to the Network starting
in the second quarter of 1999. This layer will support high capacity Internet
Protocol routers, which can deliver IP Services to customers at speeds from 1
Mbps to 622 Mbps. These routers will be supported on the DWDM layer of the
network directly and/or via ATM in the core of the Network and on top of the SDH
layer elsewhere. It is planned to extend IP Service delivery capabilities to all
cities on the Network by 2000. This layer will be able to handle failures
independently of the lower layers via re-routing at the Internet Protocol level.
The Network is controlled by a single active Network Operations Center in
Brussels in Belgium. A backup center, with equivalent management systems
continuously synchronized with the primary center, is maintained in Amsterdam.
The Network Operations Center can pinpoint potential service impacting
problems and deal with service re-routing if required much more effectively than
in networks controlled by multiple operators in different countries. The
Company's advanced operational support systems also provide comprehensive
capabilities for managing the large number of network components and local
repair organizations required in an extensive international network of this
size, as well as for advanced customer care in managing customer operational
activities.
Overall the combination of high levels of redundancy of physical and
management components and the ability to recover from individual failures at the
optical, SDH and Internet Protocol layers provides for a high degree of network
performance. As a result, the Company is able to enter into strong performance
commitments with its customers, and services on most routes of its Network has
performed at above 99.9% availability.
The Company expects to operate the Network and to own substantially all of
the Network equipment as well as some segments of the fiber optic cable. A
substantial part of the fiber is leased on a long-term basis. Long-term leases
for fiber are advantageous to the Company because they reduce the capital
expense burden of building large quantities of capacity before they can be used.
Where the Company leases dark fiber, the infrastructure provider will generally
be responsible for maintaining such fiber optic cable. The Company will enter
into agreements with equipment vendors and infrastructure providers and other
third parties to supply and/or maintain the equipment for the Network. See "Risk
Factors -- Risks Relating to the Expansion of Our Network."
NETWORK CAPACITY
The Network is being built to include 40 wavelength DWDM systems on all
routes. This allows for incremental SDH and IP systems of 2.5 Gbps to be
installed when and only when required, thus providing for efficient management
of capital investment.
Should capacity be required beyond the initial 100 Gbps on the first fiber
pair, additional fiber pair(s) can be brought into operation utilizing either
higher capacity DWDM systems at 2.5 Gbps or at 10 Gbps. Such systems will be
available from 1999. The Company plans to have a minimum of two fiber pairs on
all routes and to extend capacity both via additional routes providing further
resilience, as well as on selected existing routes where available over time.
This approach to fiber utilization again provides for an optimal management of
fiber investment.
Network Agreements. The Company has entered into agreements and letters of
intent with various infrastructure providers for construction and/or dark fiber
lease of portions of the Network. The Company's agreements for leases of
portions of the Network typically require the infrastructure provider to provide
a certain number of pairs of dark fiber and in some cases facilities along the
Network route commencing on certain dates provided by the Company. The term of a
lease agreement typically ranges from 10 to 18 years. An agreement typically
contains optical specification standards for the fiber and methods of testing.
The Company is allowed to use the cable for the transmission of messages and in
other ways, including increasing capacity. The infrastructure provider may also
provide space for the location of Company equipment and related maintenance. The
infrastructure provider is responsible for maintenance of the cable facilities.
An agreement also provides for an annual price for the provision of fiber and
for the facilities and maintenance.
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The agreements typically provide for termination by the parties only for
material breach, with a 90-day minimum cure period. The agreements typically
contain a transition period after termination of the agreement to allow the
Company to continue to serve its customers until it can reach agreement with an
alternative infrastructure provider. In certain areas of the Network, where it
is not possible to lease dark fiber, HER has signed agreements or letters of
intent for indefeasible right of use to managed bandwidth. The terms of these
agreements typically range from 10 to 25 years.
Local Access. Access to the Network will be primarily provided to clients
through SDH access lines including at the STM-1 or STM-4 level. However,
customers who continue to use the older PDH technology may also access the
Network for optical service STM-16 level. In each city, as a HER point of
presence is deployed, the Company may contract with one or more local access
network suppliers for "last mile" services to customer locations. HER will not
invest in building local access infrastructure but such connectivity can be
supplied on a case-by-case basis via preferred local access partner
arrangements. Currently, the Company has contracted with a number of local
access providers to connect the Network to intra-city networks. Pursuant to such
agreements, the Company can offer its carrier customers local connectivity in
those cities. Various local access network suppliers may also be interested in
the Company for the purpose of linking the business centers in which they are
active. Therefore, the Company believes that the relationships between the
Company and local access network suppliers can benefit both parties. Set forth
below is an illustration of the connection between the Network and local access
providers.
The portion of the Network currently in operation extends approximately
9,200 kilometers. When completed by the end of 2000, the Network will extend
approximately 25,000 kilometers. In November 1998, HER also leased capacity on a
transatlantic cable linking the European network with North America. During the
first quarter of 1999, the network is planned to be expanded through France,
Madrid and Barcelona in Spain, and in the second quarter of 1999, extended
further in Italy and to Luxembourg. By the end of 1999, the Network will be
further extended to Austria, the Czech Republic and Portugal.
The routes to be completed in the first half of 1999 are currently under
construction. "Under construction" means that with respect to each of the
segments that make up each of these routes, one of the following is occurring:
(i) the Company has contracted to build or is contracting to build the fiber
optic cable segment, and (ii) the Company has leased or will lease such segment
of dark fiber optic cable from a third party who has built or is currently
building such segment. The dates set forth above may be subject to delays due to
a variety of factors, many of which are beyond the control of the Company. See
"Risk Factors -- Risks Relating to the Expansion of Our Network."
The Company is deploying the Network along the rights-of-way of a variety
of alternative sources, including railways, motorways, waterways, pipelines and
utilities. The rights-of-way of HER-built portions of the Network are being
provided pursuant to long-term leases or other arrangements entered into with
railways, highway commissions, pipeline owners, utilities or others. It is the
policy of the Company to evaluate multiple alternative infrastructure suppliers
in order to maximize flexibility. As a result of its Network development
activities to date, the Company has gained access to infrastructure for its
Network routes which, in certain cases, the Company believes will be difficult
for its competitors to duplicate. See "Risk Factors -- Risks Relating to the
Expansion of Our Network."
COMPETITION
The European and international telecommunications industries are
competitive. The Company's success depends upon its ability to compete with a
variety of other telecommunications providers offering or seeking to offer
cross-border services, including (i) the respective PTO in each country in which
the Company operates; (ii) global alliances among some of the world's largest
telecommunications carriers; and (iii) global operators. The Company expects
that some of these potential competitors may also become its customers. The
Company believes that the ongoing liberalization of the European
telecommunications market will attract additional entrants to the market and
increase the intensity of competition. Competitors in the market compete
primarily on the basis of price and quality. The Company intends to focus on
these factors and on service innovation as
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well. The Company business plan anticipates substantial head-to-head competition
as well as indirect competition.
Various telecommunications companies, including MCI WorldCom, Inc., Viatel,
Inc., KPN N.V., Deutsche Telekom AG and France Telecom S.A., Global Crossing
Ltd., British Telecommunications plc and Esprit plc, have announced plans to
construct, have begun to construct or are operating fiber optic networks across
various European countries. Some of these networks include, or their promoters
have expressed their intentions to include, transatlantic connectivity. The
Company also competes with respect to its "point-to-point" transborder service
offering against circuits currently provided by PTOs through International
Private Leased Circuits.
If the Company's competitors, many of whom possess greater technical,
financial and other resources than the Company, devote significant resources to
the provision of pan-European, cross-border telecommunications transport
services to carriers, such action could have a material adverse effect on the
Company's business, financial condition and results of operations. There can be
no assurance that the Company will be able to compete successfully against such
new or existing competitors. See "Risk Factors -- Increased Competition Could
Reduce Demand For Our Services."
PROPERTIES
The Company owns substantially all of the telecommunications equipment
required for its business; however, a substantial part of the fiber is leased on
a long-term basis. The Company's installed fiber optic cable is laid under the
various rights-of-way held by the Company. Other fixed assets are located at
various leased locations in geographic areas served by the Company.
The Company's executive and principal administrative offices and its
Network Operations Center are located in two adjacent buildings in Hoeilaart,
Belgium, just outside Brussels. The leases on both the buildings expire on June
30, 2005. One of the buildings has an option to cancel on January 1, 2002 with a
penalty of six months rent. In addition, the Company has a short-term lease
expiring on February 28, 2000 in Rixensart, Belgium. The Company has negotiated
leases for two additional buildings in the same complex as its principal
offices. The buildings are currently under construction and are expected to be
ready for occupation in January 2000. The leases run through January 2009 but
may be terminated after six years with six months notice plus six months rental
penalty.
In addition to the offices in Belgium, the Company has a leased office
space in Dublin, Ireland, which expires on October 2, 2022 and in London, United
Kingdom, which expires in August 2002. The Company leases various offices on a
short-term basis for regional sales and service personnel.
EMPLOYEES
As of November 30, 1998, the Company employed 251 employees. The Company
believes its future success will depend on its continued ability to attract and
retain highly skilled and qualified employees. The Company believes that its
relations with its employees are good.
LEGAL PROCEEDINGS
The Company is subject to various claims and proceedings in the ordinary
course of business. Based on information currently available, the Company
believes that none of such current claims or proceedings, individually or in the
aggregate, will have a material adverse effect on the Company's financial
condition or results of operations, although there can be no assurance that this
will remain the case.
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LICENSES AND REGULATORY ISSUES
A summary discussion of the regulatory framework in certain countries where
the Company has developed and is developing the Network is set forth below. This
discussion is intended to provide a general outline, rather than a comprehensive
discussion, of the more relevant regulations and current regulatory posture of
the various jurisdictions.
National authorities in individual member states of the EU are responsible
for regulating the construction and operation of telecommunications
infrastructure. The Company believes that the adoption of the Full Competition
Directive and the various related Directives adopted by the European Parliament
and the Council of the EU have resulted in the removal of most regulatory
barriers to the construction and operation of telecommunications infrastructure
in the countries of the EU and Switzerland where the Company currently has
operations.
The Company requires licenses, authorizations or registrations in all
countries to operate the Network. There can be no assurance that the Company
will be able to obtain such licenses, authorizations or registrations or that
the Company's operations will not become subject to other regulatory,
authorization or registration requirements in the countries in which it operates
or plans to operate. Licenses, authorizations or registrations have been
obtained in Belgium, Denmark, France, Germany, Italy, the Netherlands, Sweden,
Switzerland, the United Kingdom and the United States. The Company intends to
file applications in other countries in anticipation of service launch in
accordance with the roll-out plan.
On June 28, 1990, the European Commission, in an effort to promote
competition and efficiency in the European Union, issued a directive (the "1990
Directive") requiring EU member states to immediately liberalize all
telecommunication services with the exception of voice telephony to the general
public (basic voice services provided over the public switched voice network).
This step liberalized value added services and voice services over corporate
networks and/or "closed user groups," although the exact definitions of the
terms used in the 1990 Directive were not altogether clear.
On March 13, 1996, the European Commission adopted the Full Competition
Directive extending the 1990 Directive to all services, requiring that licensing
procedures for these services be transparent and non-discriminatory, requiring
member states to fully liberalize alternative infrastructure to allow a
competitive market for "non-reserved" services such as data, value added
services and non-public (closed-user group) switched voice services by July 1,
1996 and mandating open competition in all public telecommunications services,
including voice telephony to the general public, by January 1, 1998. Deferrals
of the obligations to liberalize were granted to Spain, Ireland, Greece and
Portugal, subject to formal application and satisfaction of certain
requirements. Luxembourg, because of the small size of its market, is eligible
for a special transitional period of up to two years.
On November 5, 1997, the Commission initiated several infringement
proceedings against those Member States which had not implemented the relevant
transposition measures of the 1990 Directive and other liberalization
directives. The Member States concerned were Denmark, Greece, Italy, Luxembourg,
Germany, Portugal and Belgium. The Commission also decided to continue the
infringement procedure it had already opened against Spain. Subsequently, in
March 1998, it was reported in the press that several of these infringement
proceedings had been closed because the Member States concerned had properly
implemented the relevant provisions. The identity of the Member States for whom
such proceedings had been closed has not been made public.
On April 10, 1997, the European Parliament and the Council of Ministers
adopted a Directive on a common framework for general authorizations and
individual licenses in the field of telecommunications services, including
networks. Licenses must be awarded through open, non-discriminatory and
transparent procedures and applications will be required to be dealt with in a
timely fashion. The number of licenses may be restricted only to the extent
required to ensure the efficient use of radio frequencies or for the time
necessary to make available sufficient numbers in accordance with EC law.
On June 11, 1997, the European Parliament and the Council of Ministers
adopted a Directive on interconnection with regard to ensuring universal service
and interoperability through application of Open
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Network Provision ("ONP") principles; among other things this requires Member
States to ensure that PTOs with significant market power should provide
interconnection on the basis of cost-oriented charges.
On February 26, 1998, the European Parliament and the Council of Ministers
adopted a Directive on the application of ONP to voice telephony and on
universal service.
The Commission has also recently initiated several infringement proceedings
for incomplete or wrong transposition into national law of the April 1997
Licensing Directive (against Austria, Italy, Belgium, France and Luxembourg) and
the June 1997 ONP Interconnection Directive (against Belgium, France and
Luxembourg).
Notwithstanding the above-mentioned infringement proceedings, the Company
believes that many European countries have revised telecommunications
regulations to comply with the 1990 Directive and the Full Competition Directive
and that such changes will enhance the Company's ability to obtain other
necessary regulatory approvals for its operations.
As a multinational telecommunications company, the Company is subject to
varying degrees of regulation in each of the jurisdictions in which it provides
its services. Local laws and regulations and the interpretation of such laws and
regulations, differ significantly among the jurisdictions in which the Company
operates. There can be no assurance that future regulatory, judicial and
legislative changes will not have a material adverse effect on the Company, that
domestic or international regulators or third parties will not raise material
issues with regard to the Company's compliance or noncompliance with applicable
regulations or that regulatory activities will not have a material adverse
effect on the Company. See "Risk Factors -- Extensive Government Regulation."
The regulatory framework in certain jurisdictions in which the Company provides
its services is briefly described below.
Belgium
Belgium has implemented the "alternative infrastructure" provider provision
of the Full Competition Directive. Most of the EC telecommunications
liberalization package was adopted at the end of December 1997. The implementing
legislation (Royal Decrees) regarding the licensing regimes for the provision of
voice telephony services and the establishment of public network infrastructure
was approved by the Council of Ministers at the end of June 1998. The official
publication and the entry into force of that implementing legislation took place
in July 1998. Until such entry into force, the Belgian Telecommunication
Authority will continue to work with the system of provisional licenses. The
Company has already obtained, through a wholly owned subsidiary, a license in
February 1997 from the Belgian regulatory authority to build infrastructure
between major Belgian population centers and the relevant border crossings. The
Company also has an authorization to provide liberalized services using
alternative infrastructure. The liberalization legislation requires all
previously licensed operators to apply for new licenses or authorizations. The
Company applied for a new license in October 1998. HER expects that its existing
license will be renewed in due course although there can be no assurance that
this will be the case or that such a license will be granted on terms acceptable
to HER.
Denmark
With the liberalization of infrastructure as of July 1, 1997, Denmark has
fully liberalized its telecommunications markets in accordance with the
requirements of the relevant EC Directives. According to the Danish rules, the
Company will not require any regulatory approval in order to install or operate
the Network in Denmark.
France
A new regulatory agency, the Autorite de Regulation des Telecommunications
("ART"), was established in France effective January 1, 1997. In 1996, France
approved legislation to implement the Full Competition Directive and to remove
all remaining restrictions on competition from January 1998. In October 1997,
the Company obtained authorization to operate its Network in specific regions of
France. In
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August 1998, the Company was granted an extension of its license in order to
extend its network in France to reach Italy and Spain. Such authorization
requires prior notification to and approval of the ART of any substantial
changes in the capital of the Company or its controlling shareholder.
Germany
Germany has approved legislation to implement the Full Competition
Directive and remove all remaining restrictions on competition from August 1996.
The Company was granted a license by the German regulatory authorities on July
18, 1997. The license permits the Company to operate the portions of the Network
in Germany connecting Dusseldorf, Frankfurt and Stuttgart; Dusseldorf to the
Dutch border; and Stuttgart to the French border. In 1998, the Company was
granted extensions to its license to include operation of routes linking
Hamburg, Hanover, Munich and Berlin and of routes to Denmark.
Italy
Although in the past Italy has been dilatory in implementing EC
liberalization measures, Italy enacted legislation on July 31, 1997 creating an
independent national regulatory authority for the telecommunications and
audiovisual sectors. On September 19, 1997, Italy enacted a regulation
implementing all EC directives in the telecommunications sector and since then
specific laws relating to licensing and interconnection have been approved. The
Company was granted a license by the Italian authorities in August 1998,
enabling the development of its Network in the northwest region of Italy,
including Milan.
Luxembourg
A new Telecommunications Act became effective in April 1997 and a Royal
Decree on licensing conditions entered into force in July 1998. The Company
applied to the Luxembourg regulatory authority for a license to build and
operate its network in Luxembourg in October 1998. The Company expects to be
granted a license in Luxembourg by the first quarter of 1999. However, there can
be no assurance that such a license will be granted on terms acceptable to HER.
The Netherlands
On July 1, 1997, the Dutch government abolished the prohibition on the use
of fixed infrastructure for the provision of public voice telephony, thereby
complying with the requirements of the Full Competition Directive six months
ahead of schedule. On August 1, 1996, the Company was granted an authorization
for the installation, maintenance and use of a fixed telecommunications
infrastructure.
A new Telecommunications Act was adopted on October 13, 1998, but is not
yet in force. The new Act confirms the full liberalization of the
telecommunications market according to European Community standards. It is not
expected that the new Telecommunications Act will detrimentally affect the
conduct of business by the Company.
Spain
Under the Full Competition Directive, Spain was granted the right to
request a delay of up to five years in liberalizing fully its telecommunications
market. However, the Spanish government and the European Commission agreed that
full liberalization should take place by December 1, 1998. In April 1998, Spain
adopted its new telecommunications law ("LGT"). The LGT was implemented through
the use of secondary legislation. The LGT and the secondary legislation resulted
in the full liberalization of the Spanish telecommunications market on December
1, 1998. On December 3, 1998 the Spanish regulatory authority began to issue
licenses under the new regime. The Company has applied for a license to
establish and exploit a telecommunications network in Spain in October 1998. The
Company expects a ruling on the application during the first quarter of 1999.
However, there can be no assurance that such a license will be granted on terms
acceptable to the Company or at all.
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Sweden
Full liberalization of the Swedish telecommunications market occurred in
1993. A new Telecommunications Act was passed in 1997 to reinforce the powers of
the national regulatory authority, to ensure conformity with EC Directives and
to supplement the pre-existing licensing regime with a general authorization
regime for certain services. The Company registered with Swedish authorities and
has been able to provide its services in Sweden since July 1998.
Switzerland
The Swiss Parliament passed a Telecommunications Law, which entered into
force on January 1, 1998. Although Switzerland is not a Member State of the EU,
the effect of the law is largely to mirror the EC telecommunications
liberalization directives. From that date the voice telephony monopoly was
abolished and service fully liberalized. In September 1998 the Swiss Regulatory
authority granted the Company a definitive concession (replacing an earlier
provisional concession) allowing the Company to build and operate its Network in
Switzerland.
The United Kingdom
Since the elimination in 1991 of the United Kingdom telecommunications
duopoly consisting of British Telecommunications and Mercury, it has been the
stated goal of Oftel, the United Kingdom telecommunications regulatory
authority, to create a competitive marketplace from which detailed regulation
could eventually be withdrawn. The United Kingdom has already liberalized its
market beyond the requirements of the Full Competition Directive, and most
restrictions on competition have been removed in practice as well as in law. The
Company has received a license from the Secretary of State for Trade and
Industry dated December 18, 1996, which grants it the right to run a
telecommunications system or systems in the United Kingdom connected to an
overseas telecommunications system and to provide international services over
such systems. Like the licenses granted to other providers of international
facilities-based services, the license granted to the Company was for an initial
six months' duration and thereafter is subject to revocation on one month's
notice in writing. The short duration of these initial licenses was adopted for
administrative convenience to facilitate reforms to the licensing regime which
are expected in 1999. The Department of Trade and Industry ("DTI") has confirmed
that it intends to replace the initial licenses with new licenses and that it
would not revoke an initial license without replacing it with another license
giving an equivalent authorization. The DTI is currently discussing with license
holders the arrangements to put these new licenses into effect. Although the DTI
has indicated that the new licenses are expected to be of 25 years' duration,
there can be no certainty that this will be the case or that the new licenses
will not contain terms or conditions unfavorable to the Company.
The United States
HER was granted a license by the Federal Communications Commission pursuant
to Section 214 of the Communications Act of 1934 authorizing it to provide
limited global facilities-based and global resale services (except US services,
subject to the items and conditions imposed by law and the Authorization, to
Hungary, Poland, Czech Republic, Romania, Monaco, Russia, Ukraine, Kazakhstan,
Uzbekistan, Azerbaijan, China and India), effective October 23, 1998.
51
<PAGE> 59
The Company intends to file applications in other countries (including
Austria, Croatia, Czech Republic, Hungary, Poland, Portugal, Slovakia and
Russia) in anticipation of service launch in accordance with the roll-out plan.
With the exception of Austria and Portugal, which are members of the EU and
whose laws must comply with EC Directives, these other countries have not
generally liberalized their telecommunications sectors. There can be no
assurance that they will do so in a timely manner or at all. In addition, the
terms and conditions of the licenses, authorizations or registrations granted to
the Company may limit or otherwise affect the Company's scope of operations.
There can be no assurances that the Company will be able to obtain, maintain or
renew licenses, authorizations or registrations to provide the services it
currently provides and plans to provide, that such licenses, authorizations or
registrations will be issued or renewed on terms or with fees that are
commercially viable, or that the licenses, authorizations or registrations
required in the future can be obtained by the Company. The loss of, or failure
to obtain, these licenses, authorizations or registrations or a substantial
limitation upon the terms of these licenses, authorizations or registrations
could have a material adverse effect on the Company.
52
<PAGE> 60
MANAGEMENT
MEMBERS OF THE BOARD OF SUPERVISORY DIRECTORS AND THE BOARD OF MANAGING
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The Members of the Board of Supervisory Directors and the Board of Managing
Directors and executive officers of the Company and their respective ages as of
September 30, 1998 and positions with the Company are set forth below.
BOARD OF SUPERVISORY DIRECTORS
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gerald W. Thames......... 50 President, Chief Executive Officer and Director of GTS
Bernard J. McFadden...... 64 Director of GTS, GTS-Hermes representative on the Board of
Supervisory Directors of HER
Bo C. O. Hamnell......... 58 Former Senior Vice President and Director of Finance of the
Swedish State Railway and Former Chief Executive Officer
of AB Swedcarrier
Lars Stig M. Larsson..... 66 Retired President and Director General of the Swedish State
Railway
Joseph Surmont........... 62 Director of Information Technology of SNCB/NMBS and
President of Board of Directors of HIT Rail
Bruno d'Avanzo........... 56 Executive Vice President and Chief Operating Officer of GTS
Mikel H. Williams........ 41 Vice President-- Finance Operations of GTS
</TABLE>
BOARD OF MANAGING DIRECTORS
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Jan Loeber............... 54 Managing Director
</TABLE>
EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Jan Loeber............... 54 Managing Director (Principal Executive Officer)
Gerard J. Caccappolo..... 56 Corporate Director of Marketing and Sales
Peter Magnus............. 37 Corporate Director of Strategy and Planning
Bruce C. Rudy............ 43 Corporate Director of Business Development and Regulatory
John Allan Shearing...... 49 Corporate Operations and Engineering Director
Jan De Wispelaere........ 39 Corporate Legal Director
Steven Andrews........... 52 Corporate Administration Director
Francois Note............ 39 Corporate Financial Director -- Chief Financial Officer
(Principal Financial and Accounting Officer)
</TABLE>
BOARD OF SUPERVISORY DIRECTORS
The general affairs and business of the Company and the executive board
which manages the Company (the "Board of Managing Directors") (Directie) are
supervised by a board appointed by the general meeting of shareholders (the
"Board of Supervisory Directors") (Raad van Commissarissen).
The Company's Articles of Association (the "Articles of Association")
provide for at least four and no more than ten supervisory directors who must be
natural persons ("Supervisory Directors") to serve on the Board of Supervisory
Directors. Under the law of the Netherlands, a member of the Board of
Supervisory Directors of a Company cannot be a member of the Board of Managing
Directors of the same Company. The members of the Board of Supervisory Directors
are appointed by the general meeting of shareholders. The Board of Supervisory
Directors elects a chairman from among its members. See "Certain Relationships
and Related Transactions." Under the Shareholders Agreement, resolutions of the
Board of Supervisory Directors
53
<PAGE> 61
require the approval of a majority of the Supervisory Directors present. The
quorum for a valid meeting is a majority of the members of the Supervisory Board
with a minimum of four members. The Board of Supervisory Directors meets four
times a year and also upon the request of its chairman or the Board of Managing
Directors. Pursuant to the Articles of Association, Supervisory Directors may be
suspended or dismissed by the general meeting of shareholders. The remuneration
or compensation of the Supervisory Directors is determined by the general
meeting of shareholders.
While the Board of Managing Directors is the executive body of the Company
and is responsible for managing its affairs and representing the Company in its
dealings with third parties, the primary responsibility of the Board of
Supervisory Directors is to supervise the policies enacted by the Board of
Managing Directors and the general course of affairs of the Company. The Board
of Supervisory Directors advises the Board of Managing Directors. In the
fulfilment of their duties, members of the Board of Supervisory Directors are
required to act in the best interests of the Company.
The members of the Board of Supervisory Directors are as follows:
Gerald W. Thames. Mr. Thames is President, Chief Executive Officer and a
Director of GTS. Mr. Thames joined GTS as Chief Executive Officer in February
1994, and has served as a director of GTS since February 1994. From 1990 to
1994, Mr. Thames was President and Chief Executive Officer for British Telecom
North America and Syncordia, a joint venture company focused on the
international outsourcing market. Mr. Thames has spent over 18 years in senior
positions with telecommunications companies, where he was responsible for
developing start-up telecommunications companies, including 15 years with AT&T,
where he rose to the position of General Manager of Network Services for the
Northeast Region of AT&T Communications.
Bernard J. McFadden. Mr. McFadden has served as a director of GTS since
February 1994. Mr. McFadden currently serves as an independent consultant to
GTS. Prior to 1994, Mr. McFadden worked for 32 years with ITT Corporation, where
he served as President and Chief Executive Officer of ITT's Telecom
International Group. Mr. McFadden's career in international telecommunications
includes a four and one-half year assignment as President and Chief Operating
Officer of Alcatel Trade International, S.A.
Bo C. O. Hamnell. Mr. Hamnell was formerly Senior Vice President and
Director of Finance of SJ, the Swedish State Railway, a position he had held
since June 1993. Mr. Hamnell had also served as Chief Executive Officer of AB
Swedcarrier, a holding company for the SJ investments. Previously, Mr. Hamnell
has served as Chief Financial Officer starting in the early 1970s for Bull
General Electric and later Honeywell Bull and Compagnie Des Machines Bull in
both Scandinavia and in France. In the mid-1980's, Mr. Hamnell served as Vice
President and President for the Swedish Finance Group, Finax, with operations in
Sweden and Western Europe. Mr. Hamnell also served as part owner and vice
president of a group of companies in the electronics and finance business. Mr.
Hamnell has University degrees in Economics and business administration. Mr.
Hamnell is Chairman of the finance company SJ Invest AB and of the captive
insurance company SweRe AB and a board member of Scandlines AB, Svelast AB, TGOJ
AB, Combitrans Sweden AB, Rail-Combi AB and Eurofima S/A in Basel, Switzerland.
Lars Stig M. Larsson. Mr. Larsson was formerly President and Director
General of SJ, the Swedish State Railway, a position he held since February
1988. After receiving a Master of Science Engineering degree from Gothenburg
Technical University, where he is also a Doctor honoris causa, he joined the
Ericsson Group in 1960. From 1960 to 1987 he held different posts within the
Ericsson Group and its subsidiaries, including that of Development Director for
road and rail signalling systems as well as the telephone system AXE. In 1979
Mr. Larsson was appointed President of RIFA, the Ericsson subsidiary company
specializing in the development, production and marketing of electronic
components. In 1985 he was named President of Ericsson Information Systems. In
1988 Mr. Larsson was appointed President and Director General of SJ. After
several years in positions of responsibility within the Union Internationale des
Chemins de Fer ("UIC") framework, including as Chairman of the Strategy
Committee, Mr. Larsson was appointed Vice-Chairman of UIC in charge of
coordinating all rail cooperation in Europe in September 1993. On November 1,
1996 he was appointed Chairman of UIC. Mr. Larsson is also Chairman of the Board
of SweFerry AB, Rail Combi ABi, Royal Viking Hotel AB, Stockholm Water
Foundation and the Swedish Travel & Tourist Council. He is a
54
<PAGE> 62
board member of the Royal Academy of Engineering Sciences (IVA) section XI for
Education and Research, the Swedish Transport Research Commission (TFK), the
National Agency for Government Employees, the Taxpayers' Association, the
Stockholm Water Festival and the environmental organization, the Natural Step.
Joseph Surmont. Mr. Surmont is Director of Informational Technology of
SNCB/NMBS, the Belgian Railway company, a position he has held since February
1987. He joined the Belgian Railways in September 1960. He is currently the
President of the Board of Directors of HIT Rail.
Bruno d'Avanzo. Mr. d'Avanzo has served as Executive Vice President and
Chief Operating Officer of GTS since August 1996. He previously served as
Executive Vice President and Chief Operating Officer at Intelsat. From 1991 to
1994, Mr. d'Avanzo held senior management positions at Olivetti Corporation,
serving as Vice President and General Manager -- Europe, and Vice
President -- U.S., Canada and South America. He also spent 15 years with Digital
Equipment Corporation, a diversified computer manufacturer, where he rose to
become Vice President -- European Sales and Marketing.
Mikel H. Williams. Mr. Williams has served as Vice President -- Finance
Operations of GTS since November 1996. From 1990 to 1996, he was Managing
Director -- Finance and Administration of Burson-Marsteller, Washington Region.
Mr. Williams served as Chief Financial Officer of Black, Manafort, Stone & Kelly
from 1985 to 1990. Previously, he was a Manager with Price Waterhouse.
BOARD OF MANAGING DIRECTORS
The Board of Managing Directors, consisting of one member, is charged with
the management of the Company in accordance with the business plan of the
Company under the supervision of the Board of Supervisory Directors. Jan Loeber
acts as Managing Director. Under the Articles of Association, the Board of
Managing Directors must obtain the approval of the Board of Supervisory
Directors in order to take the following actions: (a) to adopt and amend the
business plan and the annual budget of the Company; (b) to incur expenses in
excess of the adopted or amended annual budget; (c) to incur loans outside of
the Company's ordinary business, except draw-downs of amounts previously
approved on the Company's account with a bank designated by the Board of
Supervisory Directors; (d) to lend sums which exceed the amounts previously
approved by the Board of Supervisory Directors outside the Company's ordinary
business; (e) to commit the Company to guarantee debts of third parties outside
the Company's ordinary business; (f) to extend the Company's business into a new
line of business and to discontinue the business of the Company; and (g) to
alienate a considerable part of the assets of the Company.
The Articles of Association provide that the Board of Managing Directors
shall consist of one or more members. The members of the Board of Managing
Directors are appointed by the general meeting of shareholders. The general
meeting of shareholders may suspend or dismiss a member of the Management Board
by a vote of a majority of votes cast in a meeting in which at least four-fifths
of the issued capital is present or represented. The compensation and other
terms and conditions of employment of the members of the Board of Managing
Directors is determined by the general meeting of shareholders.
Mr. Loeber's background is described below under "Executive Officers of the
Company."
EXECUTIVE OFFICERS OF THE COMPANY
Jan Loeber, Managing Director. Mr. Loeber has overall responsibility for
the development and operations of the Company. Mr. Loeber joined GTS in January
1995. From October 1992 to December 1994, Mr. Loeber was a Managing Director of
BT Securities Corporation, where he was responsible for investment banking for
telecommunications clients. From April 1990 to September 1992, Mr. Loeber held
positions as Managing Director of Unitel Ltd. (now Mercury One 2 One) in the
United Kingdom, Group President of Nokia North America Inc., Vice President of
ITT Corporation and Marketing and Product Management Director of ITT Europe. Mr.
Loeber also spent almost ten years with AT&T, where his last position was
Executive Director, Bell Laboratories. Mr. Loeber has over 22 years of
experience in the telecommunications industry and an additional nine years of
experience in information technology with the Pentagon, IBM and Chemical Bank of
New York.
55
<PAGE> 63
Gerard J. Caccappolo, Corporate Director of Marketing and Sales. Mr.
Caccappolo joined HER in January 1995 as Director of Marketing and Sales,
responsible for market and customer segmentation, services development, and
pricing and sales strategies. Prior to joining HER, from September 1988 to
December 1994, he was Vice President of Marketing and Sales -- International
Carriers at Ascom Timeplex Equipment (Telecommunications) Manufacturer.
Peter Magnus, Corporate Director of Strategy and Planning. Mr. Magnus
joined HER in January 1995 as Financial Director -- Chief Financial Officer,
responsible for treasury, financing, accounting and budgets, and served in that
capacity until October 1997, when he was appointed to his current position.
Prior to joining HER, from January 1992 to December 1994, he was Controller of
the Belgian operations of Cargill N.V.
Bruce C. Rudy, Corporate Director of Business Development and
Regulatory. Mr. Rudy joined HER in 1996 and is Director of Business Development,
Planning and Regulatory Affairs, responsible for business planning, financial
modeling, shareholder relations and development. Mr. Rudy previously worked for
Lochridge & Company, Inc. Management Consultants in Boston, where he was a
senior consultant from September 1989 to December 1995.
John Allan Shearing, Corporate Operations and Engineering Director. Mr.
Shearing joined HER in November 1995 as Director of Operations, with
responsibility for network operations, customer service and information systems.
Before joining HER, Mr. Shearing spent eight years at S.W.I.F.T. as Network
Operations Director and also managing the acceptance and implementation of a new
generation of network systems and applications.
Jan De Wispelaere, Corporate Legal Director. Mr. De Wispelaere joined HER
as a consulting attorney in 1995 and has since been promoted to the position of
Legal Director -- Corporate Secretary and General Counsel. Prior to joining HER,
from January 1994 to November 1995, Mr. De Wispelaere had been with Stanbrook &
Hooper -- European Community Lawyers. Prior to that, he was with Scott Paper
Company and SD Warren Group as Senior Counsel for five years. He has held since
1993 positions as a member of the Board of Directors and Management Board of the
German Scott -- Feldm&uhle HQ Company, as well as several Scott Paper operating
entities in Europe.
Steven Andrews, Corporate Administration Director. Mr. Andrews joined HER
in September 1997, assuming responsibility for human resources; corporate, press
and shareholder communications; quality and facilities-purchasing. Before
joining HER, Mr. Andrews was an executive of US West with recent assignment as
president of Media One and president of US West Spectrum Enterprises
International.
Francois Note, Corporate Financial Director -- Chief Financial Officer. In
his position at HER, Mr. Note is responsible for treasury, financing, accounting
and budgets. Prior to joining HER in April 1998, Mr. Note was employed by Sandoz
AG where he held different positions in the financial area. Since 1995 he was
Head of Group Controlling at Sandoz and held this position after the merger of
Ciba Geigy and Sandoz, which resulted in the survivor company Novartis
International.
COMPENSATION OF DIRECTORS
The directors on the Board of Supervising Directors and the Board of
Managing Directors receive no fees from the Company for serving as directors.
Mr. McFadden currently serves as an independent consultant to GTS pursuant to a
consulting agreement, under which he receives a consulting fee of $100,000 per
annum. One of his duties under the consulting agreement is to serve as a member
of the Board of Supervisory Directors of HER.
EXECUTIVE COMPENSATION
The following table sets forth each component of compensation paid or
awarded to, or earned by, the chief executive officer (who is the Managing
Director of HER) and the four most highly compensated
56
<PAGE> 64
executive officers other than the chief executive officer (collectively, the
"Named Executive Officers") during the years indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -----------------------
----------------------------------- RESTRICTED SECURITIES ALL
OTHER ANNUAL STOCK UNDERLYING OTHER
SALARY BONUS COMPENSATION AWARD(S) OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) ($) ($)
- --------------------------- ---- -------- ------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Jan Loeber(1) 1997 $235,000 $78,608 $46,598(2) -0- 4,812(4) $179,450(10)
Managing Director 1996 235,000 78,608 42,806(2) (3) 3.5(4) 12,986(10)
Gerald J. Caccappolo(1) 1997 173,750 80,000 32,043(6) -0- 1,714(4) 4,000(5)
Corporate Director of 1996 160,000 40,000 42,108(6) -0- 1.5(4) 3,750(5)
Marketing and Sales
Peter Magnus 1997 136,391(7) 63,980(7) (8) -0- 687(4) -0-
Corporate Director of 1996 129,889(7) 32,472(7) (8) -0- 0.5(4) -0-
Strategy and Planning
Bruce Rudy(1) 1997 140,500 13,500 15,096(9) -0- 476(4) 3,850(5)
Corporate Director of 1996 135,000 13,509 18,416(9) -0- 0.5(4) 2,532(5)
Business Development and
Regulatory
John Shearing 1997 186,678 31,491(7) (8) -0- 476(4) -0-
Corporate Operations and 1996 173,594(7) 35,163(7) (8) -0- -- -0-
Engineering Director
</TABLE>
- ---------------
(1) The terms of the Named Executive Officer's employment are included in an
agreement between the Named Executive Officer and GTS. Such Named Executive
Officer is seconded to the Company for a fee.
(2) For 1997, the amount listed represents the sum of a cost of living allowance
of $16,450, a tax equalization payment of $13,953 that compensates Mr.
Loeber for the higher taxes he pays because he resides in Belgium instead of
the United States, use of a Company car and a gross-up payment for certain
tax liabilities in the amount of $11,648. For 1996, the amount listed
represents the sum of a cost of living allowance of $16,450, paid home leave
of $9,031, use of a Company car and a gross-up payment of $12,778 for
certain tax liabilities.
(3) Mr. Loeber has been granted a restricted stock award of 30,000 shares of GTS
common stock which vests in equal thirds, beginning in January 2, 1997.
(4) For 1997, represents stock options awarded under The Key Employee Stock
Option Plan of Hermes Europe Railtel B.V. (the "HER Stock Option Plan"). For
1996, represents stock options granted under the GTS-Hermes, Inc. 1994 Stock
Option Plan (the "GTS-Hermes Plan"). The stock options granted in 1997 are
in substitution for the stock options granted in 1996, which have been
cancelled.
(5) These Named Executive Officers participate in the GTS 401(k) plan to which
GTS contributed the amounts indicated for 1997 and 1996.
(6) Mr. Caccappolo received a cost of living allowance of $12,163 and $11,200 in
1997 and 1996, respectively, and resides in a Company apartment which the
Company paid the equivalent of $16,109 and $17,928 per year in rent in 1997
and 1996, respectively. In addition, the Company provided Mr. Caccappolo
with the use of a Company car in 1997 and 1996.
(7) Converted from Belgian Francs to U.S. Dollars at an exchange rate of
BF35.77=$1.00 and BF32.04=$1.00 in 1997 and 1996, respectively.
(8) Perquisites and other personal benefits paid to Mr. Magnus and Mr. Shearing
during 1997 and 1996 were less than the lesser of $50,000 and 10 percent of
the total of annual salary and bonus reported for the Named Executive
Officer.
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<PAGE> 65
(9) Mr. Rudy received a housing allowance of $15,096 and $16,855 during 1997
and 1996, respectively. In addition, the Company provided Mr. Rudy with the
use of a Company car in 1997 and 1996.
(10) This amount represents premiums paid by GTS for $1,000,000 in term life
insurance for Mr. Loeber and contributions to Mr. Loeber's account by GTS
under the 401(k) Plan. For 1997, the amount also includes $156,700 which
represents the value at December 31, 1997 of 10,000 shares of GTS
restricted common stock which vested in 1997.
OPTION GRANTS IN THE LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
% OF TOTAL
OPTIONS
NUMBER OF GRANTED TO EXERCISE GRANT
SECURITIES EMPLOYEES OR DATE
UNDERLYING IN BASE PRESENT
OPTIONS FISCAL PRICE EXPIRATION VALUE
NAME GRANTED(#) YEAR ($/SH) DATE ($)(2)
- ---- ---------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Jan Loeber................................ 4,812 47.33% 83.12 2006 2,234,019
Gerard J. Caccappolo...................... 1,714 16.86% 100.00 2006 776,185
Peter Magnus.............................. 687 6.76% 83.12 2006 318,947
Bruce Rudy................................ 476 4.68% 180.74 2006 189,305
John Shearing............................. 476 4.68% 357.51 2007 148,998
</TABLE>
- ---------------
(1) Each stock option vests one-third on each of the first three anniversaries
of the date of grant, with one exception in which 100% vested immediately.
The Company established the HER Stock Option Plan to replace the GTS-Hermes
Plan during the fourth quarter of 1997. The options outstanding under the
GTS-Hermes Plan were cancelled and replaced by options under the HER Stock
Option Plan.
(2) The present value of each grant is estimated on the date of the grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions: dividend yield 0%, expected volatility of 0.50, risk-free
interest rate of 5.79 and expected life of five years.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND
FISCAL YEAR-ENDED OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FY-END(#) AT FY-END($)(2)
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE(1) UNEXERCISABLE
- ---- --------------------- --------------------
<S> <C> <C>
Jan Loeber.............................................. 3,208/1,604 1,417,551/708,775
Gerard J. Caccappolo.................................... 1,143/571 485,775/242,675
Peter Magnus............................................ 687/0 303,572/0
Bruce Rudy.............................................. 317/159 105,780/53,057
John Shearing........................................... 159/317 23,305/46,463
</TABLE>
- ---------------
(1) No options were exercised during the year ended December 31, 1997.
(2) Based on $525.00 per share value of common stock as of December 31, 1997
less the exercise price.
KEY EMPLOYEE STOCK OPTION PLAN OF HERMES EUROPE RAILTEL B.V.
HER has adopted the Key Employee Stock Option Plan of Hermes Europe Railtel
B.V. (the "New Plan"). Under the New Plan certain employees of HER will be
granted stock options to purchase HER common stock. Subject to adjustment in the
event of certain changes in capitalization, a maximum of 24,760 shares of HER
common stock will be authorized for grant under the New Plan which shall be
granted in the form of depository receipts (each a "Receipt"). Each Receipt will
represent a beneficial interest in one share of HER common stock that is subject
to stock options under the New Plan.
58
<PAGE> 66
The New Plan is administered by a committee composed of three members of
the Board of Supervising Directors which will have broad discretion to determine
who shall receive awards under the New Plan, the terms of such awards and
interpret the New Plan. The New Plan shall become effective upon its adoption by
the Board of Supervising Directors and shall continue in effect until 2004,
unless terminated earlier by the Board of Supervising Directors.
Each stock option granted under the New Plan shall have a term of ten
years, except those granted in 1997 reflected in the table above. The exercise
price of each such stock option will be determined at the time of grant. In
addition the stock options granted under the New Plan will become exercisable at
such times and under such conditions as determined by the committee.
The Board of Supervising Directors may amend or terminate the New Plan at
any time, provided that the rights of participants are not impaired.
PENSION PLAN
In 1995, the Company established a defined benefit pension plan (the
"Pension Plan") that covers substantially all of its employees that are at least
twenty-five years of age and have at least one year of service. The benefits are
based on years of service and the employee's compensation at retirement. Messrs.
Magnus and Shearing participate in the Pension Plan. Each participant in the
Pension Plan will receive a lump sum at retirement equal to 450% of final annual
salary up to a specified ceiling which changes every year (in 1996 the ceiling
was BF1,352,000) plus 910% of the excess multiplied by the years of service
divided by 35. The maximum years of service taken into account under the formula
is 35. The normal retirement age is 60. The Company has entered into an
agreement with an insurance company for the provision of a group insurance
policy (the "Policy"). Under the Policy, the insurance provider has undertaken a
legal obligation to provide specified benefits to participants in return for a
fixed premium; accordingly, the Company does not bear significant financial
risk. Premium payments for the Policy are partly paid by the employee based on
specified terms that consider the employee's annual salary, with the remaining
premium paid by the Company. Premiums are intended to provide not only for
benefits attributed to service to date but also for those expected to be earned
in the future. (See Note 5 to the Notes to Consolidated Financial Statements).
Upon termination of employment prior to retirement age, employer contributions
cease and the participant may decide to receive the cash surrender value of the
policy, to continue paying premiums or cease paying premiums but in either case
maintaining the policy which is paid out according to its terms.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$125,000......................... $ 370,313 $ 493,750 $ 617,188 $ 740,625 $ 863,200
$150,000......................... 467,870 623,829 779,786 935,744 1,090,610
$175,000......................... 565,508 754,011 942,513 1,131,056 1,318,200
$200,000......................... 663,100 884,140 1,105,170 1,326,210 1,545,700
$225,000......................... 760,703 1,014,271 1,267,838 1,521,405 1,773,200
$250,000......................... 858,300 1,144,400 1,430,500 1,716,600 2,000,000
$300,000......................... 1,053,490 1,404,660 1,755,820 2,106,990 2,455,700
$400,000......................... 1,443,880 1,925,181 2,406,476 2,887,771 3,365,700
$450,000......................... 1,639,080 2,185,440 2,731,800 3,278,160 3,820,700
$500,000......................... 1,834,270 2,445,700 3,057,120 3,668,550 4,275,700
</TABLE>
The above pension benefits are based on the following formula: (260% S1 +
910% S2) X N/35
S = annual salary
S1 = S up to the "ceiling"
S2 = S above the "ceiling"
N = years of service up to a maximum of 35
For purposes of this calculation the "ceiling" is U.S. $42,200.
59
<PAGE> 67
EMPLOYMENT AGREEMENTS
All the Named Executive Officers have employment agreements with either the
Company (the "Company Employment Agreements") or GTS (the "GTS Employment
Agreements"). The Company reimburses GTS for payments made to Named Executive
Officers under contracts with GTS. The Employment Agreements generally are each
for a term of two to three years and include an automatic renewal provision
unless either party provides notice of termination on or prior to 90 days
thereof.
Messrs. Magnus and Shearing have Company Employment Agreements. The
following is a summary of the material terms of such agreements. Mr. Magnus'
Company Employment Agreement was entered into by the parties on January 3, 1995
for an initial term ending December 31, 1996. The parties have agreed to extend
the term for an indefinite period of time. Mr. Magnus' initial gross annual
salary was BF4,080,000. He may also receive a yearly performance-based bonus of
up to 30% of his base salary based at the discretion of the Company. Under the
agreement, Mr. Magnus is entitled to the use of a company car. The agreement
also provides that Mr. Magnus shall be granted an option to buy shares under the
GTS-Hermes Plan under a separate stock option agreement. Finally, Mr. Magnus'
Company Employment Agreement includes a confidentiality clause of unlimited
duration.
Mr. Shearing's Company Employment Agreement was entered into by the parties
of November 1, 1995 for an undetermined period of time. Mr. Shearing's initial
annual salary was BF2,800,000, which is net of all tax and social security
contributions. He may also receive a yearly performance-based bonus of up to 10%
of his base salary at the discretion of the Company. Furthermore, beginning in
1996, Mr. Shearing may receive an additional deferred bonus of up to 10% of his
base salary, which will be payable on the third anniversary of the date such
bonus is awarded, provided that Mr. Shearing is still employed by the Company on
December 31, 1998. Mr. Shearing participates in the Company's pension plan and
is provided with a company car. Finally, Mr. Shearing's Company Employment
Agreement includes a confidentiality clause of unlimited duration.
See "Certain Relationships and Related Transactions" for a description of
the GTS Employment Agreements.
60
<PAGE> 68
SECURITY OWNERSHIP OF PRINCIPAL
SHAREHOLDERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Ordinary Shares of the Company, as of December 8, 1998, by each
beneficial owner of 5% or more of the Ordinary Shares and by directors and
officers of the Company. For the purpose of this table, a person or group of
persons is deemed to have "beneficial ownership" of any shares which such person
or group has the right to acquire within 60 days after such date, but such
shares are not deemed to be outstanding for the purpose of computing the
percentage ownership of any other person.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE
SHARES BENEFICIALLY
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED OWNED
- ------------------------ ------------------ ------------
<S> <C> <C>
GTS Carrier Services, Inc................................... 176,858 89.9%
SNCB/NMBS................................................... 13,610 6.90%
Jan Loeber(1)............................................... 4,812 2.40%
Gerard Caccappolo(1)........................................ 1,714 *
Peter Magnus(1)............................................. 688 *
John Green(1)............................................... 572 *
Bruce Rudy(1)............................................... 476 *
John Shearing(1)............................................ 317 *
Jan De Wispelaere(1)........................................ 317 *
Other Officers.............................................. 317 *
-------
All Directors and Executive Officers as a Group (8
persons).................................................. 9,213 4.68%
-------
Total of above.................................... 199,681
=======
</TABLE>
- ---------------
* Less than 1%.
(1) The shares are beneficially owned by these persons and are held in trust by
Stichting Administratiekantoor HER Foundation, which in turn has issued
depositary receipts to such persons representing beneficial ownership in the
shares. In addition, the Company has established a stock option plan
pursuant to which key officers and employees were granted options to
purchase Ordinary Shares of the Company. The Company expects that the number
of Ordinary Shares of HER subject to the proposed plan will be approximately
13% of the total Ordinary Shares of HER issued and outstanding. See
"Management-- Executive Compensation."
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<PAGE> 69
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PURCHASE OF SHARES BY GTS CARRIER SERVICES
In connection with the purchase of AB Swed Carrier's interest in HER in
December 1998, GTS Carrier Services paid approximately $5.3 million to a company
that is affiliated with a member of the Supervisory Board of HER for negotiating
with AB Swed Carrier and SNCB/NMBS on behalf of GTS Carrier Services to purchase
their respective ownership interest in HER. See "Security Ownership of Principal
Shareholders and Management."
SHAREHOLDERS AGREEMENT
Under the Shareholders Agreement, SNCB/NMBS, so long as it holds at least
6.8% of the shares of HER, is entitled to make a binding nomination for the
appointment of one member of the Board of Supervisory Directors.
SHAREHOLDER LEASES AND LOANS
The Company currently leases dark fiber and facilities from SNCB/NMBS.
SNCB/NMBS is a direct shareholder of HER.
GTS EMPLOYMENT AGREEMENTS
Messrs. Loeber, Caccappolo and Rudy are parties to GTS Employment
Agreements. Each GTS Employment Agreement provides the relevant Named Executive
Officer with a salary, bonus and a standard company welfare benefits package as
well as the use of an automobile, cost of living allowance, tax equalization and
certain other fringe benefits. In addition, the GTS Employment Agreements
include severance benefit provisions. Finally, the GTS Employment Agreements
include noncompete and nonsolicitation clauses that cover the term of employment
and twelve months thereafter. Under the GTS Agreements, each party employee was
entitled to participate in the GTS-Hermes Plan. The options outstanding under
the GTS-Hermes Plan were cancelled and replaced by options under the HER Stock
Option Plan.
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<PAGE> 70
DESCRIPTION OF THE EXCHANGE NOTES
The Outstanding Dollar Notes were issued under an Indenture (the "Dollar
Notes Indenture"), and the Euro Notes were issued under an Indenture (the "Euro
Notes Indenture," and, together with the Dollar Notes Indenture, the
"Indentures"), each dated as of January 4, 1999 between the Company and The Bank
of New York, as trustee (the "Trustee"). The Exchange Notes will be issued under
the Indentures, which will be qualified under the United States Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"), upon the effectiveness of
the Registration Statement of which this Prospectus is a part. The form and
terms of the Exchange Notes are the same in all material respects as the form
and terms of the Outstanding Notes, except that the Exchange Notes will have
been registered under the Securities Act and, therefore, will not bear legends
restricting transfer thereof (other than those relating to the offer and sale of
Exchange Notes in The Netherlands). Upon the consummation of the Exchange Offer,
holders of the Outstanding Notes will not be entitled to registration rights
under, or the contingent increase in interest rate provided pursuant to, the
Registration Rights Agreements. The Exchange Notes will evidence the same debt
as the Outstanding Notes and will be treated as a single class under the
Indentures with any Outstanding Notes that remain outstanding. The Outstanding
Notes and Exchange Notes are herein collectively referred to as the "Notes."
The following summary of certain provisions of the Indentures and the
Registration Rights Agreements does not purport to be complete and is subject
to, and is qualified in its entirety by reference to, the Trust Indenture Act,
and to all of the provisions of the Indentures and the Registration Rights
Agreements, including the definitions of certain terms therein and those terms
made a part of the Indentures by reference to the Trust Indenture Act. Copies of
the Indentures and the Registration Rights Agreements may be obtained upon
request to the Company at its address set forth elsewhere herein and any of the
Paying Agents set forth on the back cover hereof. The definitions of certain
terms used in the following summary are set forth under "-- Certain
Definitions." References in this "Description of the Exchange Notes" section to
"the Company" mean only Hermes Europe Railtel B.V. and not any of its
Subsidiaries.
GENERAL
The Outstanding Dollar Notes have been issued only in registered form,
without coupons, in denominations of $1,000 and integral multiples of $1,000.
The Euro Notes have been issued only in registered form, without coupons, in
denominations of Euro 1,000 and integral multiples of Euro 1,000. The Company
has initially appointed the Trustee to serve as registrar and principal paying
agent under the Dollar Notes Indenture at its offices at 101 Barclay Street, New
York, New York 10286 and the Company has initially appointed the Trustee, acting
through its London branch, to serve as registrar and paying agent under the Euro
Notes Indenture. The registrar, paying agents, and transfer agents (the
"Registrar," "Paying Agents" and "Transfer Agents," respectively) are appointed
in accordance with the Indentures and initially are as set forth on the inside
back cover page hereof. No service charge will be made for any registration of
transfer or exchange of the Notes, except for any tax or other governmental
charge that may be imposed in connection therewith.
RANKING
The Notes will be general unsecured obligations of the Company and will
rank senior in right of payment to all future indebtedness of the Company that
is, by its terms or by the terms of the agreement or instrument governing such
Indebtedness, expressly subordinated in right of payment to the Notes and equal
in right of payment with each other and with all existing and future unsecured
liabilities of the Company that are not so subordinated, including the Company's
11 1/2% Senior Notes due 2007 (the "Existing Notes").
The Company is a holding company with limited assets and will operate its
business through Subsidiaries. Any right of the Company and its creditors,
including holders of the Notes, to participate in the assets of any of the
Company's Subsidiaries upon any liquidation or administration of any such
Subsidiary will be subject to the prior claims of the creditors of such
Subsidiary. The claims of creditors of the Company, including holders of the
Notes, will be effectively subordinated to all existing and future third-party
indebtedness and liabilities, including trade payables, of the Company's
Subsidiaries. As of September 30, 1998 on a pro forma basis, the
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<PAGE> 71
Company would have had total long-term debt of $753.1 million (including the
Notes and the Existing Notes), and the Company's Subsidiaries would have had
total liabilities of $320.4 million reflected on the Company's balance sheet.
The Company and its Subsidiaries may incur other debt in the future, including
secured debt.
The Notes will not be entitled to any security, and will not be entitled to
the benefit of any guarantees, except under the circumstances described under
"-- Certain Covenants -- Limitation on Issuances of Guarantees by Restricted
Subsidiaries."
MATURITY, INTEREST AND PRINCIPAL OF THE NOTES
The Dollar Notes will be limited to $200.0 million aggregate principal
amount and will mature on January 15, 2009. The Euro Notes will be limited to
E$85.0 million aggregate principal amount and will mature on January 15, 2006.
The Notes will be payable in each case at maturity at par, plus accrued and
unpaid interest, if any. Cash interest on the Notes will accrue at the rate per
annum set forth on the cover page of this Offering Memorandum and will be
payable semi-annually in arrears on each January 15 and July 15, commencing July
15, 1999, to the holders of record of Notes (the "Holders") at the close of
business on January 1 and July 1, respectively, immediately preceding such
interest payment date. Cash interest will accrue from the most recent interest
payment date to which interest has been paid or, if no interest has been paid,
from January 4, 1999. Interest will be computed on the basis of a 360-day year
of twelve 30-day months.
The Luxembourg Stock Exchange will be informed of each change in the
interest rate of the Notes on the date of such change. The Company will cause a
copy of such notice to be published in a daily newspaper with general
circulation in Luxembourg (which is expected to be the Luxemburger Wort).
Principal of, and interest on, the Notes will be payable, and the transfer
of Notes will be registrable, at the office of the Trustee, and at the offices
of the Paying Agents and Transfer Agents, respectively. Where not all of the
Notes represented by a Certificated Note are the subject of a transfer, a new
Certificated Note in respect of the principal amount of Notes that have not been
so transferred will be issued to the transferor and will be available at the
office of the Transfer Agent in New York City or at the office of the Transfer
Agent in Luxembourg, as applicable. With respect to Dollar Notes, payments of
principal and premium, if any, will be made (on presentation of such Notes if in
certificates form) at the corporate trust office of the Paying Agent in New York
City or, subject to any applicable laws and regulations, at the office of the
Paying Agent in Luxembourg by United States dollar check drawn on, or wire
transfer to a United States dollar account maintained by the holder with, a bank
located in New York City. Payments of any installments of interest on Notes will
be made by a United States dollar check drawn on a bank in New York City mailed
to the holder at such holder's registered address or (if arrangements
satisfactory to the Company and the Paying Agents are made) by wire transfer to
a dollar account maintained by the holder with a bank in New York City. With
respect to Euro Notes, payments of principal, premium, if any, and interest will
be made (in the case of payments of principal, on presentation of such Notes if
in certificated form) by credit or transfer to a Euro account maintained by the
holder in the place of payment specified by the holder. Holders of Notes who
receive payment in any currency other than the Euro must make arrangements at
their own expense. For so long as the Notes are listed on the Luxembourg Stock
Exchange and the rules of such stock exchange so require, the Company will
maintain a Paying Agent and a Transfer Agent in Luxembourg.
If a payment date is not a Business Day at a place of payment, payment may
be made at that place on the next succeeding Business Day and no interest shall
accrue for the intervening period.
The Company may at any time deliver Notes to the Trustee for cancellation.
Subject to the terms of the Indentures, the Company may not issue new Notes to
replace Notes that it has paid or delivered to the Trustee for cancellation.
ADDITIONAL AMOUNTS
All payments made by the Company under or with respect to the Notes will be
made free and clear of and without withholding or deduction for or on account of
any present or future Taxes imposed or levied by or
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<PAGE> 72
on behalf of any Taxing Authority within the Netherlands, or within any other
jurisdiction in which the Company is organized or is otherwise resident for tax
purposes or any jurisdiction from or through which payment is made, (each a
"Relevant Taxing Jurisdiction"), unless the Company is required to withhold or
deduct Taxes by law or by the interpretation or administration thereof. If the
Company is required to withhold or deduct any amount for or on account of Taxes
imposed by a Relevant Taxing Jurisdiction, from any payment made under or with
respect to the Notes, the Company will pay such additional amounts ("Additional
Amounts") as may be necessary so that the net amount received by each holder of
Notes (including Additional Amounts) after such withholding or deduction will
equal the amount the holder would have received if such Taxes had not been
withheld or deducted; provided, however, that no Additional Amounts will be
payable with respect to any Tax that would not have been imposed, payable or due
(i) but for the existence of any present or former connection between the holder
(or the beneficial owner of, or person ultimately entitled to obtain an interest
in, such Notes) and the Relevant Taxing Jurisdiction (including being a citizen
or resident or national of, or carrying on a business or maintaining a permanent
establishment in, or being physically present in, the Relevant Taxing
Jurisdiction) other than the mere holding of the Notes or enforcement of rights
thereunder or the receipt of payments in respect therefrom; (ii) but for the
failure to satisfy any certification, identification or other reporting
requirements whether imposed by statute, treaty, regulation or administrative
practice, provided that the Company has delivered a request to the holder to
comply with such requirements at least 30 days prior to the date by which such
compliance is required; or (iii) if the presentation of Notes (where
presentation is required) for payment had occurred within 30 days after the date
such payment was due and payable or was duly provided for, whichever is later.
In addition, Additional Amounts will not be payable if the beneficial owner of,
or person ultimately entitled to obtain an interest in, such Notes had been the
holder of the Notes and, such beneficial owner would not be entitled to the
payment of Additional Amounts by reason of clauses (i) to (iii) inclusive above.
In addition, Additional Amounts will not be payable with respect to any Tax
which is payable otherwise than by withholding from payments of, or in respect
of principal of, or any interest on, the Notes.
Whenever in the Indentures or in this "Description of the Exchange Notes"
there is mentioned, in any context, the payment of amounts based upon the
principal amount of the Notes or of principal, interest or of any other amount
payable under or with respect to any of the Notes, such mention shall be deemed
to include mention of the payment of Additional Amounts to the extent that, in
such context, Additional Amounts are, were or would be payable in respect
thereof.
Upon request, the Company will provide the Trustee with documentation
satisfactory to the Trustee evidencing the payment of Additional Amounts.
The Company will pay any present or future stamp, court or documentary
taxes, or any other excise or property taxes, charges or similar levies which
arise in any jurisdiction from the execution, delivery or registration of the
Notes or any other document or instrument referred to therein, or the receipt of
any payments with respect to the Notes, excluding any such taxes, charges or
similar levies imposed by any jurisdiction outside of The Netherlands, any
jurisdiction in which the Company is organized or is otherwise resident for tax
purposes, the United States of America or any jurisdiction in which a Paying
Agent is located, but not excluding those resulting from, or required to be paid
in connection with, the enforcement of the Notes or any other such document or
instrument following the occurrence of any Event of Default with aspect to the
Notes.
OPTIONAL REDEMPTION
OPTIONAL REDEMPTION OF DOLLAR NOTES
The Euro Notes will be redeemable at the option of the Company, in whole or
in part, at any time or from time to time on or after January 15, 2004, upon not
less than 30 nor more than 60 days' prior notice mailed by first class mail to
the registered address of each Holder of Dollar Notes, at the redemption prices
(expressed as
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<PAGE> 73
a percentage of principal amount) set forth below, plus accrued and unpaid
interest thereon, if any, to the date of redemption, if redeemed during the
12-month period beginning on January 15 of the years indicated below:
<TABLE>
<CAPTION>
DOLLAR NOTES
REDEMPTION
YEAR PRICE
- ---- ------------
<S> <C>
2004.................................................... 105.188%
2005.................................................... 103.459%
2006.................................................... 101.729%
2007 and thereafter..................................... 100.000%
</TABLE>
OPTIONAL REDEMPTION OF EURO NOTES
The Dollar Notes will be redeemable at the option of the Company, in whole
or in part, at any time or from time to time on or after January 15, 2003, upon
not less than 30 nor more than 60 days' prior notice mailed by first class mail
to the registered address of each Holder of Euro Notes, at the redemption prices
(expressed as a percentage of principal amount) set forth below, plus accrued
and unpaid interest thereon, if any, to the date of redemption, if redeemed
during the 12-month period beginning on January 15 of the years indicated below:
<TABLE>
<CAPTION>
EURO NOTES
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2003..................................................... 105.188%
2004..................................................... 102.594%
2005..................................................... 100.000%
</TABLE>
The Company will cause a copy of such notice to be published in a daily
newspaper with general circulation in Luxembourg (which is expected to be the
Luxemburger Wort).
REDEMPTION UPON PUBLIC EQUITY OFFERING OR STRATEGIC EQUITY INVESTMENT
At any time or from time to time prior to January 15, 2002, upon not less
than 30 nor more than 60 days' prior notice mailed by first class mail to the
registered address of each Holder of Dollar Notes, the Company may redeem Dollar
Notes at a redemption price equal to 110.375% of the principal amount of the
Dollar Notes so redeemed, plus accrued and unpaid interest thereon, if any, to
the date of redemption with the net cash proceeds of one or more Public Equity
Offerings or Strategic Equity Investments resulting in aggregate gross cash
proceeds to the Company of at least $75.0 million; provided, however, that at
least two-thirds of the principal amount of Dollar Notes originally issued would
remain outstanding immediately after giving effect to any such redemption
(excluding any Dollar Notes owned by the Company or any of its Affiliates). At
any time or from time to time prior to January 15, 2002, upon not less than 30
nor more than 60 days' prior notice mailed by first class mail to the registered
address of each Holder of Euro Notes, the Company may redeem Euro Notes at a
redemption price equal to 110.375% of the principal amount of the Euro Notes so
redeemed, plus accrued and unpaid interest thereon, if any, to the date of
redemption with the net cash proceeds of one or more Public Equity Offerings or
Strategic Equity Investments resulting in aggregate gross cash proceeds to the
Company of at least $75.0 million; provided, however, that at least two-thirds
of the principal amount of Euro Notes originally issued remain outstanding
immediately after giving effect to any such redemption (excluding any Euro Notes
owned by the Company or any of its Affiliates). Notice of any such redemption
must be given within 60 days after the date of a Public Equity Offering or
Strategic Equity Investment resulting in gross cash proceeds to the Company,
when aggregated with all prior Public Equity Offerings and Strategic Equity
Investments, of at least $75.0 million. The Company will cause a copy of such
notice to be published in a daily newspaper with general circulation in
Luxembourg (which is expected to be the Luxemburger Wort).
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<PAGE> 74
REDEMPTION FOR CHANGES IN WITHHOLDING TAXES
The Company may, at its option, redeem all (but not less than all) of the
Dollar Notes then outstanding and all (but not less than all) of the Euro Notes
then outstanding, in each case at 100% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of redemption, if the Company
has become or would become obligated to pay, on the next date on which any
amount would be payable with respect to such Notes, any Additional Amounts as a
result of change in law (including any regulations promulgated thereunder) or in
the interpretation or administration thereof, if such change is announced and
becomes effective on or after the Issue Date. Notice of any such redemption must
be given within 60 days of the earlier of the announcement and the effectiveness
of any such change.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any time
pursuant to an optional redemption, selection of such Notes for redemption will
be made by the Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which the Notes are listed or, if the
Notes are not then listed on a national securities exchange, on a pro rata
basis, by lot or by such method as the Trustee shall deem fair and appropriate;
provided, however, that no Notes of a principal amount of $1,000 or E$1,000, as
applicable, or less shall be redeemed in part; provided, further, however, that
if a partial redemption is made pursuant to the provisions described in the
second paragraph under "-- Optional Redemption," selection of the Notes or
portions thereof for redemption shall be made by the Trustee only on a pro rata
basis or on as nearly a pro rata basis as is practicable (subject to the
procedures of The Depository Trust Company), unless such method is otherwise
prohibited. Notice of redemption shall be mailed by first-class mail at least 30
but not more than 60 days before the date of redemption to each Holder of Notes
to be redeemed at its registered address. The Company will cause a copy of such
notice to be published in a daily newspaper with general circulation in
Luxembourg (which is expected to be the Luxemburger Wort). If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
a principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note. On and after
the date of redemption, interest will cease to accrue on Notes or portions
thereof called for redemption so long as the Company has deposited with the
Paying Agents in New York and Luxembourg for the Notes funds in satisfaction of
the redemption price pursuant to the Indenture governing such Notes.
CHANGE OF CONTROL
Following the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Company shall notify the
Holders of such occurrence in the manner prescribed by the Indentures and shall,
within 30 days after the Change of Control Date, make an Offer to Purchase all
Notes then outstanding at a purchase price in cash equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest thereon, if
any, to the Purchase Date. The Company will cause a copy of such notice to be
published in a daily newspaper with general circulation in Luxembourg (which is
expected to be the Luxemburger Wort). The Company's obligations may be satisfied
if a third party makes the Offer to Purchase in the manner, at the times and
otherwise in compliance with the requirements of the Indentures applicable to an
Offer to Purchase made by the Company and purchases all Notes validly tendered
and not withdrawn under such Offer to Purchase.
If an Offer to Purchase is made, there can be no assurance that the Company
will have available funds sufficient to pay for all of the Notes that might be
tendered by Holders seeking to accept the Offer to Purchase. If the Company
fails to purchase all of the Notes tendered for purchase upon the occurrence of
a Change of Control, such failure will constitute an Event of Default. See
"-- Events of Default" and "-- Risk Factors -- Possible Inability to Purchase
Notes Upon a Change of Control."
If the Company makes an Offer to Purchase, the Company will comply with all
applicable tender offer laws and regulations, including, to the extent
applicable, Section 14(e) and Rule 14e-1 under the Exchange Act, and any other
applicable Federal or state securities laws and regulations and any applicable
requirements
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<PAGE> 75
of any securities exchange on which the Notes are listed, and any violation of
the provisions of the Indentures relating to such Offer to Purchase occurring as
a result of such compliance shall not be deemed a Default.
CERTAIN COVENANTS
Limitation on Restricted Payments. The Company shall not, and shall not
cause or permit any Restricted Subsidiary to, directly or indirectly,
(i) declare or pay any dividend or any other distribution on any
Equity Interests of the Company or any Restricted Subsidiary or make any
payment or distribution to the direct or indirect holders of Equity
Interests of the Company or any Restricted Subsidiary (other than any
dividends, distributions and payments made to the Company or any Restricted
Subsidiary and dividends or distributions payable to any Person solely in
Qualified Equity Interests or in options, warrants or other rights to
purchase Qualified Equity Interests);
(ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any Restricted Subsidiary (other than
any such Equity Interests owned by the Company or any Restricted
Subsidiary);
(iii) purchase, redeem, defease or retire for value, or make any
principal payment on, prior to any scheduled maturity, scheduled repayment
or scheduled sinking fund payment, any Subordinated Indebtedness (other
than any Subordinated Indebtedness held by any Restricted Subsidiary); or
(iv) make any Investment (other than Permitted Investments)
(any of the foregoing, a "Restricted Payment"), unless
(a) no Default shall have occurred and be continuing at the time of or
after giving effect to such Restricted Payment;
(b) immediately after giving effect to such Restricted Payment, the
Company would be able to Incur $1.00 of additional Indebtedness under the
first paragraph of "-- Limitation on Incurrence of Indebtedness"; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate amount of all Restricted Payments (including the Fair Market
Value of any non-cash Restricted Payment) declared or made on or after the
Issue Date (excluding any Restricted Payment described in clauses (ii),
(iii) or (iv) of the next paragraph) does not exceed an amount equal to the
sum of the following (the "Basket"):
(1) (x) the Cumulative Operating Cash Flow determined at the time
of such Restricted Payment less (y) 150% of cumulative Consolidated
Interest Expense determined for the period (treated as one accounting
period) commencing on the Issue Date and ending on the last day of the
most recent fiscal quarter immediately preceding the date of such
Restricted Payment for which consolidated financial information of the
Company is required to be available, plus
(2) the aggregate net cash proceeds received by the Company either
(x) as capital contributions to the Company after the Issue Date or (y)
from the issue and sale (other than to a Subsidiary) of Qualified Equity
Interests after the Issue Date (other than any issuance and sale of
Qualified Equity Interests (A) financed, directly or indirectly, using
funds (I) borrowed from the Company or any Subsidiary until and to the
extent such borrowing is repaid or (II) contributed, extended,
guaranteed or advanced by the Company or any Subsidiary (including,
without limitation, in respect of any employee stock ownership or
benefit plan) or (B) the proceeds of which are used to effect any
transaction permitted by clauses (ii), (iii) or (iv) of the next
paragraph), plus
(3) the aggregate amount by which Indebtedness (other than any
Subordinated Indebtedness) of the Company or any Restricted Subsidiary
is reduced on the Company's balance sheet upon the conversion or
exchange (other than by a Subsidiary of the Company) subsequent to the
Issue Date into Qualified Equity Interests (less the amount of any cash,
or the fair value of property, distributed by the Company or any
Restricted Subsidiary upon such conversion or exchange), plus
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(4) in the case of the disposition or repayment of any Investment
that was treated as a Restricted Payment made after the Issue Date, an
amount (to the extent not included in the computation of Cumulative
Operating Cash Flow) equal to the lesser of: (x) the return of capital
with respect to such Investment and (y) the amount of such Investment
that was treated as a Restricted Payment, in either case, less the cost
of the disposition of such Investment and net of taxes, plus
(5) so long as the Designation thereof was treated as a Restricted
Payment made after the Issue Date, with respect to any Unrestricted
Subsidiary that has been redesignated as a Restricted Subsidiary after
the Issue Date in accordance with "-- Designation of Unrestricted
Subsidiaries," the Company's proportionate interest in an amount equal
to the excess of (x) the total assets of such Subsidiary, valued on an
aggregate basis at the lesser of book value and Fair Market Value, over
(y) the total liabilities of such Subsidiary, determined in accordance
with GAAP (and provided that such amount shall not in any case exceed
the Designation Amount with respect to such Restricted Subsidiary upon
its Designation), minus
(6) with respect to each Subsidiary of the Company which has been
designated as an Unrestricted Subsidiary after the Issue Date in
accordance with "-- Designation of Unrestricted Subsidiaries," the
greater of (x) $0 and (y) the Designation Amount thereof (measured as of
the Date of Designation).
The foregoing provisions will not prevent (i) the payment of any dividend
or distribution on, or redemption of, Equity Interests within 60 days after the
date of declaration of such dividend or distribution or the giving of formal
notice of such redemption, if at the date of such declaration or giving of
formal notice such payment or redemption would comply with the provisions of the
Indentures; (ii) the purchase, redemption, retirement or other acquisition of
any Equity Interests of the Company in exchange for, or out of the net cash
proceeds of the substantially concurrent (A) common equity capital contribution
to the Company from any Person (other than a Subsidiary) or (B) issue and sale
(other than to a Subsidiary) of, Qualified Equity Interests; (iii) any
Investment to the extent that the consideration therefor consists of the net
proceeds of the substantially concurrent issue and sale (other than to a
Subsidiary) of Qualified Equity Interests; (iv) the purchase, redemption,
retirement, defeasance or other acquisition of Subordinated Indebtedness made in
exchange for, or out of the net cash proceeds of, a substantially concurrent
issue and sale (other than to a Subsidiary) of, (x) Qualified Equity Interests
or (y) other Subordinated Indebtedness having no stated maturity for the payment
of principal thereof prior to the Maturity Date; or (v) any Investment in any
Person principally engaged in a Telecommunications Business; provided, however,
that Investments pursuant to this clause (v) shall not exceed $25.0 million in
the aggregate at any time outstanding; provided, further, however, that in the
case of each of clauses (ii), (iii), (iv) and (v), no Default shall have
occurred and be continuing or would arise therefrom.
Limitation on Incurrence of Indebtedness. (a) The Company shall not, and
shall not cause or permit any Restricted Subsidiary to, directly or indirectly,
Incur any Indebtedness; provided, however, that the Company may Incur
Indebtedness if, at the time of such Incurrence, the Debt to Annualized
Operating Cash Flow Ratio would be less than or equal to 6.0 to 1.0.
(b) The foregoing limitations of paragraph (a) of this covenant will
not apply to any of the following, each of which shall be given independent
effect:
(i) the Notes and the Exchange Notes, and Permitted Refinancings
thereof;
(ii) Indebtedness of the Company or any Restricted Subsidiary to
the extent outstanding on the date of the Indentures, and Permitted
Refinancings thereof;
(iii) Indebtedness of the Company or Qualified Subsidiary
Indebtedness, in each case, to the extent that the proceeds of or credit
support provided by such Indebtedness is used to finance the cost
(including the cost of design, development, construction, installation
or integration) of network
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assets, equipment or inventory acquired by the Company or a Restricted
Subsidiary after the Issue Date, and Permitted Refinancings thereof;
(iv) (1) Indebtedness of the Company or Qualified Subsidiary
Indebtedness, in each case, to the extent that the proceeds of or credit
support provided by such Indebtedness is used to finance a
Telecommunications Acquisition, or working capital for, or to finance
the construction of, the business or network acquired and (2) Acquired
Indebtedness, and, in each case, Permitted Refinancings thereof, but in
each case only to the extent that (x) the aggregate amount of
Indebtedness outstanding of the Company and the Restricted Subsidiaries
after giving effect to the Incurrence of such Indebtedness and the
application of the proceeds therefrom does not exceed the product of 2.0
and the Share Capital of the Company at the date of Incurrence of such
Indebtedness or (y) the aggregate amount of such Indebtedness or
Acquired Indebtedness, together with all Indebtedness of the Person, if
any, that is to become a Restricted Subsidiary or be merged or
consolidated with or into the Company or any Restricted Subsidiary in
the contemplated transaction outstanding at the time of such transaction
(whether or not Incurred in connection with, or in contemplation of,
such transaction), does not exceed the net sum of the plant, property
and equipment set forth on the Latest Balance Sheet of such Person;
(v) (1) Indebtedness of any Restricted Subsidiary owed to and held
by the Company or any Restricted Subsidiary and (2) Indebtedness of the
Company owed to and held by any Restricted Subsidiary which is unsecured
and subordinated in right of payment to the payment and performance of
the Company's obligations under the Notes; provided, however, that an
Incurrence of Indebtedness that is not permitted by this clause (v)
shall be deemed to have occurred upon (x) any sale or other disposition
of any Indebtedness of the Company or any Restricted Subsidiary referred
to in this clause (v) to any Person other than the Company or any
Restricted Subsidiary or (y) any Restricted Subsidiary that holds
Indebtedness of the Company or another Restricted Subsidiary ceasing to
be a Restricted Subsidiary;
(vi) Interest Rate Protection Obligations of the Company or any
Restricted Subsidiary relating to Indebtedness of the Company or such
Restricted Subsidiary, as the case may be (which Indebtedness (x) bears
interest at fluctuating interest rates and (y) is otherwise permitted to
be Incurred under this covenant); provided, however, that the notional
principal amount of such Interest Rate Protection Obligations does not
exceed the principal amount of the Indebtedness to which such Interest
Rate Protection Obligations relate;
(vii) Indebtedness of the Company or any Restricted Subsidiary
under Currency Agreements to the extent relating to (x) Indebtedness of
the Company or such Restricted Subsidiary, as the case may be, and/or
(y) obligations to purchase assets, properties or services incurred in
the ordinary course of business of the Company or such Restricted
Subsidiary, as the case may be; provided, however, that such Currency
Agreements do not increase the Indebtedness or other obligations of the
Company and the Restricted Subsidiaries outstanding other than as a
result of fluctuations in foreign currency exchange rates or by reason
of fees, indemnities or compensation payable thereunder;
(viii) Indebtedness of the Company and/or any Restricted Subsidiary
in respect of performance bonds of the Company or any Restricted
Subsidiary or surety bonds provided by the Company or any Restricted
Subsidiary incurred in the ordinary course of business and on ordinary
business terms in connection with the construction or operation of a
Telecommunications Business; and
(ix) in addition to the items referred to in clauses (i) through
(viii) above, Indebtedness of the Company or Qualified Subsidiary
Indebtedness in an aggregate amount not to exceed $15.0 million at any
time outstanding.
(c) For purposes of determining any particular amount of Indebtedness
under this covenant, guarantees, Liens or obligations with respect to
letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included; provided,
however, that
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the foregoing shall not in any way be deemed to limit the provisions of
"-- Limitation on Issuances of Guarantees by Restricted Subsidiaries."
(d) For purposes of determining compliance with this covenant, in the
event that an item of Indebtedness may be Incurred through the first
paragraph of this covenant or by meeting the criteria of one or more of the
types of Indebtedness described in the second paragraph of this covenant
(or the definitions of the terms used therein), the Company, in its sole
discretion, may, at the time of such Incurrence, (i) classify such item of
Indebtedness under and comply with either of such paragraphs (or any of
such definitions), as applicable, (ii) classify and divide such item of
Indebtedness into more than one of such paragraphs (or definitions), as
applicable, and (iii) elect to comply with such paragraphs (or
definitions), as applicable, in any order.
Limitation on Restrictions Affecting Restricted Subsidiaries. The Company
shall not, and shall not cause or permit any Restricted Subsidiary to, directly
or indirectly, create or otherwise cause or suffer to exist or become effective
any encumbrance or restriction on the ability of any Restricted Subsidiary to
(x) pay dividends or make any other distributions to the Company or any other
Restricted Subsidiary on its Equity Interests or with respect to any other
interest or participation in, or measured by, its profits, or pay any
Indebtedness owed to the Company or any other Restricted Subsidiary, (y) make
loans or advances to, or guarantee any Indebtedness or other obligations of, the
Company or any other Restricted Subsidiary or (z) transfer any of its properties
or assets to the Company or any other Restricted Subsidiary.
The foregoing shall not prohibit (a) any encumbrance or restriction
existing under or by reason of any agreement in effect on the Issue Date, as any
such agreement is in effect on such date or as thereafter amended or
supplemented but only if such encumbrance or restriction is no more restrictive
than in the agreement being amended; (b) customary provisions contained in an
agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of a Restricted Subsidiary;
provided, however, that (x) such encumbrance or restriction is applicable only
to such Restricted Subsidiary or assets and (y) such sale or disposition is made
in accordance with "-- Limitation on Asset Sales"; (c) any encumbrance or
restriction existing under or by reason of applicable law; (d) customary
provisions restricting subletting or assignment of any lease governing any
leasehold interest of any Restricted Subsidiary; (e) covenants in purchase money
obligations for property acquired in the ordinary course of business restricting
transfer of such property; (f) covenants in security agreements securing
Indebtedness of a Restricted Subsidiary (to the extent that such Liens were
otherwise incurred in accordance with "-- Limitation on Liens") that restrict
the transfer of property subject to such agreements; (g) any agreement or other
instrument of a Person acquired by the Company or any Restricted Subsidiary in
existence at the time of such acquisition, which encumbrance or restriction (x)
is not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the properties or assets of the Person so acquired,
and (y) is not incurred in connection with or in contemplation of such
acquisition; or (h) contained in any agreement entered into after the Issue
Date, so long as such encumbrance or restriction is not materially more
disadvantageous to the Holders than the encumbrances and restrictions in
existence at the Issue Date.
Designation of Unrestricted Subsidiaries. (a) The Company may designate any
Subsidiary of the Company as an "Unrestricted Subsidiary" under the Indentures
(a "Designation") only if:
(i) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation; and
(ii) the Company would be permitted to make an Investment (other than
a Permitted Investment) at the time of Designation (assuming the
effectiveness of such Designation) pursuant to the first paragraph of
"-- Limitation on Restricted Payments" in an amount (the "Designation
Amount") equal to the Fair Market Value of the Company's proportionate
interest in the net worth of such Subsidiary on such date calculated in
accordance with GAAP.
All Subsidiaries of Unrestricted Subsidiaries shall be Unrestricted
Subsidiaries.
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The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, at any time (x) provide credit support
for, subject any of its properties or assets (other than the Equity Interests of
any Unrestricted Subsidiary) to the satisfaction of, or guarantee, any
Indebtedness of any Unrestricted Subsidiary (including any undertaking,
agreement or instrument evidencing such Indebtedness), (y) be liable for any
Indebtedness of any Unrestricted Subsidiary or (z) be liable for any
Indebtedness which provides that the holder thereof may (upon notice, lapse of
time or both) declare a default thereon or cause the payment thereof to be
accelerated or payable prior to its final scheduled maturity upon the occurrence
of a default with respect to any Indebtedness of any Unrestricted Subsidiary.
(b) The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation") only if:
(i) no Default shall have occurred and be continuing at the time of
and after giving effect to such Revocation;
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if Incurred at
such time, have been permitted to be Incurred for all purposes of the
Indentures; and
(iii) any transaction (or series of related transactions) between such
Subsidiary and any of its Affiliates that occurred while such Subsidiary
was an Unrestricted Subsidiary would be permitted by "-- Limitation on
Transactions with Affiliates" as if such transaction (or series of related
transactions) had occurred at the time of such Revocation (after giving
effect to any modification to such transaction (or series of related
transactions) effective at such time).
All Designations and Revocations must be evidenced by resolutions of the
Board of Directors of the Company, delivered to the Trustee certifying
compliance with the foregoing provisions.
Limitation on Liens. The Company shall not, and shall not cause or permit
any Restricted Subsidiary to, directly or indirectly, Incur any Lien (other than
any Permitted Lien) of any kind against or upon any of their respective
properties or assets now owned or hereafter acquired, or any proceeds, income or
profits therefrom, unless contemporaneously therewith or prior thereto, (i) in
the case of any Lien securing an obligation that ranks pari passu with the
Notes, effective provision is made to secure the Notes equally and ratably with
or prior to such obligation with a Lien on the same collateral and (ii) in the
case of any Lien securing an obligation that is subordinated in right of payment
to the Notes, effective provision is made to secure the Notes with a Lien on the
same collateral that is prior to the Lien securing such subordinated obligation,
in each case, for so long as such obligation is secured by such Lien.
Limitation on Asset Sales. The Company shall not, and shall not cause or
permit any Restricted Subsidiary to, directly or indirectly, make any Asset
Sale, unless (x) the Company 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 assets sold or otherwise disposed of and (y) at least 75% of
such consideration consists of (i) cash or Cash Equivalents, (ii) Replacement
Assets, (iii) publicly traded Equity Interests of a Person who is engaged
primarily in a Telecommunications Business; provided, however, that the Company
or such Restricted Subsidiary shall sell (a "Monetization Sale"), for cash or
Cash Equivalents, such Equity Interests to a third Person (other than to the
Company or a Subsidiary thereof) at a price not less than the Fair Market Value
thereof within 365 days of the consummation of such Asset Sale, or (iv) any
combination of the foregoing clauses (i) through (iii). The amount of any (x)
Indebtedness (other than any Subordinated Indebtedness) of the Company or any
Restricted Subsidiary that is actually assumed by the transferee in such Asset
Sale and from which the Company and the Restricted Subsidiaries are fully
released shall be deemed to be cash for purposes of determining the percentage
of cash consideration received by the Company or such Restricted Subsidiary and
(y) notes or other similar obligations received by the Company or any Restricted
Subsidiary from such transferee that are immediately converted, sold or
exchanged (or are converted, sold or exchanged within 365 days of the related
Asset Sale) by the Company or any Restricted Subsidiary into cash shall be
deemed to be cash, in an amount equal to the net cash proceeds realized upon
such conversion, sale or exchange for purposes of determining the percentage of
cash consideration received by the Company or such
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Restricted Subsidiary. Any Net Cash Proceeds from any Asset Sale or any
Monetization Sale that are not invested in Replacement Assets or used to repay
and permanently reduce the commitments under Indebtedness of any Restricted
Subsidiary within 365 days of the consummation of such Asset Sale or
Monetization Sale shall constitute "Excess Proceeds" subject to disposition as
provided below.
Within 40 days after the aggregate amount of Excess Proceeds equals or
exceeds $10.0 million, the Company shall make an Offer to Purchase, from all
Holders on a pro rata basis, that aggregate principal amount of Notes as can be
purchased with the Note Portion of Excess Proceeds at a price in cash equal to
100% of the principal amount thereof, plus accrued and unpaid interest, if any,
to any purchase date. To the extent that the aggregate amount of principal and
accrued interest of Notes validly tendered and not withdrawn pursuant to an
Offer to Purchase is less than the Excess Proceeds, the Company may use such
surplus for general corporate purposes. If the aggregate amount of principal and
accrued interest of Notes validly tendered and not withdrawn by Holders thereof
exceeds the amount of Notes that can be purchased with the Note Portion of
Excess Proceeds, Notes to be purchased will be selected pro rata based on the
aggregate principal amount of Notes tendered by each Holder. Upon completion of
an Offer to Purchase, the amount of Excess Proceeds with respect to the
applicable Asset Sale or Monetization Sale shall be reset to zero.
In the event that any other Indebtedness of the Company that ranks pari
passu with the Notes (the "Other Debt") requires an offer to purchase to be made
to repurchase such Other Debt upon the consummation of an Asset Sale, the
Company may apply the Excess Proceeds otherwise required to be applied to an
Offer to Purchase to offer to purchase such Other Debt and to an Offer to
Purchase so long as the amount of such Excess Proceeds applied to purchase the
Notes is not less than the Note Portion of Excess Proceeds. With respect to any
Excess Proceeds, the Company shall make the Offer to Purchase in respect thereof
at the same time as the analogous offer to purchase is made pursuant to any
Other Debt and the Purchase Date in respect thereof shall be the same as the
purchase date in respect thereof pursuant to any Other Debt.
For purposes of this covenant, "Note Portion of Excess Proceeds" means (1)
if no Other Debt is being offered to be purchased, the amount of the Excess
Proceeds and (2) if Other Debt is being offered to be purchased, the amount of
the Excess Proceeds equal to the product of (x) the Excess Proceeds and (y) a
fraction the numerator of which is the aggregate amount of all Notes tendered
pursuant to the Offer to Purchase related to such Excess Proceeds (the "Note
Amount") and the denominator of which is the sum of the Note Amount and the
aggregate amount as of the relevant purchase date of all Other Debt tendered and
purchased pursuant to a concurrent offer to purchase such Other Debt made at the
time of such Offer to Purchase.
In the event that the Company makes an Offer to Purchase the Notes, the
Company shall comply with any applicable securities laws and regulations,
including any applicable requirements of Section 14(e) of, and Rule 14e-1 under,
the Exchange Act, and any violation of the provisions of the Indentures relating
to such Offer to Purchase occurring as a result of such compliance shall not be
deemed a Default or an Event of Default.
Limitation on Transactions with Affiliates. The Company shall not, and
shall not cause or permit any Restricted Subsidiary to, directly or indirectly,
conduct any business or enter into any transaction or series of related
transactions with or for the benefit of any Affiliate, any holder of 5% or more
of any class of Equity Interests or any officer, director or employee of the
Company or any Restricted Subsidiary (each, an "Affiliate Transaction"), unless
such Affiliate Transaction is on terms that are no less favorable to the Company
or such Restricted Subsidiary, as the case may be, than could reasonably be
obtained at such time in a comparable transaction with an unaffiliated third
party. For any such transaction that involves value in excess of $5.0 million,
the Company shall deliver to the Trustee an Officers' Certificate stating that a
majority of the Disinterested Directors has determined that the transaction
satisfies the above criteria and shall evidence such a determination by a Board
Resolution delivered to the Trustee. For any such transaction that involves
value in excess of $12.5 million, the Company shall also obtain a written
opinion from an Independent Financial
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Advisor to the effect that such transaction is fair, from a financial point of
view, to the Company or such Restricted Subsidiary, as the case may be.
Notwithstanding the foregoing, the restrictions set forth in this covenant
shall not apply to (i) transactions between or among the Company and one or more
Restricted Subsidiaries or between or among Restricted Subsidiaries; (ii)
customary directors' fees, indemnification and similar arrangements, employee
salaries, bonuses or employment agreements, compensation or employee benefit
arrangements and incentive arrangements with any officer, director or employee
of the Company or any Restricted Subsidiary entered into in the ordinary course
of business (including customary benefits thereunder); (iii) transactions
pursuant to agreements in effect on the Issue Date, as such agreements are in
effect on the Issue Date or as thereafter amended or supplemented in a manner
not adverse to the Holders; (iv) loans and advances to officers, directors and
employees of the Company or any Restricted Subsidiary for travel, entertainment,
moving and other relocation expenses, in each case made in the ordinary course
of business and consistent with past business practices; (v) any transaction
between the Company or any Restricted Subsidiary, on the one hand, and any
Affiliate of the Company engaged primarily in a Telecommunications Business, on
the other hand, (x) in the ordinary course of business and consistent with
commercially reasonable practices or (y) approved by a majority of the
Disinterested Directors; (vi) any payment pursuant to any tax sharing agreement
between the Company and any other Person with which the Company files a
consolidated tax return or with which the Company is part of a consolidated
group for tax purposes; provided that such payment is not greater than that
which the Company would be required to pay as a stand-alone taxpayer; (vii) the
pledge of Equity Interests of Unrestricted Subsidiaries to support the
Indebtedness thereof; and (viii) payment of dividends in respect of Equity
Interests of the Company or any Restricted Subsidiary permitted under the
covenant described under "-- Limitation on Restricted Payments."
Limitation on Issuances of Guarantees by Restricted Subsidiaries. The
Company shall not cause or permit any Restricted Subsidiary, directly or
indirectly, to guarantee any Indebtedness of the Company ("Guaranteed
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes
and delivers a supplemental indenture to each Indenture pursuant to which such
Restricted Subsidiary guarantees (a "Subsidiary Guarantee") all of the Company's
obligations under the applicable Notes and such Indenture and (ii) such
Restricted Subsidiary waives and will not in any manner whatsoever claim or take
the benefit or advantage of, any rights of reimbursement, indemnity or
subrogation or any other rights against the Company or any other Restricted
Subsidiary as a result of any payment by such Restricted Subsidiary under its
Subsidiary Guarantee. If the Guaranteed Indebtedness is (A) pari passu with the
Notes, then the guarantee of such Guaranteed Indebtedness shall be pari
passuwith, or subordinated to, the Subsidiary Guarantee or (B) subordinated to
the Notes, then the guarantee of such Guaranteed Indebtedness shall be
subordinated to the Subsidiary Guarantee at least to the extent that the
Guaranteed Indebtedness is subordinated to the Notes.
Any Subsidiary Guarantee by a Restricted Subsidiary shall provide by its
terms that it shall be automatically and unconditionally released and discharged
upon (i) any sale, exchange or transfer, to any Person not an Affiliate of the
Company, of all of the Equity Interests of the Company or any Restricted
Subsidiary in, or all or substantially all the assets of, such Restricted
Subsidiary (which sale, exchange or transfer is made in accordance with the
Indentures) or (ii) the release or discharge of the guarantee which resulted in
the creation of such Subsidiary Guarantee, except a discharge or release by or
as a result of payment under such guarantee.
Limitation on the Issuance and Sale of Capital Stock of Restricted
Subsidiaries. The Company shall not sell, and shall not cause or permit any
Restricted Subsidiary, directly or indirectly, to issue or sell, any Equity
Interests of a Restricted Subsidiary, except (i) to the Company or a Wholly
Owned Restricted Subsidiary; (ii) if, immediately after giving effect to such
issuance or sale, such Restricted Subsidiary would no longer constitute a
Restricted Subsidiary; or (iii) in the case of issuance of Equity Interests by a
non-Wholly Owned Restricted Subsidiary if, after giving effect to such issuance,
the Company maintains its direct or indirect percentage of beneficial and
economic ownership of such non-Wholly Owned Restricted Subsidiary.
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Merger, Sale of Assets, etc. The Company shall not consolidate with or
merge with or into (whether or not the Company is the Surviving Person) any
other Person, and the Company shall not, and shall not cause or permit any
Restricted Subsidiary to, sell, convey, assign, transfer, lease or otherwise
dispose of all or substantially all of the property and assets of the Company
and the Restricted Subsidiaries, taken as a whole, to any Person or Persons
(other than any Restricted Subsidiary), in each case, in a single transaction or
series of related transactions, unless: (i) either (x) the Company shall be the
Surviving Person or (y) the Surviving Person (if other than the Company) shall
be a corporation organized and validly existing under the laws of The
Netherlands, the United States of America or any State thereof or the District
of Columbia, and shall, in any such case, expressly assume by a supplemental
indenture to each Indenture, the due and punctual payment of the principal of
and interest on the applicable Notes and the performance and observance of every
covenant of such Indenture and the applicable Registration Rights Agreement to
be performed or observed on the part of the Company; (ii) immediately after
giving effect to such transaction, no Default shall have occurred and be
continuing; and (iii) immediately after giving effect to such transaction, the
Surviving Person (as the Company) could Incur at least $1.00 of additional
Indebtedness under the first paragraph of "-- Limitation on Incurrence of
Indebtedness."
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all the properties and assets of one or more Restricted
Subsidiaries the Equity Interests of which constitutes all or substantially all
the properties and assets of the Company shall be deemed to be the transfer of
all or substantially all the properties and assets of the Company.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the first paragraph of this covenant in
which the Company is not the Surviving Person and the Surviving Person is to
assume all the Obligations of the Company under the Notes, the Indentures and
the Registration Rights Agreements pursuant to supplemental indentures, such
Surviving Person shall succeed to, and be substituted for, and may exercise
every right and power of, the Company and the Company shall be discharged from
its Obligations under the Notes, the Indentures and the Registration Rights
Agreements.
Provision of Financial Information. Whether or not the Company is subject
to Section 13(a) or 15(d) of the Exchange Act, or any successor provision
thereto, the Company shall file with the SEC (if permitted by SEC practice and
applicable law and regulations) the annual reports, quarterly reports and other
documents which the Company would have been required to file with the SEC
pursuant to such Section 13(a) or 15(d) or any successor provision thereto if
the Company were so required, such documents to be filed with the SEC on or
prior to the respective dates (the "Required Filing Dates") by which the Company
would have been required so to file such documents if the Company were so
required; provided, however, that until the Company is subject to Section 13(a)
or Section 15(d) of the Exchange Act or any successor provisions thereto, the
Required Filing Dates for such quarterly reports shall be 75 days following the
end of the applicable fiscal quarter. The Company shall also in any event (a)
within 15 days of each Required Filing Date (whether or not permitted or
required to be filed with the SEC but subject to the proviso in the previous
sentence) (i) transmit (or cause to be transmitted) by mail to all Holders, as
their names and addresses appear in the Note register, without cost to such
Holders, and (ii) file with the Trustee, copies of the annual reports, quarterly
reports and other documents which the Company is required to file with the SEC
pursuant to the preceding sentence, or, if such filing is not so permitted,
information and data of a similar nature, and (b) if, notwithstanding the
preceding sentence, filing such documents by the Company with the SEC is not
permitted by SEC practice or applicable law or regulations, promptly upon
written request supply copies of such documents to any Holder. In addition, for
so long as any Notes remain outstanding, the Company will furnish to the Holders
and to securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act, and, to any beneficial holder of Notes, if not obtainable from
the SEC, information of the type that would be filed with the SEC pursuant to
the foregoing provisions, upon the request of any such holder.
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EVENTS OF DEFAULT
The occurrence of any of the following will be defined as an "Event of
Default" under the Indentures: (a) failure to pay principal of any Note when
due; (b) failure to pay any interest on any Note when due, continued for 30 days
or more; (c) failure to pay on the Purchase Date the Purchase Price for any Note
validly tendered pursuant to any Offer to Purchase; (d) failure to perform or
comply with any of the provisions described under "-- Certain
Covenants -- Merger, Sale of Assets, etc."; (e) failure to perform any other
covenant, warranty or agreement of the Company under the Indentures or in the
Notes continued for 30 days or more after written notice to the Company by the
Trustee or Holders of at least 25% in aggregate principal amount of the
outstanding Dollar Notes or 25% in aggregate principal amount of the outstanding
Euro Notes, as the case may be; (f) there shall be, with respect to any issue or
issues of Indebtedness of the Company or any Restricted Subsidiary having an
outstanding principal amount of $10.0 million or more in the aggregate for all
such issues of all such Persons, whether such Indebtedness now exists or shall
hereafter be created, (x) an event of default that has caused the holders
thereof (or their representative) (I) to declare such Indebtedness to be due and
payable prior to its scheduled maturity and such Indebtedness has not been
discharged in full or such acceleration has not been rescinded or annulled
within 45 days following such acceleration and/or (II) to commence judicial
proceeding to foreclose upon, or to exercise remedies under applicable law or
applicable security documents to take ownership of, the property or assets
securing such Indebtedness and/or (y) the failure to make a principal payment at
the final (but not any interim) fixed maturity and such defaulted payment shall
not have been made, waived or extended within 45 days of such payment default;
(g) the rendering of a final judgment or judgments against the Company or any
Restricted Subsidiary in an amount of $10.0 million or more which remains
undischarged or unstayed for a period of 60 consecutive days; or (h) certain
events of bankruptcy, insolvency or reorganization affecting the Company or any
Significant Restricted Subsidiary.
If an Event of Default with respect to the Notes (other than an Event of
Default with respect to the Company described in clause (h) of the preceding
paragraph) occurs and is continuing, the Trustee or the Holders of at least 25%
in aggregate principal amount of the outstanding Dollar Notes or 25% in
aggregate principal amount of the outstanding Euro Notes, as the case may be, by
notice in writing to the Company may declare the unpaid principal of and accrued
interest to the date of acceleration on all such outstanding Notes to be due and
payable immediately and, upon any such declaration, such principal amount and
accrued interest, notwithstanding anything contained in such Notes or the
Indenture governing such Notes to the contrary, will become immediately due and
payable; provided, however, that after such acceleration, but before a judgment
or decree based on acceleration, the Holders of a majority in aggregate
principal amount of such outstanding Notes may, under certain circumstances,
rescind and annul such acceleration if all Events of Default, other than the
nonpayment of accelerated principal, have been cured or waived as provided in
the Indenture governing such Notes. If an Event or Default specified in clause
(h) of the preceding paragraph with respect to the Company occurs under the
Indentures, the Notes will ipso facto become immediately due and payable without
any declaration or other act on the part of the Trustee or any Holder.
The Indentures provide that the Trustee shall, within 30 days after the
occurrence of any Default with respect to the Notes, give the Holders notice of
all uncured Defaults thereunder known to it; provided, however, that, except in
the case of an Event of Default in payment with respect to the Notes or a
Default or Event of Default in complying with "-- Certain Covenants -- Merger,
Sale of Assets, etc.," the Trustee shall be protected in withholding such notice
if and so long as a committee of its trust officers in good faith determines
that the withholding of such notice is in the interest of the Holders.
No Holder will have any right to institute any proceeding with respect to
the Indenture or for any remedy thereunder, unless the Trustee (i) shall have
failed to act for a period of 60 days after receiving written notice of a
continuing Event of Default by such Holder and a request to act by Holders of at
least 25% in aggregate principal amount of Dollar Notes outstanding or 25% in
aggregate principal amount of the outstanding Euro Notes, as the case may be,
(ii) shall have been offered indemnity reasonably satisfactory to it and (iii)
shall not have received from the Holders of a majority in aggregate principal
amount of the outstanding Dollar Notes or Euro Notes, as the case may be, a
direction inconsistent with such request. However, such limitations do not apply
to a suit instituted by a Holder of any Note for enforcement of payment of the
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principal of or interest on such Note on or after the due date therefor (after
giving effect to the grace period specified in clause (b) of the first paragraph
of this "-- Events of Default" section).
The Company will be required to furnish to the Trustee after the end of
each fiscal year a statement as to the performance by it of certain of its
obligations under the Indentures and as to any default in such performance.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, INCORPORATOR AND
STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
or any of its Affiliates, as such, shall have any liability for any obligations
of the Company or any of its Affiliates under the Notes or the Indentures or for
any claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes.
SATISFACTION AND DISCHARGE OF INDENTURES; DEFEASANCE
The Company may terminate its substantive obligations in respect of the
Dollar Notes or the Euro Notes by delivering all such outstanding Notes to the
Trustee for cancellation and paying all sums payable by it on account of
principal of, premium, if any, and interest on all such Notes or otherwise. In
addition to the foregoing, the Company may terminate the applicability of the
covenants under "-- Certain Covenants" and "-- Change of Control" or any Event
of Default under clause (e) of "-- Events of Default" by (i) depositing with the
Trustee, under the terms of an irrevocable trust agreement, money or United
States Government Obligations sufficient (without reinvestment) to pay all
remaining indebtedness on such Notes at maturity or upon earlier redemption;
(ii) delivering to the Trustee either an Opinion of Counsel or a ruling directed
to the Trustee from the Internal Revenue Service to the effect that the Holders
of such Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit and termination of obligations; (iii)
delivering to the Trustee an Opinion of Counsel to the effect that the Company's
exercise of its option under this paragraph will not result in any of the
Company, the Trustee or the trust created by the Company's deposit of funds
pursuant to this provision becoming or being deemed to be an "investment
company" under the United States Investment Company Act of 1940, as amended (the
"Investment Act"); and (iv) complying with certain other requirements set forth
in the Indentures. In addition, the Company may, provided that no Default has
occurred and is continuing or would arise therefrom (or, with respect to a
Default specified in clause (h) of "-- Events of Default," occurs at any time on
or prior to the 91st calendar day after the date of the deposit (it being
understood that this condition shall not be deemed satisfied until after such
91st day)) under the Indentures, terminate all of its substantive obligations in
respect of the Dollar Notes or the Euro Notes (including its obligations to pay
the principal of and interest on such Notes) by (i) depositing with the Trustee,
under the terms of an irrevocable trust agreement, money or United States
Government Obligations sufficient (without reinvestment) to pay all remaining
Indebtedness on such Notes at maturity or upon earlier redemption; (ii)
delivering to the Trustee either a ruling directed to the Trustee from the
Internal Revenue Service to the effect that the Holders of such Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such deposit and termination of obligations or an Opinion of Counsel addressed
to the Trustee based upon such a ruling or based on a change in the applicable
federal tax law since the date of the Indentures, to such effect; (iii)
delivering to the Trustee an Opinion of Counsel to the effect that the Company's
exercise of its option under this paragraph will not result in any of the
Company, such Trustee or the relevant trust created by the Company's deposit of
funds pursuant to this provision becoming or being deemed to be an "investment
company" under the Investment Act; and (iv) complying with certain other
requirements set forth in the Indentures.
MODIFICATION AND WAIVER
Modifications and amendments of each Indenture may be made by the Company
and the Trustee with the consent of the Holders of a majority in aggregate
principal amount of the Outstanding Notes to which such Indenture applies
(including consents obtained in connection with a tender offer or exchange offer
for such Notes); provided, however, that no such modification or amendment to
either Indenture may, without
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the consent of the Holder of each Outstanding Note affected thereby, (a) change
the maturity of the principal of any such Note; (b) alter the optional
redemption or repurchase provisions of any such Note or such Indenture in a
manner adverse to the Holders of such Notes; (c) reduce the principal amount of
any such Note; (d) reduce the rate of or extend the time for payment of interest
on any such Note; (e) change the place or currency of payment of principal of or
interest on any such Note; (f) modify any provisions of such Indenture relating
to the waiver of past defaults (other than to add sections of such Indenture or
the Notes subject thereto) or the right of the Holders of Notes to institute
suit for the enforcement of any payment on or with respect to any such Note in
respect thereof or the modification and amendment provisions of such Indenture
and such Notes (other than to add sections of such Indenture or such Notes which
may not be amended, supplemented or waived without the consent of each Holder
therein affected); (g) reduce the percentage of the principal amount of
outstanding Notes necessary for amendment to or waiver of compliance with any
provision of such Indenture or the Notes or for waiver of any Default in respect
thereof; (h) waive a default in the payment of principal of, interest on, or
redemption payment with respect to, such Note (except a rescission of
acceleration of the relevant Notes by the Holders thereof as provided in the
Indenture and a waiver of the payment default that resulted from such
acceleration); (i) modify the ranking or priority of any such Note; (j) modify
the provisions of any covenant (or the related definitions) in such Indenture
requiring the Company to make an Offer to Purchase in a manner materially
adverse to the Holders of Notes affected thereby.
The Holders of a majority in aggregate principal amount of the outstanding
Dollar Notes or Euro Notes, as the case may be, on behalf of all Holders
thereof, may waive compliance by the Company with certain restrictive provisions
of the Indenture governing such Notes. Subject to certain rights of the Trustee
as provided in the Indentures, the Holders of a majority in aggregate principal
amount of the Dollar Notes or Euro Notes, as the case may be, on behalf of all
Holders thereof, may waive any past default under the Indenture governing such
Notes (including any such waiver obtained in connection with a tender offer or
exchange offer for such Notes), except a default in the payment of principal or
interest or a default arising from failure to purchase any Notes tendered
pursuant to an Offer to Purchase pursuant thereto, or a default in respect of a
provision that under such Indenture cannot be modified or amended without the
consent of the Holder of each Note that is affected.
GOVERNING LAW
The Indentures and the Notes are governed by the laws of the State of New
York without regard to principles of conflicts of laws. Under the Judiciary Law
of the State of New York, a judgment or decree in an action based upon an
obligation denominated in a currency other than U.S. dollars will be rendered in
the foreign currency of the underlying obligation and converted into U.S.
dollars at a rate of exchange prevailing on the date of entry of the judgment or
decree.
THE TRUSTEE
Except during the continuance of a Default, the Trustee will perform only
such duties as are specifically set forth in the Indentures. During the
existence of a Default under either Indenture, the Trustee will exercise such
rights and powers vested in it under such Indenture and use the same degree of
care and skill in its exercise as a prudent person would exercise under the
circumstances in the conduct of such person's own affairs.
The Indentures and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee, should it
become a creditor of the Company or any other obligor upon the Notes, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claim as the Notes or otherwise. The Trustee is
permitted to engage in other transactions with the Company or an Affiliate of
the Company; provided, however, that if it acquires any conflicting interest (as
defined in the Indentures or in the Trust Indenture Act), it must eliminate such
conflict or resign.
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LISTING
Application will be made to list the Exchange Notes on the Luxembourg Stock
Exchange. The legal notice relating to the issue of the Exchange Notes and the
Articles of Association of the Company will be registered prior to the listing
with the Registrar of the District Court in Luxembourg, where such documents are
available for inspection and where copies thereof can be obtained upon request.
As long as the Exchange Notes are listed on the Luxembourg Stock Exchange, an
agent for making payments on, and transfers of, Notes will be maintained in
Luxembourg. The Company has initially designated Banque Internationale a
Luxembourg S.A. as its agent for such purposes.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indentures. Reference
is made to the Indentures for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed in
connection with an Acquisition from such Person or (b) existing at the time such
Person becomes a Restricted Subsidiary or is merged or consolidated with or into
the Company or any Restricted Subsidiary; provided, however, that such
Indebtedness was not Incurred in connection with, or in contemplation of, such
Acquisition, such Person becoming a Restricted Subsidiary or such merger or
consolidation.
"Acquired Person" means, with respect to any specified Person, any other
Person which merges with or into or becomes a Subsidiary of such specified
Person.
"Acquisition" means (i) any 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) by the Company or any Restricted
Subsidiary to any other Person, or any acquisition or purchase of Equity
Interests of any other Person by the Company or any Restricted Subsidiary, in
either case pursuant to which such Person shall become a Restricted Subsidiary
or shall be consolidated, merged with or into the Company or any Restricted
Subsidiary or (ii) any acquisition by the Company or any Restricted Subsidiary
of the assets of any Person which constitute substantially all of an operating
unit or line of business of such Person or which is otherwise outside of the
ordinary course of business.
"Additional Interest" has the meaning provided in Section 4(a) of each
Registration Rights Agreement.
"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. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such person, whether through the
ownership of voting securities, by agreement or otherwise.
"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease
(that has the effect of a disposition) or other disposition (including, without
limitation, any merger, consolidation or sale-leaseback transaction) to any
Person other than the Company or a Restricted Subsidiary, in one transaction or
a series of related transactions, of (i) any Equity Interest of any Restricted
Subsidiary; (ii) any material license, franchise or other authorization of the
Company or any Restricted Subsidiary; (iii) any assets of the Company or any
Restricted Subsidiary which constitute substantially all of an operating unit or
line of business of the Company or any Restricted Subsidiary; or (iv) any other
property or asset of the Company or any Restricted Subsidiary outside of the
ordinary course of business (including the receipt of proceeds paid on account
of the loss of or damage to any property or asset and awards of compensation for
any asset taken by condemnation, eminent domain or similar proceedings). For the
purposes of this definition, the term "Asset Sale" shall not include (a) any
transaction consummated in compliance with "-- Certain Covenants -- Merger, Sale
of Assets, etc." and the creation of any Lien not prohibited by "-- Certain
Covenants -- Limitation on Liens"; provided, however, that any transaction
consummated in compliance with "-- Certain Covenants -- Merger, Sale of Assets,
etc." involving a sale, conveyance, assignment, transfer, lease or other
disposal of less than all of
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the properties or assets of the Company and the Restricted Subsidiaries shall be
deemed to be an Asset Sale with respect to the properties or assets of the
Company and Restricted Subsidiaries that are not so sold, conveyed, assigned,
transferred, leased or otherwise disposed of in such transaction; (b) sales of
property or equipment that has become worn out, obsolete or damaged or otherwise
unsuitable for use in connection with the business of the Company or any
Restricted Subsidiary, as the case may be; and (c) any transaction consummated
in compliance with "-- Certain Covenants -- Limitation on Restricted Payments."
In addition, solely for purposes of "-- Certain Covenants -- Limitation on
Asset Sales," any sale, conveyance, transfer, lease or other disposition of any
property or asset, whether in one transaction or a series of related
transactions, involving assets with a Fair Market Value not in excess of $1.0
million in any fiscal year shall be deemed not to be an Asset Sale.
"Basket" has the meaning set forth in "-- Certain Covenants -- Limitation
on Restricted Payments."
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person (or comparable governing body), or any authorized
committee of that Board (it being understood that the Board of Directors of the
Company shall be its Board of Supervisory Directors).
"Business Day" means a day (other than a Saturday or Sunday) on which the
Depository and banks in the place of payment are open for business.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be so required to be capitalized on the balance sheet in accordance
with GAAP.
"Cash Equivalents" means: (a) U.S. dollars; (b) securities issued or
directly and fully guaranteed or insured by the U.S. government or any agency or
instrumentality thereof having maturities of not more than six months from the
date of acquisition; (c) certificates of deposit and eurodollar time deposits
with maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any commercial bank having capital and surplus in
excess of $500 million; (d) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clauses (b) and
(c) entered into with any financial institution meeting the qualifications
specified in clause (c) above; and (e) commercial paper rated P-1, A-1 or the
equivalent thereof by Moody's Investors Service, Inc. or Standard & Poor's
Ratings Group, respectively, and in each case maturing within six months after
the date of acquisition.
"Change of Control" shall mean the occurrence of any of the following
events (whether or not approved by the Board of Directors of the Company): (a)
any Person or group, excluding Permitted Holders, is or becomes the beneficial
owner, directly or indirectly, of Voting Equity Interests representing 35% or
more of the total voting power of the Voting Equity Interests of the Company at
a time when the Permitted Holders together (x) own Voting Equity Interests
representing a lesser percentage of the total voting power of the Voting Equity
Interests of the Company, than such Person or group (for purposes of determining
the percentage of the Voting Equity Interests of such Person or group, the
holdings of the Permitted Holders who are part of such Person or group shall not
be counted in the Voting Equity Interests of such Person or group) or (y) do not
hold the power to elect a majority of the members of the Board of Directors of
the Company; (b) any Person or group is or becomes the beneficial owner,
directly or indirectly, of Voting Equity Interests representing 50% or more of
the total voting power of the Voting Equity Interests of GTS or has the power,
directly or indirectly, to elect a majority of the members of the Board of
Directors of GTS; (c) the Company consolidates with, or merges with or into,
another Person or the Company or one or more Restricted Subsidiaries sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially all
of the assets of the Company and the Restricted Subsidiaries, taken as a whole,
to any Person (other than a Wholly Owned Restricted Subsidiary), or any Person
consolidates with, or merges with or into, the Company, in any such event other
than pursuant to a transaction in which the Person or Persons that "beneficially
owned," directly or indirectly, a majority of the total voting power of the
Voting Equity Interests of the Company immediately prior to such transaction,
"beneficially own," directly or indirectly, Voting Equity Interests representing
a majority of the total voting power of the Voting Equity Interests of the
surviving or transferee Person; (d) GTS consolidates with, or merges with or
into, another Person or GTS or one or more of its Subsidiaries
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sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of the assets of GTS and its Subsidiaries, taken as a whole,
to any Person (other than a wholly owned Subsidiary of GTS), or any Person
consolidates with, or merges with or into, GTS, in any such event other than
pursuant to a transaction in which the Person or Persons that "beneficially
owned," directly or indirectly, Voting Equity Interests representing a majority
of the total voting power of the Voting Equity Interests of GTS immediately
prior to such transaction, "beneficially own," directly or indirectly, Voting
Equity Interests representing a majority of the total voting power of the Voting
Equity Interests of the surviving or transferee Person; (e) during any
consecutive two-year period, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any new
directors whose election by the Board of Directors of the Company or whose
nomination for election by the stockholders of the Company was approved by a
vote of a majority 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) cease for any reason (other than by action
of the Permitted Holders) to constitute a majority of the Board of Directors of
the Company then in office; (f) during any consecutive two year period,
individuals who at the beginning of such period constituted the Board of
Directors of GTS (together with any new directors whose election by the Board of
Directors of GTS or whose nomination for election by the stockholders of GTS was
approved by a vote of a majority 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) cease for any reason to constitute a
majority of the Board of Directors of GTS then in office; or (g) there shall
occur the liquidation or dissolution of the Company or GTS. For purposes of this
definition, (I) "group" has the meaning under Section 13(d) and 14(d) of the
Exchange Act or any successor provision to either of the foregoing, including
any group acting for the purpose of acquiring, holding or disposing of
securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act, and
(II) "beneficial ownership" has the meaning set forth in Rules 13d-3 and 13d-5
under the Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all securities that such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time, upon
the happening of an event or otherwise.
"Change of Control Date" has the meaning set forth under "-- Change of
Control."
"Consolidated Income Tax Expense" means, with respect to any period, the
provision for federal, state, local and foreign income taxes payable by the
Company and the Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any period, without
duplication, the sum of (i) the interest expense of the Company and the
Restricted Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP, including, without limitation, (a) any amortization of
debt discount, (b) the net cost under Interest Rate Protection Obligations
(including any amortization of discounts), (c) the interest portion of any
deferred payment obligation, (d) all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance financing
and (e) all capitalized interest and all accrued interest, (ii) the interest
component of Capitalized Lease Obligations paid, accrued and/or scheduled to be
paid or accrued by the Company and the Restricted Subsidiaries during such
period as determined on a consolidated basis in accordance with GAAP and (iii)
dividends and distributions in respect of Disqualified Equity Interests actually
paid in cash by the Company or any Restricted Subsidiary (other than to the
Company or another Restricted Subsidiary) during such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any period, the net income
of the Company and the Restricted Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, adjusted, to the extent included in
calculating such net income, by excluding, without duplication, (a) other than
for purposes of calculating the Basket, all extraordinary gains or losses for
such period, (b) other than for purposes of calculating the Basket, all gains or
losses from the sales or other dispositions of assets out of the ordinary course
of business (net of taxes, fees and expenses relating to the transaction giving
rise thereto) for such period; (c) that portion of such net income derived from
or in respect of investments in Persons other than Restricted Subsidiaries,
except to the extent actually received in cash by the Company or any Restricted
Subsidiary (subject, in the case of any Restricted Subsidiary, to the provisions
of clause (f) of this definition);
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(d) the portion of such net income (or loss) allocable to minority interests in
any Person (other than a Restricted Subsidiary) for such period, except to the
extent the Company's allocable portion of such Person's net income for such
period is actually received in cash by the Company or any Restricted Subsidiary
(subject, in the case of any Restricted Subsidiary, to the provisions of clause
(f) of this definition); (e) the net income (or loss) of any other Person
combined with the Company or any Restricted Subsidiary on a "pooling of
interests" basis attributable to any period prior to the date of combination;
and (f) the net income of any Restricted Subsidiary to the extent that the
declaration of dividends or similar distributions by that Restricted Subsidiary
of that income is not at the time (regardless of any waiver) permitted, directly
or indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulations
applicable to that Restricted Subsidiary or its Equity Interest holders.
"Consolidated Operating Cash Flow" means, with respect to any period,
Consolidated Net Income for such period increased (without duplication), to the
extent deducted in calculating such Consolidated Net Income, by (a) Consolidated
Income Tax Expense for such period; (b) Consolidated Interest Expense for such
period; and (c) depreciation, amortization and any other non-cash items for such
period (other than any non-cash item which requires the accrual of, or a reserve
for, cash charges for any future period) of the Company and the Restricted
Subsidiaries, including, without limitation, amortization of capitalized debt
issuance costs for such period, all of the foregoing determined on a
consolidated basis in accordance with GAAP minus non-cash items to the extent
they increase Consolidated Net Income (including the partial or entire reversal
of reserves taken in prior periods) for such period.
"Cumulative Operating Cash Flow" means, as at any date of determination,
the positive cumulative Consolidated Operating Cash Flow realized during the
period commencing on the Issue Date and ending on the last day of the most
recent fiscal quarter immediately preceding the date of determination for which
consolidated financial information of the Company is available or, if such
cumulative Consolidated Operating Cash Flow for such period is negative, the
negative amount by which cumulative Consolidated Operating Cash Flow is less
than zero.
"Currency Agreement" shall mean any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement, which may include the
use of derivatives, designed to protect the Company or any Restricted Subsidiary
against fluctuations in currency values.
"Debt to Annualized Operating Cash Flow Ratio" means the ratio of (a) the
Total Consolidated Indebtedness as of the date of calculation (the
"Determination Date") to (b) two times the Consolidated Operating Cash Flow for
the latest two fiscal quarters for which financial information is available
immediately preceding such Determination Date (the "Measurement Period"). For
purposes of calculating Consolidated Operating Cash Flow for the Measurement
Period immediately prior to the relevant Determination Date, (I) any Person that
is a Restricted Subsidiary on the Determination Date (or would become a
Restricted Subsidiary on such Determination Date in connection with the
transaction that requires the determination of such Consolidated Operating Cash
Flow) will be deemed to have been a Restricted Subsidiary at all times during
such Measurement Period, (II) any Person that is not a Restricted Subsidiary on
such Determination Date (or would cease to be a Restricted Subsidiary on such
Determination Date in connection with the transaction that requires the
determination of such Consolidated Operating Cash Flow) will be deemed not to
have been a Restricted Subsidiary at any time during such Measurement Period,
and (III) if the Company or any Restricted Subsidiary shall have in any manner
(x) acquired (through an Acquisition or the commencement of activities
constituting such operating business) or (y) disposed of (by way of an Asset
Sale or the termination or discontinuance of activities constituting such
operating business) any operating business during such Measurement Period or
after the end of such period and on or prior to such Determination Date, such
calculation will be made on a pro forma basis in accordance with GAAP as if, in
the case of an Acquisition or the commencement of activities constituting such
operating business, all such transactions had been consummated on the first day
of such Measurement Period and, in the case of an Asset Sale or termination or
discontinuance of activities constituting such operating business, all such
transactions had been consummated prior to the first day of such Measurement
Period (it being understood that in calculating Consolidated Operating Cash Flow
the exclusions set forth in clauses (a) through (f) of the definition of
Consolidated Net Income shall apply to an Acquired Person as if it were a
Restricted Subsidiary).
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"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Designation" has the meaning set forth in "-- Certain
Covenants -- Designation of Unrestricted Subsidiaries."
"Designation Amount" has the meaning set forth in "-- Certain
Covenants -- Designation of Unrestricted Subsidiaries."
"Disinterested Director" means a member of the Board of Directors of the
Company who does not have any material direct or indirect financial interest in
or with respect to the transaction being considered.
"Disposition" means, with respect to any Person, any merger, consolidation
or other business combination involving such Person (whether or not such Person
is the Surviving Person) or the sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of such Person's assets.
"Disqualified Equity Interest" means any Equity Interest which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable at the option of the holder thereof), or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable, at the option of the holder thereof, in
whole or in part, on or prior to the Maturity Date; provided, however, that any
Equity Interests that would not constitute Disqualified Equity Interests but for
provisions thereof giving holders thereof the right to require the Company to
repurchase or redeem such Equity Interests upon the occurrence of a change in
control occurring prior to the Maturity Date shall not constitute Disqualified
Equity Interests if the change in control provisions applicable to such Equity
Interests are no more favorable to the holders of such Equity Interests than the
provisions described under "-- Change of Control" and such Equity Interests
specifically provide that the Company will not repurchase or redeem any such
Equity Interests pursuant to such provisions prior to the Company's repurchase
of Notes as are required to be repurchased pursuant to the provisions described
under "-- Change of Control."
"Dollar Equivalent" shall mean, with respect to a 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 other currency involved in
such computation into U.S. dollars at the rate for the purchase of U.S. dollars
with the applicable currency as set forth in the Key Currency Cross Rates table
of The Wall Street Journal (or a successor table) on the date that is two
Business Days prior to such determination.
"Equity Interest" in any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, in
such Person, including any Preferred Equity Interests.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC thereunder.
"Existing Notes" means the Company's 11 1/2% Senior Notes due 2007.
"Expiration Date" has the meaning set forth in the definition of "Offer to
Purchase."
"Fair Market Value" means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) which could be
negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing and able buyer, neither of which is under any
compulsion to complete the transaction; provided, however, that the Fair Market
Value of any such asset or assets shall be determined conclusively by the Board
of Directors of the Company acting in good faith, which determination shall be
evidenced by a resolution of such Board delivered to the Trustee.
"GAAP" means, at any date of determination, generally accepted accounting
principles in effect in the United States which are applicable at the date of
determination and which are consistently applied for all applicable periods.
"GTS" means Global TeleSystems Group, Inc., a Delaware corporation, and its
successors.
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"guarantee" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit. A guarantee shall include,
without limitation, any agreement to maintain or preserve any other person's
financial condition or to cause any other Person to achieve certain levels of
operating results.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "Incurrence," "Incurred" and "Incurring" shall have meanings
correlative to the foregoing). Indebtedness of a Person existing at the time
such Person becomes a Restricted Subsidiary or is merged or consolidated with or
into the Company or any Restricted Subsidiary shall be deemed to be Incurred at
such time.
"Indebtedness" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent, (a) every obligation of such Person for money borrowed; (b)
every obligation of such Person evidenced by bonds, debentures, notes or other
similar instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses; (c) every reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person; (d)
every obligation of such Person issued or assumed as the deferred purchase price
of property or services (but excluding trade accounts payable incurred in the
ordinary course of business and payable in accordance with industry practices,
or other accrued liabilities arising in the ordinary course of business which
are not overdue or which are being contested in good faith); (e) every Capital
Lease Obligation of such Person; (f) every net obligation under interest rate
swap or similar agreements or foreign currency hedge, exchange or similar
agreements of such Person; (g) every obligation of the type referred to in
clauses (a) through (f) of another Person and all dividends of another Person
the payment of which, in either case, such Person has guaranteed or is
responsible or liable for, directly or indirectly, as obligor, guarantor or
otherwise; and (h) any and all Refinancing of, or amendments, modifications or
supplements to, any liability of the kind described in any of the preceding
clauses (a) through (g) above. Indebtedness (i) shall never be calculated taking
into account any cash and cash equivalents held by such Person; (ii) shall not
include obligations of any Person (x) arising from the honoring by a bank or
other financial institution of a check, draft or similar instrument
inadvertently drawn against insufficient funds in the ordinary course of
business, provided that such obligations are extinguished within two Business
Days of their incurrence unless covered by an overdraft line, (y) resulting from
the endorsement of negotiable instruments for collection in the ordinary course
of business and consistent with past business practices and (z) under stand-by
letters of credit to the extent collateralized by cash or Cash Equivalents;
(iii) which provides that an amount less than the principal amount thereof shall
be due upon any declaration of acceleration thereof shall be deemed to be
Incurred or outstanding in an amount equal to the accreted value thereof at the
date of determination determined in accordance with GAAP; and (iv) shall include
the liquidation preference and any mandatory redemption payment obligations in
respect of any Disqualified Equity Interests of the Company or any Preferred
Equity Interests of any Restricted Subsidiary.
"Independent Financial Advisor" means a recognized, accounting, appraisal,
investment banking firm or consultant with experience in a Telecommunications
Business (i) which does not, and whose directors, officers and employees or
Affiliates do not, have a material direct or indirect financial interest in the
Company and (ii) which, in the judgment of the Board of Directors of the
Company, is otherwise independent and qualified to perform the task for which it
is to be engaged.
"interest" means, with respect to the Notes, the sum of any cash interest
and any Additional Interest on the Notes.
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"Interest Rate Protection Obligations" means, with respect to any Person,
the Obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Investment" means, with respect to any Person, any direct or indirect
loan, advance, guarantee or other extension of credit or capital contribution to
(by means of transfers of cash or other property or assets to others or payments
for property or services for the account or use of others, or otherwise), or
purchase or acquisition of capital stock, bonds, notes, debentures or other
securities or evidences of Indebtedness issued by, any other Person. The amount
of any Investment shall be the original cost of such Investment, plus the cost
of all additions thereto, and minus the amount of any portion of such Investment
repaid to such Person in cash as a repayment of principal or a return of
capital, as the case may be, but without any other adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment. In determining the amount of any investment involving a transfer of
any property or asset other than cash, such property shall be valued at its Fair
Market Value at the time of such transfer. "Investments" shall exclude
extensions of trade credit in the ordinary course of business in accordance with
normal trade practices.
"Issue Date" means the original issue date of the Notes.
"Latest Balance Sheet" means, of any Person, the latest consolidated
balance sheet of such Person reported on by a recognized firm of independent
accountants without qualification as to scope.
"Lien" means any lien, mortgage, charge, security interest, hypothecation,
assignment for security or encumbrance of any kind (including any conditional
sale or capital lease or other title retention agreement, any lease in the
nature thereof, and any agreement to give any security interest).
"Maturity Date" means the date, which is set forth on the face of the
Notes, on which the Notes will mature.
"Net Cash Proceeds" means the aggregate proceeds in the form of cash or
Cash Equivalents received by the Company or any Restricted Subsidiary in respect
of any Asset Sale, including all cash or Cash Equivalents received upon any
sale, liquidation or other exchange of proceeds of Asset Sales received in a
form other than cash or Cash Equivalents, net of (a) the direct costs relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof; (b) taxes paid or payable as a result thereof
(after taking into account any available tax credits or deductions and any tax
sharing arrangements); (c) amounts required to be applied to the repayment of
Indebtedness secured by a Lien on the asset or assets that were the subject of
such Asset Sale; (d) amounts deemed, in good faith, appropriate by the Board of
Directors of the Company to be provided as a reserve, in accordance with GAAP,
against any liabilities associated with such assets which are the subject of
such Asset Sale (provided that the amount of any such reserves shall be deemed
to constitute Net Cash Proceeds at the time such reserves shall have been
released or are not otherwise required to be retained as a reserve); and (e)
with respect to Asset Sales by Subsidiaries, the portion of such cash payments
attributable to Persons holding a minority interest in such Subsidiary.
"Obligations" means any principal, interest (including, without limitation,
post-petition interest), penalties, fees, indemnifications, reimbursement
obligations, damages and other liabilities payable under the documentation
governing any Indebtedness.
"Offer" has the meaning set forth in the definition of "Offer to Purchase."
"Offer to Purchase" means a written offer (the "Offer") sent by or on
behalf of the Company by first-class mail, postage prepaid, to each holder at
his address appearing in the register for the Dollar Notes or the Euro Notes, as
the case may be, on the date of the Offer offering to purchase up to the
principal amount of such Notes specified in such Offer at the purchase price
specified in such Offer (as determined pursuant to the Indenture governing such
Notes). Unless otherwise required by applicable law, the Offer shall specify an
expiration date (the "Expiration Date") of the Offer to Purchase, which shall be
not less than 20 Business Days nor more than 90 days after the date of such
Offer, and a settlement date (the "Purchase Date") for purchase of such Notes to
occur no later than five Business Days after the Expiration Date. The Company
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shall notify the Trustee at least 15 Business Days (or such shorter period as is
acceptable to the Trustee) prior to the mailing of the Offer of the Company's
obligation to make an Offer to Purchase, and the Offer shall be mailed by the
Company or, at the Company's request, by the Trustee in the name and at the
expense of the Company. The Offer shall contain all the information required by
applicable law to be included therein. The Offer shall contain all instructions
and materials necessary to enable such Holders to tender Notes pursuant to the
Offer to Purchase. The Offer shall also state:
(1) the Section of the Indenture governing such Notes pursuant to
which the Offer to Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the outstanding Dollar Notes or
Euro Notes offered to be purchased by the Company pursuant to the Offer to
Purchase (including, if less than 100%, the manner by which such amount has
been determined pursuant to the Section of the Indenture requiring the
Offer to Purchase) (the "Purchase Amount");
(4) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Dollar Notes accepted for payment or for each
Euro 1,000 aggregate principal amount of Euro Notes accepted for payment
(as specified pursuant to the applicable Indenture) (the "Purchase Price");
(5) that the holder may tender all or any portion of Dollar Notes or
Euro Notes registered in the name of such holder and that any portion of a
Note tendered must be tendered in an integral multiple of $1,000 aggregate
principal amount or Euro 1,000 aggregate principal amount, as the case may
be;
(6) the place or places where Notes are to be surrendered for tender
pursuant to the Offer to Purchase;
(7) that interest on any Note not tendered or tendered but not
purchased by the Company pursuant to the Offer to Purchase will continue to
accrue;
(8) that on the Purchase Date the Purchase Price will become due and
payable upon each Note being accepted for payment pursuant to the Offer to
Purchase and that interest thereon shall cease to accrue on and after the
Purchase Date;
(9) that each holder electing to tender all or any portion of a Note
pursuant to the Offer to Purchase will be required to surrender such Note
at the place or places specified in the Offer prior to the close of
business on the Expiration Date (such Note being, if the Company or the
Trustee so requires, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Trustee
duly executed by, the holder thereof or his attorney duly authorized in
writing);
(10) that holders will be entitled to withdraw all or any portion of
Notes tendered if the Company (or its Paying Agent) receives, not later
than the close of business on the fifth Business Day next preceding the
Expiration Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the holder, the principal amount of the Note the
holder tendered, the certificate number of the Note the holder tendered and
a statement that such holder is withdrawing all or a portion of his tender;
(11) that (a) if Notes in an aggregate principal amount less than or
equal to the Purchase Amount are duly tendered and not withdrawn pursuant
to the Offer to Purchase, the Company shall purchase all such Notes and (b)
if Notes in an aggregate principal amount in excess of the Purchase Amount
are tendered and not withdrawn pursuant to the Offer to Purchase, the
Company shall purchase Notes having an aggregate principal amount equal to
the Purchase Amount on a pro rata basis (with such adjustments as may be
deemed appropriate so that only Notes in denominations of $1,000 aggregate
principal amount or Euro 1,000 aggregate principal amount, as the case may
be, or integral multiples thereof shall be purchased); and
(12) that in the case of any holder whose Note is purchased only in
part, the Company shall execute and the Trustee shall authenticate and
deliver to the holder of such Note without service charge, a new
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Note or Notes, of any authorized denomination as requested by such holder,
in an aggregate principal amount equal to and in exchange for the
unpurchased portion of the Note so tendered.
An Offer to Purchase shall be governed by and effected in accordance with
the provisions above pertaining to any Offer.
"Permitted Holders" means GTS or any of its Affiliates.
"Permitted Investments" means (a) Cash Equivalents; (b) Investments in
prepaid expenses, negotiable instruments held for collection and lease, utility
and workers' compensation, performance and other similar deposits; (c) loans and
advances to employees made in the ordinary course of business not to exceed
$3,000,000 in the aggregate at any one time outstanding; (d) Interest Rate
Protection Obligations and Currency Agreements permitted under "-- Certain
Covenants -- Limitation on Incurrence of Indebtedness"; (e) bonds, notes,
debentures or other securities received as a result of Asset Sales permitted
under "-- Certain Covenants -- Limitation on Asset Sales"; (f) transactions with
officers, directors and employees of the Company or any Restricted Subsidiary
entered into in the ordinary course of business (including compensation or
employee benefit arrangements with any such director or employee) and consistent
with past business practices; (g) Investments made in the ordinary course of
business and on ordinary business terms as partial payment for constructing a
network relating principally to a Telecommunications Business; (h) Investments
in any Restricted Subsidiary; (i) intercompany Indebtedness to the extent
permitted under paragraph (b)(v) of "-- Certain Covenants -- Limitation on
Incurrence of Indebtedness"; (j) Investments by the Company or any Restricted
Subsidiary in another Person, if as a result of such Investment (x) such other
Person becomes a Restricted Subsidiary or (y) such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially all of
its assets to, the Company or a Restricted Subsidiary; and (k) Investments in
evidences of Indebtedness, securities or other property received from another
Person by the Company or any Restricted Subsidiary in connection with any
bankruptcy proceeding or by reason of a composition or readjustment of debt or a
reorganization of such Person or as a result of foreclosure, perfection or
enforcement of any Lien in exchange for evidences of Indebtedness, securities or
other property of such Person held by the Company or any Restricted Subsidiary,
or for other liabilities or obligations of such other Person to the Company or
any Restricted Subsidiary that were created in accordance with the terms of the
Indenture.
"Permitted Liens" means (a) Liens on property of a Person existing at the
time such Person is merged into or consolidated with the Company or any
Restricted Subsidiary; provided, however, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not secure any
property or assets of the Company or any Restricted Subsidiary other than the
property or assets subject to the Liens prior to such merger or consolidation;
(b) Liens existing on the Issue Date; (c) Liens securing Indebtedness consisting
of Capitalized Lease Obligations, mortgage financings, industrial revenue bonds
or other monetary obligations, in each case incurred solely for the purpose of
financing all or any part of the purchase price or cost of construction or
installation of assets used in the business of the Company or any Restricted
Subsidiary, or repairs, additions or improvements to such assets; provided,
however, that (I) such Liens secure Indebtedness in an amount not in excess of
the original purchase price or the original cost of any such assets or repair,
addition or improvement thereto (plus an amount equal to the reasonable fees and
expenses in connection with the Incurrence of such Indebtedness), (II) such
Liens do not extend to any other assets of the Company or any Restricted
Subsidiary (and, in the case of repair, addition or improvements to any such
assets, such Lien extends only to the assets (and improvements thereto or
thereon) repaired, added to or improved), (III) the Incurrence of such
Indebtedness is permitted by "-- Certain Covenants -- Limitation on Incurrence
of Indebtedness" and (IV) such Liens attach within 90 days of such purchase,
construction, installation, repair, addition or improvement; (d) Liens to secure
any Refinancings, in whole or in part, of any Indebtedness secured by Liens
referred to in the clauses above so long as such Lien does not extend to any
other property (other than improvements thereto); (e) Liens securing letters of
credit entered into in the ordinary course of business and consistent with past
business practice; (f) Liens on and pledges of the capital stock of any
Unrestricted Subsidiary securing any Indebtedness of such Unrestricted
Subsidiary; (g) Liens on any property or assets of a Restricted Subsidiary
granted in favor of and held by the Company or any Restricted Subsidiary; (h)
Liens on any property or assets of the Company or any Restricted Subsidiary
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securing on a pari passu basis all of the Notes; (i) statutory Liens of
landlords and carriers, warehousemen, mechanics, suppliers, materialmen,
repairmen or other like Liens arising in the ordinary course of business of the
Company or any Restricted Subsidiary and with respect to amounts not yet
delinquent or being contested in good faith by appropriate proceedings; (j)
Liens for taxes, assessments, government charges or claims that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted; provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor; (k)
Liens incurred or deposits made to secure the performance of tenders, bids,
leases, statutory obligations, surety and appeal bonds, government contracts,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business (other than contracts for the payment of money); (l)
easements, rights-of-way, restrictions and other similar charges or encumbrances
not interfering in any material respect with the business of the Company or any
Restricted Subsidiary incurred in the ordinary course of business; (m) Liens
arising by reason of judgment, decree or order of any court so long as such Lien
is adequately bonded and any appropriate legal proceedings that may have been
duly initiated for the review of such judgment, decree or order shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired; (n) Liens securing Qualified Subsidiary
Indebtedness to the extent permitted to be Incurred under "-- Certain
Covenants -- Limitation on Incurrence of Indebtedness"; (o) Liens securing
Indebtedness under Interest Rate Protection Obligations or Indebtedness under
Currency Agreements to the extent permitted to be Incurred under "-- Certain
Covenants -- Limitation on Incurrence of Indebtedness"; and (p) Liens incurred
or deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security.
"Permitted Refinancing" means, with respect to any Indebtedness,
Indebtedness to the extent representing a Refinancing of such Indebtedness;
provided, however, that (1) the Refinancing Indebtedness shall not exceed the
sum of the amount of the Indebtedness being Refinanced, plus the amount of
accrued interest or dividends thereon, the amount of any reasonably determined
prepayment premium necessary to accomplish such Refinancing and reasonable fees
and expenses incurred in connection therewith; (2) the Refinancing Indebtedness
shall have a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of the Indebtedness being Refinanced and shall
not permit redemption or other retirement (including pursuant to any required
offer to purchase to be made by the Company or any Restricted Subsidiary) of
such Indebtedness at the option of the holder thereof prior to the final stated
maturity of the Indebtedness being Refinanced, other than a redemption or other
retirement at the option of the holder of such Indebtedness (including pursuant
to a required offer to purchase made by the Company or a Restricted Subsidiary)
upon a change of control of the Company pursuant to provisions substantially
similar to those contained in the Indenture described under "-- Change of
Control"; (3) Indebtedness that ranks pari passu with the Notes may be
Refinanced only with Indebtedness that is made pari passu with or subordinate in
right of payment to the Notes, and Indebtedness that is subordinated in right of
payment to the Notes may be Refinanced only with Indebtedness that is
subordinate in right of payment to the Notes on terms no less favorable to the
Holders than those contained in the Indebtedness being Refinanced; and (4) the
Refinancing Indebtedness shall be Incurred by the obligor on the Indebtedness
being Refinanced or by the Company.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, limited liability
partnership, limited partnership, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Equity Interest," in any Person, means an Equity Interest of any
class or classes (however designated) which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over Equity
Interests of any other class in such Person.
"principal" of a debt security means the principal of the security plus,
when appropriate, the premium, if any, on the security.
"Public Equity Offering" means an underwritten public offering of common
Equity Interests of the Company pursuant to an effective registration statement
filed under the Securities Act (excluding registration statements filed on Form
S-8).
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"Purchase Amount" has the meaning set forth in the definition of "Offer to
Purchase."
"Purchase Date" has the meaning set forth in the definition of "Offer to
Purchase."
"Purchase Price" has the meaning set forth in the definition of "Offer to
Purchase."
"Qualified Equity Interest" means any Equity Interest of the Company other
than any Disqualified Equity Interest.
"Qualified Subsidiary Indebtedness" means (i) Indebtedness of Restricted
Subsidiaries under one or more senior credit agreements, senior loan agreements
or similar senior facilities, secured or unsecured, entered into from time to
time, including any related notes, guarantees collateral documents, instruments
and agreements executed in connection therewith or (ii) Indebtedness of
Restricted Subsidiaries in an aggregate principal amount not to exceed $25.0
million in the aggregate at any time outstanding.
"Refinance" means refinance, renew, extend, replace, defease or refund; and
"Refinancing" and "Refinanced" have correlative meanings.
"Replacement Assets" means (x) properties and assets (other than cash or
any Equity Interests or other security) that will be used in a
Telecommunications Business of the Company and the Restricted Subsidiaries or
(y) Equity Interests of any Person engaged primarily in a Telecommunications
Business, which Person will become on the date of acquisition thereof a
Restricted Subsidiary as a result of the Company's acquiring such Equity
Interests.
"Restricted Subsidiary" means any Subsidiary of the Company that has not
been designated by the Board of Directors of the Company, by a resolution of the
Board of Directors of the Company delivered to the Trustee, as an Unrestricted
Subsidiary pursuant to "-- Certain Covenants -- Designation of Unrestricted
Subsidiaries." Any such designation may be revoked by a resolution of the Board
of Directors of the Company delivered to the Trustee, subject to the provisions
of such covenant.
"SEC" means the Securities and Exchange Commission.
"Share Capital" shall mean, at any time of determination, the stated
capital of the Equity Interests (other than Disqualified Stock) and additional
paid-in capital of the Company at such time, all as determined in accordance
with GAAP.
"Significant Restricted Subsidiary" means, at any date of determination,
(a) any Restricted Subsidiary that, together with its Subsidiaries that
constitute Restricted Subsidiaries (i) for the most recent fiscal year of the
Company accounted for more than 10.0% of the consolidated revenues of the
Company and the Restricted Subsidiaries or (ii) as of the end of such fiscal
year, owned more than 10.0% of the consolidated assets of the Company and the
Restricted Subsidiaries, all as set forth on the consolidated financial
statements of the Company and the Restricted Subsidiaries for such year prepared
in conformity with GAAP, and (b) any Restricted Subsidiary which, when
aggregated with all other Restricted Subsidiaries that are not otherwise
Significant Restricted Subsidiaries and as to which any event described in
clause (h) of "-- Events of Default" has occurred and is continuing, would
constitute a Significant Restricted Subsidiary under clause (a) of this
definition.
"Stated Maturity", when used with respect to any Note or any installment of
interest thereon, means the date specified in such Note as the fixed date on
which the principal of such Note or such installment of interest is due and
payable.
"Strategic Equity Investments" means the issuance and sale of Qualified
Equity Interests to a Person that has an equity market capitalization, a net
asset value or annual revenues of at least $1.5 billion and owns and operates
business primarily in a Telecommunications Business.
"Subordinated Indebtedness" means any Indebtedness of the Company which is
expressly subordinated in right of payment to the Notes.
"Subsidiary" means, with respect to any Person, (a) any corporation of
which the outstanding Voting Equity Interests having at least a majority of the
votes entitled to be cast in the election of directors shall at
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the time be owned, directly or indirectly, by such Person, or (b) any other
Person of which at least a majority of Voting Equity Interests are at the time,
directly or indirectly, owned by such first named Person.
"Surviving Person" means, with respect to any Person involved in or that
makes any Disposition, the Person formed by or surviving such Disposition or the
Person to which such Disposition is made.
"Tax" shall mean any tax, duty, levy, impost, assessment or other
governmental charge (including penalties, interest and any other liabilities
related thereto).
"Taxing Authority" shall mean any government or political subdivision or
territory or possession of any government or any authority or agency therein or
thereof having power to tax.
"Telecommunications Acquisition" means an Acquisition of properties or
assets to be used in a Telecommunications Business or of the Equity Interests of
any Person that becomes a Restricted Subsidiary; provided, however, that such
Person's properties and assets shall consist principally of properties or assets
that will be used in a Telecommunications Business.
"Telecommunications Business" means any business owning, constructing,
financing and operating a telephone and/or communications system located
entirely in countries located in Western and Central Europe, or any business
reasonably related thereto, including, without limitation, any business
conducted by the Company or any Restricted Subsidiary on the Issue Date.
"Total Consolidated Indebtedness" means, as at any date of determination,
an amount equal to the aggregate amount of all Indebtedness of the Company and
the Restricted Subsidiaries, on a consolidated basis, outstanding as of such
date of determination, after giving effect to any Incurrence of Indebtedness and
the application of the proceeds therefrom giving rise to such determination.
"U.S. Government Obligations" means direct non-callable obligations of, or
obligations guaranteed by, the United States of America for the payment of which
guarantee or obligations the full faith and credit of the United States is
pledged.
"Unrestricted Subsidiary" means any Subsidiary of the Company designated as
such pursuant to "-- Certain Covenants -- Designation of Unrestricted
Subsidiaries." Any such designation may be revoked by a resolution of the Board
of Directors of the Company delivered to the Trustee, subject to the provisions
of such covenant.
"Voting Equity Interests" means Equity Interests in a corporation or other
Person with voting power under ordinary circumstances entitling the holders
thereof to elect the Board of Directors or other governing body of such
corporation or Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the sum of the
products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment of final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
aggregate principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary all of
the outstanding Voting Equity Interests (other than directors' qualifying
shares) of which are owned, directly or indirectly, by the Company.
EXCHANGE OFFER; REGISTRATION RIGHTS; ADDITIONAL INTEREST
EXCHANGE OFFER
Holders of Exchange Notes are not entitled to any registration rights with
respect to the Exchange Notes. The Company has agreed to file with the
Commission on or before the Filing Date (as defined below), offers to exchange
(the "Exchange Offer") any and all of the Registrable Securities (as defined
below) for a like aggregate principal amount of senior debt securities of the
Company which are identical to the Outstanding
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Dollar Notes and the Outstanding Euro Notes (the "Exchange Securities") (and
which are entitled to the benefits of the Indenture governing such notes or a
trust indenture which is substantially identical to such Indenture (other than
such changes as are necessary to comply with any requirements of the Commission
to effect or maintain the qualification of such trust indenture under the Trust
Indenture Act (the "TIA")) and which has been qualified under the TIA), except
that the Exchange Securities shall have been registered pursuant to an effective
Registration Statement under the Securities Act and shall contain no restrictive
legend thereon. The Exchange Offer will be registered under the Securities Act
on the appropriate form (the "Exchange Offer Registration Statement") and will
comply with all applicable tender offer rules and regulations under the Exchange
Act. The Company agrees to use its reasonable best efforts to (i) cause the
Exchange Offer Registration Statement to become effective and commence the
Exchange Offer on or prior to the Effectiveness Date (as defined below), (ii)
keep the Exchange Offer open for 30 days (or longer if required by applicable
law) (the last day of such period, the "Expiration Date") and (iii) exchange
Exchange Securities for all Outstanding Notes validly tendered and not withdrawn
pursuant to the Exchange Offer on or prior to the fifth day following the
Expiration Date. The Company will provide written notice of the terms and
effectiveness of the Exchange Offer Registration Statement as well as the
results of the Exchange Offer and will cause a copy of any such notices to be
published in a daily newspaper with general circulation in Luxembourg (which is
expected to be the Luxemburger Wort). In addition, the Company will notify the
Luxembourg Stock Exchange of the results of the Exchange Offer.
The Company shall use its reasonable best efforts to keep both of the
Exchange Offer Registration Statement effective and to amend and supplement the
prospectuses contained therein in order to permit such prospectuses to be
lawfully delivered by all persons subject to the prospectuses delivery
requirements of the Securities Act for at least 180 days (or such shorter time
as such persons must comply with such requirements in order to resell the
Exchange Securities) (the "Applicable Period").
If, (i) because of any change in law or in currently prevailing
interpretations of the Staff of the Commission, the Company is not permitted to
effect the Exchange Offer, (ii) the Exchange Offer is not commenced on or prior
to the Effectiveness Date, (iii) the Exchange Offer is not, for any reason,
consummated on or prior to the 165th day after the original issue date (January
4, 1999) of the Outstanding Notes, (iv) any Holder of Private Exchange
Securities (as defined in the Registration Rights Agreements) so requests, (v)
in the case of any Holder that participates in the Exchange Offer, such Holder
does not receive Exchange Securities on the date of the exchange that may be
sold without restriction under state and federal securities laws, or (vi) any
Initial Purchaser or any affiliate (as defined under the Securities Act) is
required to deliver a prospectus in connection with sales of Outstanding Notes
(the occurrence of any such event, a "Shelf Registration Event"), then, in the
case of each of clauses (i) to and including (v) of this sentence, the Company
shall promptly deliver to the Holders of such Outstanding Notes and the Trustee
notice thereof and shall thereafter file an Initial Shelf Registration Statement
pursuant to the terms of the applicable Registration Rights Agreement.
Application will be made to list the Exchange Securities on the Luxembourg
Stock Exchange and the Company intends to comply with the rules and regulations
of the Luxembourg Stock Exchange in connection therewith. The Exchange Offer
Registration Statement and all other documents relating to the Exchange Offer
will be made available at the Exchange Agent in New York and London. Holders of
Outstanding Notes will be able to participate fully in the Exchange Offer
through the Exchange Agent in New York and London. The Luxembourg Stock Exchange
will be notified in the case of any increase in the rate of interest on the
Outstanding Notes, and a notice regarding any increase in the rate of interest
on the Outstanding Notes will be published in a daily newspaper of general
circulation in Luxembourg (which is expected to be the Luxemburger Wort).
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SHELF REGISTRATION
If a Shelf Registration Event with respect to the Outstanding Notes has
occurred (and whether or not an Exchange Offer Registration Statement with
respect to such Outstanding Notes has been filed with the Commission or has
become effective, or the Exchange Offer with respect to such Outstanding Notes
has been consummated), then:
Initial Shelf Registration Statement. The Company shall promptly
prepare and file with the Commission a Registration Statement for an
offering to be made on a continuous basis pursuant to Rule 415 covering all
of the Registrable Securities affected thereby (an "Initial Shelf
Registration Statement"). The Company shall file with the Commission such
Initial Shelf Registration Statement on or prior to the applicable Filing
Date. The applicable Initial Shelf Registration Statement shall be on Form
S-1 or another appropriate form if available, permitting registration of
such Registrable Securities for resale by such holders in the manner
designated by them (including, without limitation, in one or more
underwritten offerings). The Company shall not permit any securities other
than the Registrable Securities to be included in the applicable Initial
Shelf Registration Statement or any Subsequent Shelf Registration
Statement. The Company shall use its reasonable best efforts to cause such
Initial Shelf Registration Statement to be declared effective under the
Securities Act on or prior to the Effectiveness Date, and to keep such
Initial Shelf Registration Statement continuously effective under the
Securities Act for so long as any Outstanding Notes are outstanding and any
Initial Purchasers or any affiliate thereof (as defined under the
Securities Act) is required to deliver a prospectus in connection with
sales of Outstanding Notes (such period, the "Effectiveness Period").
Subsequent Shelf Registration Statements. If any Initial Shelf
Registration Statement or any Subsequent Shelf Registration Statement
ceases to be effective for any reason at any time during the Effectiveness
Period (other than because of the sale of all of the securities registered
thereunder), the Company shall use its reasonable best efforts to obtain
the prompt withdrawal of any order suspending the effectiveness thereof,
and in any event the Company shall within 45 days of such cessation of
effectiveness amend such Shelf Registration Statement in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional "shelf" Registration Statement
pursuant to Rule 415 covering all of the Registrable Securities (a
"Subsequent Shelf Registration Statement"). If a Subsequent Shelf
Registration Statement is filed, the Company shall use its reasonable best
efforts to cause such Subsequent Shelf Registration Statement to be
declared effective as soon as reasonably practicable after such filing and
to keep such Registration Statement continuously effective until the end of
the Effectiveness Period. As used herein the term "Shelf Registration
Statement" means any Initial Shelf Registration Statement and any
Subsequent Shelf Registration Statement.
Supplements and Amendments. The Company shall promptly supplement and
amend a Shelf Registration Statement if required by the rules, regulations
or instructions applicable to the registration form used for such Shelf
Registration Statement, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Registrable Securities covered by such Registration Statement or by any
underwriter of such Registrable Securities.
ADDITIONAL INTEREST
The Company agrees to pay, as liquidated damages, additional interest on
the Outstanding Notes ("Additional Interest") under the circumstances and to the
extent set forth below (each of which shall be given independent effect):
(i) if either the Exchange Offer Registration Statement or the Initial
Shelf Registration Statement with respect to such Outstanding Notes has not
been filed on or prior to the Filing Date (unless, with respect to the
Exchange Offer Registration Statement, a Shelf Registration Event described
in clause (i) of the third paragraph under "-- Exchange Offer" above shall
have occurred prior to the Filing Date), Additional Interest shall accrue
on such Outstanding Notes over and above the stated interest on the
principal at a rate equal to 50 basis points for the first 90 days (or any
part thereof), immediately
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following such date, such Additional Interest increasing by an additional
50 basis points for each subsequent 90-day period (or any part thereof);
(ii) if either the Exchange Offer Registration Statement or the
Initial Shelf Registration Statement with respect to such Outstanding Notes
is not declared effective by the Commission on or prior to the
Effectiveness Date (unless, with respect to the Exchange Offer Registration
Statement, a Shelf Registration Event described in clause (i) of the third
paragraph under "-- Exchange Offer" above shall have occurred), Additional
Interest shall accrue on the Outstanding Notes included or which should
have been included in such Registration Statement over and above the stated
interest on the principal at a rate equal to 50 basis points for the first
90 days (or any part thereof), immediately following the day after such
date, such Additional Interest increasing by an additional 50 basis points
for each subsequent 90-day period (or any part thereof); and
(iii) if (A) the Company has not exchanged Exchange Securities for all
Outstanding Notes validly tendered and not withdrawn in accordance with the
terms of the Exchange Offer with respect to such notes on or prior to the
fifth day after the Expiration Date, or (B) the Exchange Offer Registration
Statement with respect to such notes ceases to be effective at any time
prior to the Expiration Date, or (C) if applicable, any Shelf Registration
Statement with respect to such notes has been declared effective and such
Shelf Registration Statement ceases to be effective at any time during the
Effectiveness Period, then Additional Interest shall accrue on such
Outstanding Notes (over and above any interest otherwise payable on
principal of the Outstanding Notes) in an amount equal to 50 basis points
for the first 90 days (or any part thereof) commencing on the (x) sixth day
after the Expiration Date, in the case of (A) above, or (y) the day the
Exchange Offer Registration Statement ceases to be effective in the case of
(B) above, or (z) the day such Shelf Registration Statement ceases to be
effective in the case of (C) above, such Additional Interest increasing by
an additional 50 basis points at the beginning of each such subsequent
90-day period (or any part thereof); provided, however, that the Additional
Interest rate on the Outstanding Notes may not exceed at any one time in
the aggregate 150 basis points, provided, further, that (1) upon the filing
of the Exchange Offer Registration Statement or a Shelf Registration
Statement with respect to the notes as required hereunder (in the case of
clause (i) of this paragraph), (2) upon the effectiveness of the Exchange
Offer Registration Statement or the Shelf Registration Statement as
required hereunder with respect to Dollar Notes or Euro Notes (in the case
of clause (ii) of this paragraph) or (3) upon the exchange of Exchange
Securities for all Outstanding Notes validly tendered and not withdrawn (in
the case of clause (iii)(A) of this paragraph), or upon the effectiveness
of the Exchange Offer Registration Statement which had ceased to remain
effective (in the case of (iii)(B) of this paragraph), or upon the
effectiveness of the Shelf Registration Statement which had ceased to
remain effective (in the case of (iii)(C) of paragraph), Additional
Interest on the Outstanding Notes as a result of such clause (or the
relevant subclause thereof), as the case may be, shall cease to accrue (but
any accrued amount shall be payable).
DEFINITIONS
As used in this section, the following terms shall have the following
meanings:
Effectiveness Date: The 135th day after the original issue date of the
Outstanding Notes; provided, however, that, with respect to either Initial Shelf
Registration Statement, (i) if the Filing Date in respect thereof is fewer than
60 days prior to the 135th day after the Closing Date, then the Effectiveness
Date in respect thereof shall be the 60th day after such Filing Date and (ii) if
the Filing Date is after the filing of the Exchange Offer Registration Statement
with the Commission, then the Effectiveness Date in respect thereof shall be the
60th day after such Filing Date.
Filing Date: The 90th day after the original issue date of the Outstanding
Notes; provided, however, that, with respect to either Initial Shelf
Registration Statement, (i) if a Shelf Registration Event shall have occurred
fewer than 30 days prior to the 90th day after the Closing Date, then the Filing
Date in respect thereof shall be the 30th day after such Shelf Registration
Event and (ii) if a Shelf Registration Event shall
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have occurred after the filing of the Exchange Offer Registration Statement with
the Commission, then the Filing Date in respect thereof shall be the 30th day
after such Shelf Registration Event.
Registrable Securities: The Outstanding Notes upon original issuance
thereof and at all times subsequent thereto, each Exchange Security as to which
clause (v) of the third paragraph under "-- Exchange Offer" above is applicable
upon original issuance and at all times subsequent thereto and, if issued, the
Private Exchange Securities, until in the case of any such Outstanding Notes,
Exchange Securities or Private Exchange Securities as the case may be, (i) a
Registration Statement (other than, with respect to any Exchange Security as to
which clause (v) of the third paragraph under "-- Exchange Offer" above is
applicable, the Exchange Offer Registration Statement) covering such Outstanding
Notes, Exchange Securities or Private Exchange Securities has been declared
effective by the Commission and such Outstanding Notes, Exchange Securities or
Private Exchange Securities, as the case may be, have been disposed of in
accordance with such effective Registration Statement, (ii) such Outstanding
Notes, Exchange Securities or Private Exchange Securities, as the case may be,
are sold in compliance with Rule 144 under the Securities Act, (iii) such
Outstanding Note has been exchanged for an Exchange Note pursuant to the
Exchange Offer and clause (v) of paragraph (b) of "-- Exchange Offer" above is
not applicable thereto, or (iv) such Outstanding Notes, Exchange Securities or
Private Exchange Securities, as the case may be, cease to be outstanding.
REPLACEMENT NOTES
If a mutilated Note is surrendered to the Trustee or if the holder of a
Note claims that the Note has been lost, destroyed or wrongfully taken, the
Company shall issue and the Trustee shall authenticate a replacement Note if the
Trustee's requirements for replacement of Notes are met. Such holder must
provide an indemnity bond or other indemnity, sufficient in the judgment of both
the Company and the Trustee, to protect the Company, the Trustee and any Agent
from any loss which any of them may suffer if a Note is replaced and evidence to
their satisfaction of the apparent loss, destruction or theft of such Note. The
Company may charge such holder for its reasonable out-of-pocket expenses in
replacing a Note, including reasonable fees and expenses of counsel.
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CERTAIN TAX CONSIDERATIONS
The following is a summary of the principal Netherlands and United States
federal tax consequences to U.S. Holders (as defined below) of the exchange of
Outstanding Notes for Exchange Notes pursuant to the Exchange Offer and the
ownership and disposition of Exchange Notes by a holder acquiring the Exchange
Notes pursuant to the Exchange Offer. This discussion is not exhaustive of all
the possible tax considerations and potential investors are advised to consult
their own tax advisors in order to determine the final tax consequences of
exchanging Outstanding Notes for Exchange Notes in their own particular
circumstances.
THE NETHERLANDS
This summary is based on the tax laws of the Netherlands, as well as the
Convention between the United States of America and the Kingdom of the
Netherlands for the Avoidance of Double Taxation and the Prevention of Fiscal
Evasion with respect to Taxes on Income (the "Treaty"), to the extent they were
published and effective on July 1, 1997. Changes made to these laws after that
date may have retroactive effect, and may affect the tax consequences described
herein.
The outline below is based on the assumption that the U.S. Holder is not,
and has not been for at least five years, a resident of the Netherlands for
purposes of Dutch tax legislation and is not engaged in a trade or business
through a branch or agency in the Netherlands and does not have a permanent
establishment therein (a "Non-Resident Holder"). In addition, it is assumed that
holders who are individuals do not own, either alone or together with related
individuals, 25% or more of any class of shares of Hermes. Finally it is assumed
that the limitation on benefits provision in the Treaty cannot be invoked
against the holder.
GENERAL APPLICATION OF DUTCH TAX LAW
A Non-Resident Holder of Notes is liable for Corporate or Individual Income
Tax ("CIT" or "IIT"), according to Dutch Law, if he/she receives interest with
respect to the Notes provided that either (i) he or she has, directly or
indirectly, a substantial interest or a deemed substantial interest (as defined
below) in Hermes which does not form part of his or her business equity or (ii)
such interest is attributable to a Dutch enterprise. Similarly, the capital
gains realized upon sale of the Outstanding Notes are only taxable if the Notes
are (deemed to be) part of such "substantial" interest, or if the Notes are
attributable to a Dutch enterprise.
A substantial interest is deemed to exist if the Non-Resident Holder,
either alone or together with related individuals, owns at least five percent of
the share capital in any class of shares issued by Hermes or if he/she holds an
option to buy at least 5% in any class of shares in the capital of Hermes.
INTEREST -- WITHHOLDING TAX AND TAX TREATY LIMITATIONS
According to article 12 of the Treaty, interest can only be subject to
CIT/IIT in the country of residence of the recipient of the interest. As a
result, no Dutch CIT or IIT will be due on interest received on the Notes.
In addition, the Netherlands does not levy any withholding taxes on the
payment of interest, provided that these payments do not depend and/or are not
deemed to be dependent on the profits realized and/or distributed by the company
paying the interest. If such link can be established, payments are likely to be
reclassified as payments of dividends. Although amounts reclassified as
dividends generally would be subject to Dutch withholding tax when paid to a
Non-Resident Holder, it does not appear that any substantial basis exists for
such reclassification. The forced reduction under the Treaty of the maximum
withholding tax to zero in such a case would, however, be irrelevant.
CAPITAL GAINS
As a result of article 14 of the Treaty, the Dutch intention to impose CIT
or IIT on capital gains realized upon disposal of any or all of the Notes by a
Non-Resident Holder can only be effectuated, if the Notes are participating or
deemed to be participating in the profits of the Company, where a Holder who is
an individual, who has been a resident of the Netherlands at any time during the
five year period preceding the alienation, and who, at the time of the
alienation, owns, either alone or together with related individuals, at least
25% of any class of shares of the Company, or if the Notes form part of a
permanent establishment of the holder in
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The Netherlands, or a fixed base available to the holder in the Netherlands for
the purpose of performing independent personal services.
EXCHANGE OFFER
Pursuant to the Exchange Offer contemplated by the Company herein, an
exchange of Outstanding Notes for Exchange Notes will not be a taxable event for
Netherlands income tax purposes.
THE UNITED STATES
The following is a summary of the principal U.S. federal income tax
considerations relevant to the Exchange Offer, and to the acquisition, ownership
and disposition of the Exchange Notes by U.S. Holders (as defined below). This
summary is based on the Internal Revenue Code of 1986, as amended (the "Code"),
existing and proposed Treasury Regulations, revenue rulings, administrative
interpretations and judicial decisions (all as currently in effect and all of
which are subject to change, possibly with retroactive effect). Except as
specifically set forth herein, this summary deals only with Exchange Notes held
as capital assets within the meaning of Section 1221 of the Code. This summary
does not discuss all of the tax consequences that may be relevant to holders in
light of their particular circumstances (including, without limitation, the
possible imposition of U.S. federal alternative minimum tax) or to holders
subject to special tax rules, such as insurance companies, dealers in securities
or foreign currencies, tax-exempt investors, persons holding the Exchange Notes
as part of a hedging transaction, "straddle," conversion transaction, or other
integrated transaction, U.S. Holders whose functional currency (as defined in
Section 985 of the Code) is not the U.S. dollar or persons who hold the Exchange
Notes through partnerships or other passthrough entities. Persons considering
the purchase of the Exchange Notes should consult with their own tax advisors
with regard to the application of the U.S. federal income tax laws to their
particular situations as well as any tax consequences arising under the laws of
any state, local or foreign jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of an
Outstanding Note or an Exchange Note who or that is for U.S. federal income tax
purposes (i) a citizen or individual resident of the United States, (ii) a
corporation created or organized in or under the laws of the United States or
any political subdivision thereof, (iii) an estate the income of which is
subject to U.S. federal income taxation regardless of its source, or (iv) a
trust if both: (A) a U.S. court is able to exercise primary supervision over the
administration of the trust, and (B) one or more U.S. persons have the authority
to control all substantial decisions of the trust.
INTEREST
Interest on the Exchange Notes and Additional Amounts, if any, paid in
respect of withholding taxes imposed on payments on the Notes (as described in
"Description of the Notes -- Additional Amounts") generally will be taxable to a
U.S. Holder as ordinary income at the time accrued or received, in accordance
with such U.S. Holder's method of accounting for U.S. federal income tax
purposes. The amount of interest required to be included in income by a U.S.
Holder will include the amount of such taxes, if any, withheld by the Company in
respect thereof. Thus, in the event of such withholding, a U.S. Holder would be
required to report gross income in an amount greater than the cash it receives
in respect of payments on its Exchange Note. However, a U.S. Holder could, be
eligible, subject to certain limitations, to claim such withholding taxes as a
credit or deduction for purposes of computing the amount of its U.S. federal
income tax liability, notwithstanding that the payment of such taxes will be
made by the Company. Interest income on the Exchange Notes will constitute
foreign source income and generally will be considered "passive" income (or
"high withholding tax interest" if the applicable withholding tax is imposed at
a rate of 5% or more) or "financial services" income for U.S. foreign tax credit
purposes. The rules relating to foreign tax credits and the timing thereof are
extremely complex and U.S. Holders should consult with their own tax advisors
with regard to the availability of a foreign tax credit and the application of
the foreign tax credit limitations to their particular situations.
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A cash basis U.S. Holder receiving an interest payment in Euro will be
required to include in income the U.S. dollar value of such payment (determined
using the spot rate in effect on the date such payment is received) regardless
of whether such payment is subsequently converted into U.S. dollars. No exchange
gain or loss will be recognized by such holder if the Euro are converted to U.S.
dollars on the date received. The U.S. federal income tax consequences of the
conversion of Euro into U.S. dollars is described below. See "Transaction in
Euro."
An accrual basis U.S. Holder will be required to include in income the U.S.
dollar value of the amount of U.S. interest income that has accrued on a Euro
Exchange Note in a taxable year, determined by translating such income at the
average rate of exchange for the relevant interest accrual period or, with
respect to an interest accrual period that spans two taxable years, at the
average rate for the portion of such interest accrual period within the taxable
year. The average rate of exchange for an interest accrual period (or portion
thereof) is the simple average of the exchange rates for each business day of
such period (or such other average that is reasonably derived and consistently
applied). An accrual basis holder may elect to translate interest income on a
Euro Exchange Note using the spot rate in effect on the last day of an interest
accrual period (or the last day of the taxable year for the portion of such
period within the taxable year). In addition, a holder may elect to use the spot
rate in effect on the date of receipt (or payment) for such purpose if such date
is within five business days of the last date of an interest accrual period. The
election must be made in a statement filed with the taxpayer's return, and is
applicable to all debt instruments for such year and thereafter unless changed
with the consent of the Internal Revenue Service (the "IRS").
Upon receipt of an interest payment on a Euro Exchange Note, an accrual
basis U.S. Holder will recognize ordinary gain or loss with respect to accrued
interest income in an amount equal to the difference between the U.S. dollar
value of the payment received (determined using the spot rate in effect on the
date such payment is received) in respect of such interest accrual period and
the U.S. dollar value of the interest income that has accrued during such
interest accrual period (as determined in the preceding paragraph). Any such
gain or loss will be treated as ordinary income or loss but generally will not
be treated as interest income or expense, except to the extent provided by
future regulations or administrative pronouncements of the IRS. The U.S. federal
income tax consequences of the conversion of Euro into U.S. dollars is described
below. See "Transactions in Euro."
EXCHANGE OFFER; OPTIONAL REDEMPTION
Pursuant to the Exchange Offer, an exchange of Outstanding Notes for
Exchange Notes will not be a taxable event for U.S. federal income tax purposes
and a U.S. Holder will have the same tax basis and holding period in the
Exchange Notes as the Outstanding Notes.
The Exchange Notes may be redeemed prior to their stated maturity at the
option of the Company. For purposes of computing the yield of the Exchange
Notes, the Company will be deemed to exercise or not exercise its option to
redeem the Exchange Notes in a manner that minimizes the yield on the Exchange
Notes. It is not anticipated that the Company's ability to redeem prior to
stated maturity will affect the yield to maturity of the Exchange Notes.
MARKET DISCOUNT AND PREMIUM
If a U.S. Holder purchases an Exchange Note for an amount that is less than
its principal amount, the amount of the difference will be treated as "market
discount" for U.S. federal income tax purposes, unless such difference is less
than a specified de minimis amount.
Unless a U.S. Holder elects to accrue market discount as described below,
such U.S. Holder will be required to treat any partial principal payment on, or
any gain realized on the sale, exchange, retirement or other disposition of, an
Exchange Note as ordinary income to the extent of the lesser of (i) the amount
of such payment or realized gain and (ii) the market discount that has not
previously been included in income and is treated as having accrued on such Note
at the time of such payment or disposition. Market discount will be considered
to accrue on a straight-line basis during the period from the date of
acquisition to the maturity date of the Note, unless the U.S. Holder elects to
accrue on a constant-yield basis.
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A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry an Exchange Note until the maturity of the Exchange Note or
its earlier disposition. A U.S. Holder may elect to include market discount in
income currently as it accrues (on either a straight-line or a constant-yield
basis), in which case such U.S. Holder will not be subject to the rules
described above regarding the treatment of gain as ordinary income upon the
disposition of the Exchange Note and upon the receipt of certain cash payments
and regarding the deferral of interest deductions.
In the case of a Euro Exchange Note, any accrued market discount not taken
into income shall be translated into U.S. dollars at the spot rate on the date
the U.S. Holder disposes of the Euro Exchange Note (or receives a partial
principal payment to which the accrued market discount relates). No part of such
accrued market discount is treated as exchange gain or loss. With respect to a
U.S. Holder of a Euro Exchange Note that elects to include market discount into
income currently as it accrues, such accrued market discount shall be translated
in U.S. dollars at the average exchange rate for the accrual period in a manner
described above in "-- Interest."
If a U.S. Holder purchases an Exchange Note for an amount that is greater
than the sum of all amounts payable on the Exchange Note after its acquisition
(other than payments of stated interest), such U.S. Holder will be considered to
have purchased such Exchange Note at a "premium" equal in amount to such excess,
and may elect (in accordance with applicable Code provisions) to amortize such
premium, on a constant yield method over the remaining term of the Exchange Note
(subject to special rules concerning early call provisions). If an election to
amortize the premium is not made, the premium will decrease the gain or increase
the loss otherwise recognized on a taxable disposition of the Exchange Note. In
the case of a Euro Exchange Note, the amount of amortizable premium is
determined using the exchange conventions applicable to payments of interest.
See "-- Interest" above.
The election to include market discount in income currently or to amortize
premium, once made, applies to all debt obligations held or subsequently
acquired by the electing U.S. Holder on or after the first day of the first
taxable year to which the election applied and may not be revoked without the
consent of the IRS.
DISPOSITIONS
Upon the sale, exchange or retirement of an Exchange Note, a U.S. Holder
generally will recognize taxable gain or loss equal to the difference between
the amount realized on the sale, exchange or retirement and such holder's
adjusted tax basis in the Exchange Note (as increased by any market discount
previously includible in income by the U.S. Holder and decreased by amortized
premium with respect to the Exchange Note). In the case of an Euro Exchange
Note, a U.S. Holder's tax basis in such Exchange Note generally will be the U.S.
dollar value of the purchase price of such Euro Exchange Note on the date of a
purchase (determined by translating the purchase price into U.S. dollars at the
spot rate in effect on the date of purchase), adjusted by market discount or
premium as described above. Upon the sale, exchange or redemption of a Euro
Exchange Note, a holder generally will recognize gain or loss equal to the
difference between the amount realized on the sale, exchange or redemption (or,
if it is realized in other than U.S. dollars, the U.S. dollar value of the
amount using the spot rate in effect on the date of such sale, exchange or
redemption) and the holder's tax basis in such Euro Exchange Note. For these
purposes, the amount realized on the sale, exchange or retirement of an Exchange
Note does not include any amount attributable to accrued but unpaid interest,
which will be taxable as ordinary income unless previously taken into account.
Except with respect to gains or losses attributable to changes in currency
exchange rates, as described below, such gain or loss will be capital gain or
loss. Such gain will generally be treated as U.S. source gain and, under
recently issued Treasury Regulations, a loss on such a disposition also would be
allocated to reduce U.S. source income, subject to applicable limitations.
Gain or loss recognized by a U.S. Holder on the sale, exchange or
retirement of a Euro Exchange Note that is attributable to changes in the rate
of exchange between the U.S. dollar and the Euro will be treated as ordinary
income or loss and generally will not be treated as interest income or expense
except to the extent provided by future regulations or administrative
pronouncements of the IRS. Such foreign currency gain or
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loss is recognized on the sale or retirement of a Euro Exchange Note only to the
extent of total gain or loss recognized on such sale or retirement.
As a result of certain limitations on the U.S. foreign tax credit under the
Code, a U.S. Holder may not be able to claim a U.S. foreign tax credit for
Netherlands withholding taxes, if any, imposed on the proceeds received upon the
sale, exchange or redemption by the Company or other disposition of Exchange
Notes. Prospective investors should consult their own tax advisors concerning
the application of the U.S. foreign tax credit rules to their particular
situations.
For certain non-corporate U.S. Holders (including individuals), the rate of
taxation of capital gains will depend upon (i) the holder's holding period in
the capital asset (with a preferential rate available for capital assets held
for more than one year) and (ii) the holder's marginal tax rate for ordinary
income. The deductibility of capital losses is subject to limitations.
TRANSACTIONS IN EURO
Euro received as interest on, or on the sale, exchange or retirement of, a
Euro Note will have a tax basis equal to their U.S. dollar value at the time
such interest is received or at the time payment is received in consideration of
such sale, exchange or retirement. The amount of gain or loss recognized on a
sale or other disposition of such Euro will be equal to the difference between
(i) the amount of U.S. dollars, or the fair market value in U.S. dollars of the
other currency or property received in such sale or other disposition and (ii)
the tax basis of such Euro.
A holder that purchases a Euro Exchange Note with previously owned Euro
would recognize gain or loss in an amount equal to the difference, if any,
between such holder's tax basis in such Euro and the U.S. dollar fair market
value of such Euro Exchange Note on the date of purchase. Generally, any such
gain or loss will be ordinary income or loss and will not be treated as interest
income or expense, except to the extent provided by future regulations or
administrative pronouncements of the IRS. However, a holder that converts U.S.
dollars to Euro and immediately uses such Euro to purchase a Euro Exchange Note
ordinarily would not recognize any exchange gain or loss in connection with such
conversion or purchase.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to payments on an
Exchange Note and to the proceeds of the sale of an Exchange Note made to United
States Holders other than certain exempt recipients (such as corporations). A
31% backup withholding tax will apply to such payments if the United States
Holder fails to provide a taxpayer identification number or certification of
other exempt status or fails to report in full dividend and interest income.
Treasury regulations, generally effective for payment made after December
31, 1999, modify certain of the certification requirements for backup
withholding. It is possible that the Company and other withholding agents may
request a new withholding exemption form from holders in order to qualify for
continued exemption from backup withholding under Treasury regulations when they
become effective.
Any amounts withhold under the backup withholding rules will be credited
toward such Holder's United States federal income tax liability, if any. To the
extent that the amounts withheld exceed the Holder's tax liability, the excess
may be refunded to the Holder provided the required information is furnished to
the IRS. In addition to providing the necessary information, the Holder must
file a United States tax return in order to obtain a refund of the excess
withholding.
99
<PAGE> 107
PLAN OF DISTRIBUTION
Based on positions taken by the staff of the Commission set forth in
no-action letters issued to Exxon Capital Holdings Corp. and Morgan Stanley &
Co. Inc., among others, the Company believes that Exchange Notes issued pursuant
to the Exchange Offer in exchange for Outstanding Notes may be offered for
resale, resold and otherwise transferred by holders thereof (other than any
holder which is (i) an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act, (ii) a broker-dealer who acquired Notes directly from
the Company, or (iii) broker-dealers who acquired Notes as a result of
market-making or other trading activities) without compliance with the
registration and prospectus delivery provisions for the Securities Act provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business, and such holders are not engaged in, and do not intend to engage in,
and have no arrangement or understanding with any person to participate in, a
distribution of such Exchange Notes, provided that broker-dealers
("Participating Broker-Dealers") receiving Exchange Notes in the Exchange Offer
will be subject to a prospectus delivery requirement with respect to resales of
such Exchange Notes. To date, the staff of the Commission has taken the position
that Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to transactions involving an exchange of securities
such as the exchange pursuant to the Exchange Offer (other than a resale of an
unsold allotment from the sale of the Outstanding Notes to the Initial
Purchasers thereof) with the Prospectus contained in the Registration Statement.
Pursuant to the Registration Rights Agreements, the Company has agreed to permit
Participating Broker-Dealers and other persons, if any, subject to similar
prospectus delivery requirements to use this Prospectus in connection with the
resale of such Exchange Notes. The Company has agreed that, for a period of 180
days after the Exchange Offer has been consummated, it will make this
Prospectus, and any amendment or supplement to this Prospectus, available to any
broker-dealer that requests such documents in the Letter of Transmittal.
Each holder of Outstanding Notes who wishes to exchange its Outstanding
Notes for Exchange Notes in the Exchange Offer will be required to make certain
representations to the Company as set forth in "The Exchange Offer". In
addition, each holder who is a broker-dealer and who receives Exchange Notes for
its own account in exchange for Outstanding Notes that were acquired by it as a
result of market-making activities or other trading activities, will be required
to acknowledge that it will deliver a prospectus in connection with any resale
by it of such Exchange Notes.
Holders who tender Outstanding Notes in the Exchange Offer with the
intention to participate in a distribution of the Exchange Notes may not rely
upon the Exxon Capital Holdings Corp., the Morgan Stanley & Co. Inc. or similar
no-action letters.
The Company 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
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. The Letter
of Transmittal 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.
The Company has agreed to pay all expenses incidental to the Exchange Offer
other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Outstanding Notes (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act, as
set forth in the Registration Rights Agreements.
100
<PAGE> 108
LEGAL MATTERS
Dutch company law matters will be passed upon by Loeff Claeys Verbeke,
Amsterdam, the Netherlands. Certain legal matters in connection with the
validity of the Exchange Notes offered hereby and the United States federal
income tax consequences of the Exchange Offer will be passed upon for the
Company by Shearman & Sterling, New York, New York.
INDEPENDENT AUDITORS
The financial statements of HER as of December 31, 1997 and 1996, and for
each of the three years in the period ended December 31, 1997 included in this
Prospectus have been audited by Ernst & Young Reviseurs d'Entreprises S.C.C.,
independent auditors, as set forth in their report appearing elsewhere herein.
GENERAL LISTING INFORMATION
LISTING
Application has been made to list the Exchange Notes on the Luxembourg
Stock Exchange. The Articles of Association of the Company and the legal notice
relating to the issue of the Notes will be deposited prior to the listing with
the Registrar of the District Court in Luxembourg (Greffier en Chef du Tribunal
d' Arrondissement a Luxembourg), where such documents are available for
inspection and where copies thereof can be obtained upon request. As long as the
Exchange Notes are listed on the Luxembourg Stock Exchange, an Agent for making
payments on, and transfers of, Exchange Notes will be maintained in Luxembourg.
COMMENTS
The Company has obtained all necessary consents, approvals and
authorizations in connection with the issue of the Notes. The issue of the Notes
was authorized by resolutions of the Board of Supervisory Directors of the
Company passed on December 11, 1998.
NO MATERIAL CHANGE
Except as disclosed in this Prospectus, there has been no material change
in the financial position of the Company and its subsidiaries since September
30, 1998 and no material adverse change in the financial position or prospects
of the Company and its subsidiaries since September 30, 1998.
LITIGATION
Neither the Company nor any of its subsidiaries or affiliates is involved
in any litigation or arbitration proceedings which relate to claims or amounts
which are material in the context of the issue of the Notes or that may have, or
have had during the 12 months preceding the date of this Prospectus, a material
adverse effect on the financial position of the Company, nor, so far as any of
them is aware, is any such proceeding pending or threatened.
AUDITORS
The consolidated accounts of the Company for the three years ended December
31, 1997 have been prepared in accordance with United States generally accepted
accounting principles ("U.S. GAAP") and have been audited by Ernst & Young
Reviseurs d'Entreprises S.C.C. in accordance with United States generally
accepted auditing standards. The unaudited consolidated interim accounts for the
nine months ended September 30, 1997 and 1998 were prepared in accordance with
U.S. GAAP. Ernst & Young Reviseurs d'Entreprises S.C.C. have given and not
withdrawn their written consent to the issue of this Prospectus with the
inclusion in it of their report in the form and context in which it is included.
101
<PAGE> 109
DOCUMENTS FOR INSPECTION
Copies of the following documents may be inspected at the specified office
of the Paying and Transfer Agent in Luxembourg.
- Articles of Association of the Company;
- the Registration Rights Agreements relating to the Notes; and
- the Indentures relating to the Notes (which include the forms of the Note
certificates).
In addition, copies of the most recent consolidated financial statements of
the Company for the preceding financial year, and any interim quarterly
financial statements published by the Company, will be available at the
specified office of the Paying and Transfer Agent in Luxembourg for so long as
the Exchange Notes are listed on the Luxembourg Stock Exchange. The Company
publishes only consolidated financial statements.
CLEARING SYSTEMS
The Notes distributed pursuant to Regulation S and represented by the
Regulation S Global Certificate have been accepted for clearance through the
facilities of Euroclear and Cedel. Relevant trading information is set forth
below.
<TABLE>
<CAPTION>
ISIN CUSIP NUMBER COMMON CODE
------------ ------------ -----------
<S> <C> <C> <C>
Dollar Notes
144A.................................. US427516AC32 427516AC3 009350764
Regulation S.......................... USN40243AB81 N40243AB8 009350721
Euro Notes
144A.................................. XS0093506599 427516AF6 009350659
Regulation S.......................... XS0093505781 N40243AC6 009350578
</TABLE>
NOTICES
All notices shall be deemed to have been given upon (i) the mailing by
first class mail, postage prepaid, of such notices to Holders of the Notes at
their registered addresses as recorded in the Register; and (ii) so long as the
Exchange Notes are listed on the Luxembourg Stock Exchange and it is required by
the rules of the Luxembourg Stock Exchange, publication of such notice to the
Holders of the Notes in English in a leading newspaper having general
circulation in Luxembourg (which is expected to be the Luxemburger Wort) or, if
such publication is not practicable, in one other leading English language daily
newspaper with general circulation in Europe, such newspaper being published on
each business day in morning editions, whether or not it shall be published in
Saturday, Sunday or holiday editions.
102
<PAGE> 110
GLOSSARY
Add-drop multiplexer (ADM). A multiplexer which controls cross connect
between individual circuits by software, permitting dynamic cross connect of
individual 64 kbps circuits within an E1 line.
Asynchronous Transfer Mode (ATM). A switching and transmission technology
that is one of a general class of packet technologies that relay traffic by way
of an address contained within the first five bits of a standard fifty-three
bit-long packet or cell. ATM-based packet transport was specifically developed
to allow switching and transmission of mixed voice, data and video at varying
rates. The ATM format can be used by many different information systems,
including LANs.
Bps. Bits per second; the basic measuring unit of speed in a digital
transmission system; the number of bits that a transmission facility can convey
between a sending location and a receiving location in one second.
Backbone. The through-portions of a transmission network, as opposed to
spurs which branch off the through-portions.
Bandwidth. The range of frequencies that can be passed through a medium,
such as glass fibers, without distortion. The greater the bandwidth, the greater
the information-carrying capacity of such medium. For fiber optic transmission,
electronic transmitting devices determine the bandwidth, not the fibers
themselves. Bandwidth is measured in Hertz (analog) or Bits Per Second
(digital).
Capacity. Refers to transmission.
Carrier. A provider of communications transmission services by fiber, wire
or radio.
Closed User Group. A group of customers with some affiliation with one
another and which are treated for regulatory purposes as not being the public.
Competitive Local Telecommunications Provider. A company that provides its
customers with an alternative to the local telephone company for local transport
of private line, special access and transport of switched access
telecommunications services. Competitive Local Telecommunications Providers are
also referred to in the industry as alternative local telecommunications service
providers (ALTS), Competitive Access Providers (CAPs) and Competitive Local
Exchange Carriers (CLECs).
Dark Fiber. Fiber that lacks the requisite electronic and optronic
equipment necessary to use the fiber for transmission.
Dedicated. Refers to telecommunications lines dedicated to or reserved for
use by particular customers along predetermined routes (in contrast to
telecommunications lines within the local telephone company's public switched
network).
Dense Wavelength Division Multiplexing (DWDM). A multiplexing technique
allowing a large number of different signals to be carried simultaneously on a
fiber by allocating resources according to frequency on non-overlapping
frequency bands.
Digital. Describes a method of storing, processing and transmitting
information through the use of distinct electronic or optical pulses that
represent the binary digits 0 and 1. Digital transmission/switching technologies
employ a sequence of discrete, distinct pulses to represent information, as
opposed to the continuously variable analog signal.
E1. Data transmission rate of approximately 2 Mbps.
E3. Data transmission rate of approximately 34 Mbps.
Enhanced Network Services. Telecommunications services providing digital
connectivity, primarily for data applications, via frame relay, ATM, or digital
interexchange private line facilities. Enhanced network services also include
applications on such networks, including Internet access and other Internet
services.
Frame Relay. A wide area transport technology that organizes data into
units called frames instead of providing fixed bandwidth as with private lines.
A high-speed, data-packet switching service used to transmit
103
<PAGE> 111
data between computers. Frame Relay supports data units of variable lengths at
access speeds ranging from 56 kilobits per second to 1.5 megabits per second.
This service is well-suited for connecting local area networks, but is not
presently well suited for voice and video applications due to the variable
delays which can occur. Frame Relay was designed to operate at high speeds on
modern fiber optic networks.
Gbps. Gigabits per second, which is a measurement of speed for digital
signal transmission expressed in billions of bits per second.
Hertz. The unit for measuring the frequency with which an electromagnetic
signal cycles through the zero-value state between lowest and highest states.
One Hz (Hertz) equals one cycle per second. KHz (kilohertz) stands for thousands
of Hertz; MHz (megahertz) stands for millions of Hertz.
Interconnect. Connection of a telecommunications device or service to the
PSTN.
International Simple Resale. Refers to the wholesale purchase of IPLCs from
facilities-based carriers and the reselling of such capacity to customers for
switched telephone service.
IPLC. International Private Leased Circuits.
Kbps. Kilobits per second, which is a measurement of speed for digital
signal transmission expressed in thousands of bits per second.
Local Area Network (LAN). The interconnection of computers for the purpose
of sharing files, programs and peripheral devices such as printers and
high-speed modems. LANs may include dedicated computers or file servers that
provide a centralized source of shared files and programs. LANs are generally
confined to a single customer's premises and may be extended or interconnected
to other locations through the use of bridges and routers.
Local Loop. The local loop is that portion of the local telephone network
that connects the customer's premises to the local exchange provider's central
office or switching center. This includes all the facilities starting from the
customer premise interface which connects to the inside wiring and equipment at
the customer premise to a terminating point within the switching wire center.
Mbps. Megabits per second, which is a measurement of speed for digital
signal transmission expressed in millions of bits per second.
Multiplexing. The use of some means to inter-leave narrow-band or
slow-speed data from multiple sources in order to make use of a wide-band or
high-speed channel.
Nodes. Locations within the network housing electronic equipment and/or
switches which serve as intermediate connection points to send and receive
transmission signals.
Plesiochronous Digital Hierarchy (PDH). A method of controlling the timing
between transmission and switching systems that is not synchronized but rather
relies on highly accurate clocks to minimize the slip rates between switching
nodes.
Points of Presence (POPs). Locations where a carrier has installed
transmission equipment in a service area that serves as, or relays calls to, a
network switching center of that carrier.
PSTN. Public switched telecommunications network.
Public Telecommunications Operator (PTO). A licensed telecommunications
common carrier.
Redundant Electronics. Describes a telecommunications facility using two
separate electronic devices to transmit the telecommunications signal so that if
one device malfunctions, the signal may continue without interruption.
Regeneration/amplifier. Devices which automatically re-transmit or boost
signals on an out-bound circuit.
Route Kilometers. The number of kilometers along which fiber optic cables
are installed.
104
<PAGE> 112
Route Mile. The number of miles along which fiber optic cables are
installed.
STM-1. Data transmission rate of approximately 155 Mbps.
STM-4. Data transmission rate of approximately 622 Mbps.
STM-16. Data transmission rate of approximately 2,488 Mbps.
STM-64. Data transmission rate of approximately 9,952 Mbps.
Switch. A sophisticated computer that accepts instructions from a caller in
the form of a telephone number. Like an address on an envelope, the numbers tell
the switch where to route the call. The switch opens or closes circuits or
selects the paths or circuits to be used for transmission of information.
Switching is a process of interconnection circuits to form a transmission path
between users. Switches allow local telecommunications service providers to
connect calls directly to their destination, while providing advanced features
and recording connection information for future billing.
Synchronous Digital Hierarchy (SDH). SDH is a set of standards for optical
communications transmission systems that define optical rates and formats,
signal characteristics, performance, management and maintenance information to
be embedded within the signals and the multiplexing techniques to be employed in
optical communications transmission systems. SDH facilitates the
interoperability of dissimilar vendors' equipment and benefits customers by
minimizing the equipment necessary for telecommunications applications. SDH also
improves the reliability of the local loop connecting customers' premises to the
local exchange provider, historically one of the weakest links in the service
delivery.
Time Division Multiplexing (TDM). A multiplexing technique allowing
multiple signals to be carried simultaneously on a fiber by allocating resources
on a time interval basis.
Trunk. A telephone circuit with a switch at both ends.
X.25. A CCITT standard governing the interface between data terminals and
data circuit termination equipment for terminals on packet-switched data
networks.
105
<PAGE> 113
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
YEAR END FINANCIAL STATEMENTS
Report of Ernst & Young Reviseurs d'Entreprises S.C.C.,
Independent Auditors...................................... F-2
Audited Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1996 and
1997................................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1995, 1996 and 1997....................... F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1996 and 1997....................... F-5
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1995, 1996 and 1997........... F-6
Notes to Consolidated Financial Statements.................. F-7
THIRD QUARTER FINANCIAL STATEMENTS (UNAUDITED)
Condensed, Consolidated Balance Sheets as of December 31,
1997 and September 30, 1998............................... F-17
Condensed, Consolidated Statements of Operations for the
three and nine months ended September 30, 1997 and 1998... F-18
Condensed, Consolidated Statements of Cash Flows for the
three and nine months ended September 30, 1997 and 1998... F-19
Notes to the Condensed, Consolidated Financial Statements... F-20
</TABLE>
F-1
<PAGE> 114
REPORT OF ERNST & YOUNG REVISEURS D'ENTREPRISES S.C.C.
INDEPENDENT AUDITORS
To the Board of Directors and the Shareholders of
Hermes Europe Railtel B.V.
We have audited the accompanying consolidated balance sheets of Hermes
Europe Railtel B.V. as of December 31, 1996 and 1997, and the related
consolidated statements of operations, cash flows, and shareholders' equity for
each of the three years in the period ended December 31, 1997. These 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 auditing standards generally
accepted in the United States. 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Hermes Europe
Railtel B.V. at December 31, 1996 and 1997, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles
in the United States.
Ernst & Young Reviseurs d'Entreprises
S.C.C.
Represented by
L. Swolfs
Partner
Brussels, Belgium
February 26, 1998
F-2
<PAGE> 115
HERMES EUROPE RAILTEL B.V.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
-------- --------
(IN THOUSANDS,
EXCEPT SHARE DATA)
--------------------
<S> <C> <C>
Current assets
Cash and cash equivalents................................. $ 2,013 $204,327
Restricted cash........................................... 3,840 29,539
Accounts receivable....................................... 84 2,129
Due from affiliated companies............................. 491 49
Other assets.............................................. 1,100 13,281
-------- --------
Total current assets.............................. 7,528 249,325
Property and equipment, net................................. 20,303 204,944
Deferred financing costs, net............................... -- 13,310
Restricted cash............................................. -- 28,271
-------- --------
TOTAL ASSETS...................................... $ 27,831 $495,850
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses..................... $ 8,476 $ 37,457
Due to affiliated companies............................... 3,344 1,311
Deferred income........................................... 24 1,436
Other current liabilities................................. 8 236
Debt maturing within one year............................. 63 50
Current portion of capital lease obligations.............. -- 21,490
-------- --------
Total current liabilities......................... 11,915 61,980
Long-term debt, less current portion........................ 499 265,383
Long-term portion of capital lease obligations.............. -- 117,645
-------- --------
TOTAL LIABILITIES................................. 12,414 445,008
Commitments and contingencies
Shareholders' loans......................................... 34,863 --
SHAREHOLDERS' EQUITY
Common stock, 1000 guilders par value (305 shares authorized
and 80 shares issued and outstanding at December 31, 1996;
297,000 shares authorized and 190,468 shares issued and
outstanding at December 31, 1997.......................... 45 96,757
Additional paid-in capital.................................. 2,884 10,130
Cumulative translation adjustment........................... 316 (3,665)
Accumulated deficit......................................... (22,691) (52,380)
-------- --------
TOTAL SHAREHOLDERS' EQUITY........................ (19,446) 50,842
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $ 27,831 $495,850
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 116
HERMES EUROPE RAILTEL B.V.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1995 1996 1997
--------- ---------- ----------
(IN THOUSANDS, EXCEPT WEIGHTED
AVERAGE SHARES AND PER SHARE DATA)
<S> <C> <C> <C>
Revenues.................................................... $ -- $ 48 $ 5,373
------- -------- --------
Operating costs and expenses:
Cost of revenues.......................................... -- 4,694 9,972
Selling, general and administrative....................... 6,637 10,552 18,493
------- -------- --------
6,637 15,246 28,465
------- -------- --------
Loss from operations........................................ (6,637) (15,198) (23,092)
Other income/(expense):
Interest income........................................... 125 508 6,596
Interest expense.......................................... (9) (153) (12,826)
Foreign currency (losses) gains........................... 19 (1,126) (367)
------- -------- --------
135 (771) (6,597)
------- -------- --------
Net loss before income taxes................................ (6,502) (15,969) (29,689)
Income taxes................................................ -- -- --
------- -------- --------
Net loss.................................................... $(6,502) $(15,969) $(29,689)
======= ======== ========
Net loss per share.......................................... $(90.31) $(199.61) $ (0.33)
======= ======== ========
Weighted average common shares outstanding.................. 72 80 89,957
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 117
HERMES EUROPE RAILTEL B.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1996 1997
------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss................................................... $(6,502) $(15,969) $ (29,689)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................ 11 683 4,257
Deferred interest........................................ -- 130 --
Non-cash compensation.................................... -- -- 2,651
Changes in assets and liabilities:
Accounts receivable................................... -- (87) (2,116)
Deposits.............................................. (16) (627) (9,807)
Accounts payable and accrued expenses................. 4,364 4,336 30,991
Other changes in assets and liabilities............... (512) (6) (704)
------- -------- ---------
Net cash used in operating activities...................... (2,655) (11,540) (4,417)
INVESTING ACTIVITIES
Purchases of property and equipment...................... (4,405) (16,807) (51,830)
Restricted cash.......................................... -- (3,974) (55,636)
------- -------- ---------
Net cash used in investing activities...................... (4,405) (20,781) (107,466)
FINANCING ACTIVITIES
Proceeds from debt....................................... 19 564 268,678
Payment of debt issue costs.............................. -- -- (14,139)
Net proceeds from issuance of common stock............... 1,732 -- 50,993
Proceeds from shareholders' loans........................ 7,942 27,358 13,205
Due to affiliated companies, net......................... 1,951 1,002 (1,237)
------- -------- ---------
Net cash provided by financing activities.................. 11,644 28,924 317,500
Effect of exchange rate changes on cash and cash
equivalents.............................................. 333 (374) (3,303)
------- -------- ---------
Net increase (decrease) in cash and cash equivalents....... 4,917 (3,771) 202,314
Cash and cash equivalents at beginning of year............. 867 5,784 2,013
------- -------- ---------
Cash and cash equivalents at end of year................... $ 5,784 $ 2,013 $ 204,327
======= ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 118
HERMES EUROPE RAILTEL B.V.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE TOTAL
----------------- PAID-IN TRANSLATION ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT CAPITAL ADJUSTMENT DEFICIT EQUITY
------- ------- ---------- ----------- ----------- -------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994...... 61 32 996 58 (220) 866
Proceeds from the sale of common
stock........................... 19 13 1,888 -- -- 1,901
Translation adjustment............ -- -- -- (312) -- (312)
Net loss.......................... -- -- -- -- (6,502) (6,502)
------- ------- ------- ------- -------- --------
BALANCE AT DECEMBER 31, 1995...... 80 45 2,884 (254) (6,722) (4,047)
Translation adjustment............ -- -- -- 570 -- 570
Net loss.......................... -- -- -- -- (15,969) (15,969)
------- ------- ------- ------- -------- --------
BALANCE AT DECEMBER 31, 1996...... 80 45 2,884 316 (22,691) (19,446)
Recapitalization, net of tax...... 190,388 96,712 4,633 -- -- 101,345
Compensatory stock options........ -- -- 2,613 -- -- 2,613
Translation adjustment............ -- -- -- (3,981) -- (3,981)
Net loss.......................... -- -- -- -- (29,689) (29,689)
------- ------- ------- ------- -------- --------
BALANCE AT DECEMBER 31, 1997...... 190,468 $96,757 $10,130 $(3,665) $(52,380) $ 50,842
======= ======= ======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 119
HERMES EUROPE RAILTEL B.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: NATURE OF BUSINESS OPERATIONS
Hermes Europe Railtel B.V. ("the Company") is developing and operating the
initial segments of a pan-European high capacity fiber optic network that is
designed to interconnect a majority of the largest Western and Central European
cities, and to transport international voice, data and multimedia/image traffic
for other carriers throughout Western and Central Europe.
The Company's objective is to become the leading pan-European carriers'
carrier by providing centrally managed crossborder telecommunications
transmission capacity to telecommunications companies including traditional
public telecommunications operators ("PTOs") and new entrants, such as
alternative carriers, global consortia of telecommunications operators,
international carriers, Internet backbone networks, resellers, value-added
networks and other service providers ("New Entrants").
The European telecommunications market has historically been dominated by
monopoly PTOs. This system has ensured the development of broad access to
telecommunications services in Europe, but has also restricted the growth of
high quality and competitive priced pan-European voice and data services. The
current liberalization occurring in Europe is intended to address these
structural deficiencies by breaking down PTO monopolies, allowing new
telecommunications operators to enter the market and increasing the competition
within the European Telecommunications market. In March 1996, the European
Commission adopted a directive (the "Full Competition Directive") requiring the
full liberalization of all telecommunications services in most EU member states
by January 1, 1998. The company expects that full liberalization in these
European countries will lead to the emerge of New Entrants with new and
competitive service offerings. The Company expects this increase in competition
will result in lower prices and a substantial increase in the volume of traffic
and range of telecommunications services provided. The Company believes that as
a result of the increased call volume and growth in value added services,
participants in these markets will require significant amounts of new
cross-border telecommunications transport capacity to provide their services.
In an effort to generate sufficient capital resources to continue its
buildout of the network and sustain working capital requirements, the Company
undertook a recapitalization (the "Recapitalization") during the first quarter
of 1997, which was completed in September 1997. Prior to the Recapitalization,
the Company was 50% owned by HIT Rail B.V. ("HIT Rail"), a consortium of eleven
European railway companies, and 50% owned by GTS-Hermes, Inc. ("GTS-Hermes"), a
U.S. holding company that is a wholly-owned subsidiary of Global TeleSystems
Group, Inc., a provider of a broad range of telecommunications services to
businesses, other telecommunications service providers and consumers through its
operations of voice and data networks, international gateways, local access and
cellular networks and the provision of various value-added services, in markets
outside the United States.
Pursuant to the Recapitalization, the Company offered to GTS-Hermes, HIT
Rail and the eleven individual members of the HIT Rail consortium the right to
subscribe to additional common stock of the Company. GTS-Hermes and two of the
members of HIT Rail, Societe Nationale des Chemins de Fer Belges S.A. de Droit
Public/Nationale Maatschappij der Belgische Spoorwegen N.V. ("NMBS") and AB Swed
Carrier ("Swed Carrier"), exercised their rights, while HIT Rail and the nine
remaining members of HIT Rail declined to participate.
As a result of the finalization of the Recapitalization, total shareholder
loans of ECU 39.4 million (approximately $48.5 million) from, collectively,
GTS-Hermes, HIT Rail, NMBS and Swed Carrier were transferred into equity.
Additionally, GTS-Hermes contributed ECU 46.0 million (approximately $51.8
million) and NMBS contributed a ten-year fiber optic cable lease with a fair
value of ECU 1.8 million (approximately $2.0 million).
F-7
<PAGE> 120
HERMES EUROPE RAILTEL B.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The ownership of the Company as a result of the Recapitalization is as
follows:
<TABLE>
<CAPTION>
SHARES OWNERSHIP %
------- -----------
<S> <C> <C>
GTS-Hermes.................................................. 150,632 79.1%
HIT Rail.................................................... 24,047 12.6
NMBS........................................................ 11,424 6.0
Swed Carrier................................................ 4,365 2.3
------- -----
Total............................................. 190,468 100.0%
======= =====
</TABLE>
In an additional effort to obtain capital resources, the Company completed
a debt offering in August 1997 that raised $265.0 million (see Note 4, "Debt
Obligations").
The Company was a development stage enterprise through December 31, 1996.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements include the accounts of Hermes Europe Railtel
B.V., its Belgian branch, HER Network Services B.V.B.A. (formerly Hermes Europe
Railtel N.V.), Hermes Europe Railtel (UK) Limited, Hermes Europe Railtel
(Holdings) B.V. and Beheer- en Beleggingsmaatschappij Vesto B.V. All significant
intercompany accounts and transactions are eliminated upon consolidation.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1995 and 1996 consolidated
financial statements in order to conform to the 1997 presentation.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less at the time of purchase to be cash equivalents. The Company
had $3.8 million and $57.8 million of restricted cash at December 31, 1996 and
1997, respectively. The restricted cash is primarily related to cash held in
escrow for interest payments (see Note 4, "Debt Obligations").
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation, which includes the
amortization of assets recorded under capital leases, is calculated on a
straight-line basis over the lesser of the estimated lives ranging from five to
ten years for telecommunications equipment and five to ten years for furniture,
fixtures and equipment and other property, or their contractual term. A
substantial part of the costs includes construction in process, which is
currently related to the configuration and buildout of the network, and these
costs primarily consist of labor. These costs are transferred to
telecommunications equipment in service as construction is completed and/or
equipment is placed in service. Depreciation is recorded commencing with the
first full month that assets are placed into service. Maintenance and repairs
are charged to expense as incurred.
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
34, "Capitalization of Interest Costs," the Company intends to capitalize
material interest costs associated with the construction of capital assets for
business operations and amortize the costs over the assets' useful lives. The
Company has not capitalized any interest costs through 1997.
F-8
<PAGE> 121
HERMES EUROPE RAILTEL B.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DEFERRED FINANCING COSTS
Deferred financing costs are amortized on a straight-line basis over the
lesser of their estimated useful lives or their contractual term, generally ten
years. In accordance with APB 17, "Intangible Assets," the Company continues to
evaluate the amortization period to determine whether events or circumstances
warrant revised amortization periods. Additionally, the Company considers
whether the carrying value of such assets should be reduced based on the future
benefits of its deferred financing costs.
LONG-LIVED ASSETS
In accordance with SFAS No. 121, long-lived assets to be held and used by
the Company are reviewed to determine whether any events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. For long-lived assets to be held and used, the Company bases its
evaluation on such impairment indicators as the nature of the assets, the future
economic benefit of the assets, any historical or future profitability
measurements, as well as other external market conditions or factors that may be
present. If such impairment indicators are present or other factors exist that
indicate that the carrying amount of the asset may not be recoverable, the
Company determines whether an impairment has occurred through the use of an
undiscounted cash flow analysis of assets at the lowest level for which
identifiable cash flows exist. If an impairment has occurred, the Company
recognizes a loss for the difference between the carrying amount and the
estimated value of the asset. The fair value of the asset is measured using
quoted market prices or, in the absence of quoted market prices, fair value is
based on an estimate of discounted cash flow analysis. Based on its analysis for
the years ended December 31, 1996 and 1997, the Company determined that there
was not an impairment of its long-lived assets.
INCOME TAXES
The Company uses the liability method of accounting for income taxes.
Deferred income taxes result from temporary differences between the tax basis of
assets and liabilities and the basis as reported in the consolidated financial
statements.
FOREIGN CURRENCY TRANSLATION
The accounting records of Hermes Europe Railtel B.V., Hermes Europe Railtel
(Holdings) B.V. and Beheer-en Beleggingsmaatschappij Vesto B.V. are maintained
in Dutch guilders. The accounting records of the Belgian branch and HER Network
Services B.V.B.A. (formerly Hermes Europe Railtel N.V.) company are maintained
in Belgian francs. The accounting records of Hermes Europe Railtel (UK) Limited
are maintained in British pounds. The functional currency for the Company has
been determined to be the Belgian franc. Therefore, the Dutch guilder statements
and the British pound statements have been remeasured into Belgian franc
equivalents, consolidated with the Belgian branch and Belgian B.V.B.A.
statements and then translated into U.S. dollar equivalents for the purpose of
preparing the accompanying financial statements in accordance with accounting
principles generally accepted in the United States.
The Company follows a translation policy in accordance with SFAS No. 52,
"Foreign Currency Translation." Assets and liabilities are translated at the
rates of exchange at the balance sheet date. Income and expense accounts are
translated at average monthly rates of exchange. The resultant translation
adjustments are included in the cumulative translation adjustment, a separate
component of shareholders' equity. Gains and losses from foreign currency
transactions are included in the operations.
F-9
<PAGE> 122
HERMES EUROPE RAILTEL B.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REVENUE RECOGNITION
The Company's revenue is associated with its customers' right to use the
network and is recognized on a straight-line basis over the terms of the
customer contracts. Billings received in advance of service being performed are
deferred and recognized as revenue as the service is performed.
NET LOSS PER SHARE
During 1997, the Company adopted SFAS No. 128, "Earnings Per Share," which
requires the Company to present basic and fully diluted earnings per share for
all years presented. The Company's net loss per share calculation (basic and
fully diluted) is based upon the weighted average common shares issued. There
are no reconciling items in the numerator or denominator of the Company's net
loss per share calculation. Employee stock options (see Note 5, "Employee
Benefits") have been excluded from the net loss per share calculation because
their effect would be anti-dilutive.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company believes that the carrying amount of its assets and liabilities
reported in the balance sheets approximates their fair value.
OFF BALANCE SHEET RISK AND CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of cash and cash equivalents and accounts
receivable. At December 31, 1996, the Company maintained most of its cash and
cash equivalents in high quality European financial institutions. At December
31, 1997, the Company maintained most of its cash and cash equivalents in high
quality U.S. financial institutions. The Company extends credit to various
customers and establishes an allowance for doubtful accounts for specific
customers that it determines to have significant credit risk.
The Company does not now hedge against foreign currency fluctuations,
although the Company is currently considering alternatives to hedge the foreign
exchange exposure resulting from the issuance of $265.0 million senior notes
(see Note 4, "Debt Obligations"). Under current practices, the Company's results
from operations could be adversely affected by fluctuations in foreign currency
exchange rates.
STOCK BASED COMPENSATION
SFAS No. 123, "Accounting for Stock-Based Compensation," establishes a fair
value method of accounting for employee stock options and similar equity
instruments. The fair value method requires compensation cost to be measured at
the grant date based on the value of the award and is recognized over the
service period. SFAS No. 123 allows companies to either account for stock-based
compensation under the new provisions of SFAS No. 123 or under the provisions of
APB No. 25, "Accounting for Stock Issued to Employees." The Company has elected
to account for its stock-based compensation in accordance with the provisions of
APB No. 25 and presents pro forma disclosures of net loss as if the fair value
method had been adopted.
USES OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
The preparation of these consolidated financial statements, in conformity
with generally accepted accounting principles, requires management to make
estimates and assumptions that affect amounts in the financial statements and
accompanying notes and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-10
<PAGE> 123
HERMES EUROPE RAILTEL B.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board has issued two new standards which
become effective for reporting periods beginning after December 15, 1997. SFAS
No. 130, "Reporting Comprehensive Income," requires additional disclosures with
respect to certain changes in assets and liabilities that previously were not
required to be reported as results of operations for the period. The Company
will begin making the additional disclosures required by SFAS No. 130 in the
first quarter of 1998. SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," requires financial and descriptive
information with respect to "operating segments" of an entity based on the way
management disaggregates the entity for making internal operating decisions. The
Company will begin making the disclosures required by SFAS No. 131 with
financial statements for the period ending December 31, 1998.
NOTE 3: SUPPLEMENTAL BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
------- --------
(IN THOUSANDS)
<S> <C> <C>
Other assets consists of:
Deposits.................................................. $ 606 $ 9,577
VAT receivable............................................ 402 1,184
Interest receivable....................................... -- 918
Other assets.............................................. 92 1,602
------- --------
Total other assets.......................................... $ 1,100 $ 13,281
======= ========
Property and equipment, net consists of:
Telecommunications equipment in service................... $ 4,947 $198,723
Furniture, fixtures and equipment......................... 2,507 3,409
Leasehold improvements.................................... 543 840
Construction in process................................... 12,981 6,255
------- --------
20,978 209,227
Less: accumulated depreciation......................... 675 4,283
------- --------
Total property and equipment, net........................... $20,303 $204,944
======= ========
Accounts payable and accrued expenses consists of:
Trade accounts payable.................................... $ 5,445 $ 19,678
Accrued interest.......................................... 10 11,621
Accrued salaries and bonuses.............................. 1,150 2,058
Accrued consulting expense................................ 152 968
Accrued vacation expense.................................. 774 1,094
Other..................................................... 945 2,038
------- --------
Total accounts payable and accrued expenses................. $ 8,476 $ 37,457
======= ========
</TABLE>
F-11
<PAGE> 124
HERMES EUROPE RAILTEL B.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4: DEBT OBLIGATIONS
Company debt consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
---- --------
(IN THOUSANDS)
<S> <C> <C>
Senior notes, due August 15, 2007 at 11.5% interest payable
semiannually.............................................. $ -- $265,000
Other financing agreements.................................. 562 433
---- --------
Total debt outstanding...................................... 562 265,433
Less: debt maturing within one year....................... 63 50
---- --------
Total long-term debt........................................ $499 $265,383
==== ========
</TABLE>
On August 15, 1997, the Company issued aggregate principal amount $265.0
million of senior notes due August 15, 2007 (the "Senior Notes"). The Senior
Notes are general unsecured obligations of the Company, with interest payable
semiannually at a rate of 11.5%. Approximately $56.6 million of the net proceeds
of the offering was placed in escrow for the first four semiannual interest
payments commencing on February 15, 1998. The Company may redeem the Senior
Notes, in whole or in part, any time on or after August 15, 2002 at specific
redemption prices. The Company may also redeem the Senior Notes at a price equal
to 111.5% of the principal amount prior to August 15, 2000 with net cash
proceeds of a public equity offering with gross proceeds of at least $75.0
million or in certain other circumstances specified in the indenture for the
Senior Notes, provided, however, that at least two-thirds of the principal
amount of the Senior Notes originally issued remain outstanding after each such
redemption. Pursuant to the covenants in the offering, the Company has filed an
S-4 registration statement with the Securities and Exchange Commission to
exchange registered senior notes, with the same terms and conditions as the
Senior Notes, for the Senior Notes.
On a pro forma basis, assuming the Senior Notes had been outstanding as of
January 1, 1997, the Company's net loss would have been $50.1 million for 1997,
as a result of interest expense of $30.5 million and amortization expense of
$1.4 million related to amortizing $13.7 million of deferred financing fees over
the term of the Senior Notes.
Aggregate maturities of long-term debt, as of December 31, 1997, are as
follows: 1998 -- $0.05 million, 1999 -- $0.05 million, 2000 -- $0.06 million,
2001 -- $0.06 million, 2002 -- $0.07 million, and $265.2 million thereafter.
NOTE 5: EMPLOYEE BENEFITS
The Company established a pension plan in 1995 that covers substantially
all of its employees upon twenty-five years of age and at least one year of
service. The benefits are based on years of service and the employee's
compensation. The Company has entered into an arrangement, an annuity contract,
with an insurance company for the provision of a group insurance policy ("the
Policy"). Under the Policy, the insurance provider has undertaken a legal
obligation to provide specified benefits to participants in return for a fixed
premium; accordingly, the Company no longer bears significant financial risk.
Premium payments for the Policy are partly paid by the employee, based on
specified terms that consider the employee's annual salary, with the remaining
premium paid by the employer. Premiums are intended to provide not only for
benefits attributed to service to date but also for those expected to be earned
in the future.
The Company's pension costs for 1995, 1996 and 1997 were $0.05 million,
$0.4 million and $0.7 million, respectively.
In the fourth quarter of 1997, the Company implemented a stock option plan
for its key officers and employees (the "Stock Option Plan"). The ownership
dilution caused by the Stock Option Plan is not
F-12
<PAGE> 125
HERMES EUROPE RAILTEL B.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
expected to be significant. As a result of issuing options under the Stock
Option Plan, the Company will incur a non-cash charge of approximately $3.7
million, of which $2.6 million was recorded during the fourth quarter and the
remaining $1.1 million will be recognized in 1998.
The Company applies the provisions of APB No. 25 in accounting for its
stock option incentive plans. The effect of applying SFAS No. 123 on the net
loss as reported is not representative of the effects on reported net loss for
future years due to the vesting period of the stock options and the fair value
of additional stock options in future years. Had compensation expense been
determined in accordance with the methodology of SFAS No. 123, the Company's net
loss for the year ended December 31, 1997 would have been approximately $29.9
million. The fair value of options granted was estimated between $51.80 and
$456.63 per share using the Black-Scholes option pricing with the following
assumptions: expected volatility of .50, dividend yield 0%, risk free interest
rate of 5.79% and an expected life of five years.
The Company maintains the Stock Option Plan, with the maximum number of
shares of common stock available for grant under the Stock Option Plan of
24,760. All options granted under the Stock Option Plan were at exercise prices
that were at least equal to the fair market value of common stock at the date of
grant. Generally, all options granted under the Stock Option Plan vest over a
three-year period from the date of grant and expire ten years from the date of
grant. There were a few exceptions in which the granting of options had
instantaneous vesting rights.
Additional information with respect to stock option activity is summarized
as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
----------------------------
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
------- -----------------
<S> <C> <C>
Outstanding at beginning of year............................ -- $ --
Options granted............................................. 10,166 379.92
Options exercised........................................... -- --
Options canceled or expired................................. -- --
------ -------
Outstanding at end of year.................................. 10,166 379.92
====== =======
Options exercisable at year end............................. 6,244 $107.20
</TABLE>
The following table summarizes information about stock options outstanding:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------ ----------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE PRICE AT NUMBER CONTRACTUAL LIFE EXERCISE NUMBER EXERCISE
DECEMBER 31, 1997: OUTSTANDING (IN YEARS) PRICE EXERCISABLE PRICE
------------------ ----------- ---------------- --------- ----------- --------
<S> <C> <C> <C> <C> <C>
$83.12.............................. 5,500 8 $ 83.12 3,895 $ 83.12
$100.00 to $191.31.................. 2,762 8 113.92 2,032 112.59
$378.43 to $2,887.62................ 1,904 9 1,623.15 317 368.46
------ -----
10,166 8 $ 379.92 6,244 $107.20
====== =====
</TABLE>
F-13
<PAGE> 126
HERMES EUROPE RAILTEL B.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6: INCOME TAXES
The components of loss before income taxes were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1996 1997
------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Pretax loss:
Domestic (the Netherlands)......................... $ (422) $ (608) $ (7,154)
Foreign............................................ (6,080) (15,361) (22,535)
------- -------- --------
$(6,502) $(15,969) $(29,689)
======= ======== ========
</TABLE>
No current income taxes are due, as the Company incurred losses due to the
start-up activities in the Belgian branch and the Company.
A deferred tax asset is recorded on temporary differences between earnings
as reported in the financial statements and earnings for income tax purposes.
The following table summarizes major components of the Company's deferred tax
assets:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1995 1996 1997
------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards................... $ 3,919 $ 11,729 $ 16,918
------- -------- --------
Total deferred tax asset............................. 3,919 11,729 16,918
Less: valuation allowance.......................... (3,919) (11,729) (16,918)
------- -------- --------
Total................................................ $ -- $ -- $ --
======= ======== ========
</TABLE>
As of December 31, 1997, the Company had net operating loss carryforwards
for Belgian and Dutch income tax purposes of approximately $43.1 million, which
are recoverable from profits for an unlimited period of time.
NOTE 7: SUPPLEMENTAL CASH FLOW INFORMATION
The following table summarizes non-cash investing and financing activities
for the year ended December 31, 1997:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
(IN THOUSANDS)
<S> <C>
Transfer of shareholders' loans to equity................... $ 48,491
Contribution of fiber optic cable lease..................... 1,989
Non cash compensation (stock options)....................... 2,613
Capitalization of leases.................................... 139,135
</TABLE>
There were no significant non-cash activities in 1996.
The Company paid interest of $0.02 million, $0.01 million and $1.2 million
in 1995, 1996 and 1997, respectively.
F-14
<PAGE> 127
HERMES EUROPE RAILTEL B.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8: COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
Operating lease commitments are primarily for office space and car rental.
The office lease of the first office building has a term of nine years, expiring
on June 30, 2005, with an option to cancel January 1, 2002 upon the payment of
certain penalties. In addition, the Company received a reduction in annual
expense during the first three years of the lease. This reduction is being
amortized over the first six years of the lease, using a straight-line method.
On April 29, 1997, the Company entered into a lease for a second office
building, with annual payments of $0.4 million beginning in October 1997 and
expiring on June 30, 2005.
Rental expense aggregated approximately $0.5 million, $0.7 million and $1.0
million for the years ended December 31, 1995, 1996 and 1997, respectively.
CAPITAL LEASES
Assets and liabilities under capital leases are included in the
consolidated balance sheets as follows :
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
---- --------
(IN THOUSANDS)
<S> <C> <C>
Telecommunications equipment in service..................... $ -- $150,787
Less: accumulated amortization............................ -- $ 482
---- --------
$ -- $150,305
==== ========
</TABLE>
Future minimum payments, by year and in the aggregate, under the capital
leases and other non-cancelable operating leases with initial or remaining terms
in excess of one year as of December 31, 1997 were as follows :
<TABLE>
<CAPTION>
CAPITAL LEASES OPERATING LEASES
-------------- ----------------
(IN THOUSANDS)
<S> <C> <C>
December 31, 1998........................................ $ 26,679 $1,599
1999..................................... 14,217 1,448
2000..................................... 15,300 1,251
2001..................................... 16,465 1,041
2002..................................... 16,630 924
Thereafter............................................... 152,016 1,155
-------- ------
Total minimum lease payments............................. 241,307 $7,418
======
Less amount representing interest........................ 102,172
--------
Present value of net minimum lease payments.............. 139,135
Less current portion of capital lease obligations........ 21,490
--------
Long-term portion of capital lease obligations........... $117,645
========
</TABLE>
MAJOR CUSTOMERS
In 1997, the Company had two major customers, representing $1.8 million and
$1.2 million or 34.2% and 21.7% of revenue, respectively. There were no major
customers in 1995 and 1996.
OTHER MATTERS
In the ordinary course of business, the Company may be party to various
legal and tax proceedings, and subject to claims, certain of which relate to the
regulatory environments in which the Company currently
F-15
<PAGE> 128
HERMES EUROPE RAILTEL B.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
operates or intends to operate. In the opinion of management, the Company's
liability, if any, in all pending litigation, or other legal proceeding or other
matter other than what is discussed above, will not have a material effect upon
the financial condition, results of operations or liquidity of the Company.
NOTE 9: RELATED PARTY TRANSACTIONS
The Company received financing through shareholders' loan transactions
provided by HIT Rail, GTS-Hermes, NMBS, and Swed Carrier. The Company had
outstanding shareholders' loans from HIT Rail and GTS-Hermes of $14.0 million
and $20.9 million, respectively, at December 31, 1996. All shareholder loans
outstanding were converted into equity during 1997 as part of the
Recapitalization (see Note 1, "Nature of Business Operations").
NOTE 10: SUBSEQUENT EVENTS
Subsequent to December 31, 1997, the Company further entered into
contractual commitments to lease fibre pairs, including facilities and
maintenance and utilizing the partial routes for laying fibre optic cable. Based
on the contract provisions, these commitments are currently estimated to
aggregate approximately $12.9 million. The commitments have expected lease terms
of ten to twenty-one years with options for renewal rights of one and one-half
to five additional years.
In an effort to expand its presence in Europe, the Company incorporated
subsidiary companies in The Netherlands, Ireland, The United Kingdom, Germany,
France, Italy and Spain. In Belgium, the activities of the Network Operations
Centre have been transferred to HER Network Services B.V.B.A (formerly Hermes
Europe Railtel N.V.).
NOTE 11: EVENTS OCCURRING SUBSEQUENT TO DATE OF AUDIT REPORT
In March 1998, HIT Rail sold all of its shares in the Company to
GTS-Hermes, NMBS and Swed Carrier. As a result of the sale, GTS-Hermes, NMBS and
Swed Carrier will own 89.4%, 7.2% and 3.4% of the Company, respectively.
F-16
<PAGE> 129
HERMES EUROPE RAILTEL B.V.
CONDENSED, CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Current assets
Cash and cash equivalents................................. $204,327 $185,034
Restricted cash........................................... 29,539 29,467
Accounts receivable....................................... 2,129 26,112
Other assets.............................................. 13,330 33,532
-------- --------
Total current assets.............................. 249,325 274,145
Property and equipment, net................................. 204,944 362,322
Goodwill and intangible assets, net......................... 13,310 31,875
Restricted cash............................................. 28,271 --
Other noncurrent assets..................................... -- 13,176
-------- --------
Total Assets...................................... $495,850 $681,518
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses..................... $ 37,457 $ 83,914
Due to affiliated companies............................... 1,311 16,381
Deferred income........................................... 1,436 28,527
Current portion of capital lease obligations.............. 21,540 31,186
Other current liabilities................................. -- 2,114
-------- --------
Total current liabilities......................... 61,744 162,122
Long-term debt, less current portion........................ 265,383 265,367
Long-term portion of capital lease obligations.............. 117,645 187,900
Other noncurrent liabilities................................ 236 20,607
-------- --------
Total Liabilities................................. 445,008 635,996
Minority interest........................................... -- 27,710
Commitments and contingencies
Shareholders' Equity
Common stock, 1000 guilders par value (297,000 shares
authorized and 190,468 shares issued and outstanding at
December 31, 1997 and September 30, 1998).............. 96,757 96,757
Additional paid-in capital................................ 10,130 11,093
Accumulated other comprehensive loss...................... (3,665) (2,488)
Accumulated deficit....................................... (52,380) (87,550)
-------- --------
Total Shareholders' Equity........................ 50,842 17,812
-------- --------
Total Liabilities and Shareholders' Equity........ $495,850 $681,518
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-17
<PAGE> 130
HERMES EUROPE RAILTEL B.V.
CONDENSED, CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
1997 1998 1997 1998
----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT WEIGHTED AVERAGE SHARES AND PER
SHARE DATA)
<S> <C> <C> <C> <C>
Revenues........................................... $ 1,669 $ 26,997 $ 2,262 $ 42,933
-------- -------- -------- --------
Operating costs and expenses:
Cost of revenues................................. 2,685 19,720 5,989 36,677
Selling, general and administrative.............. 3,832 7,794 10,177 18,201
-------- -------- -------- --------
6,517 27,514 16,166 54,878
-------- -------- -------- --------
Loss from operations............................... (4,848) (517) (13,904) (11,945)
Other income/(expense):
Interest income.................................. 2,649 1,932 2,729 7,844
Interest expense................................. (3,944) (7,898) (4,593) (23,419)
Foreign currency (losses) gains.................. 498 (2,561) 93 (5,227)
-------- -------- -------- --------
(797) (8,527) (1,771) (20,802)
-------- -------- -------- --------
Net loss before income taxes and minority
interest......................................... (5,645) (9,044) (15,675) (32,747)
Income taxes....................................... -- 1,819 -- 1,819
-------- -------- -------- --------
Net loss before minority interest.................. (5,645) (10,863) (15,675) (34,566)
Minority interest.................................. -- (564) -- (604)
-------- -------- -------- --------
Net loss........................................... $ (5,645) $(11,427) $(15,675) $(35,170)
======== ======== ======== ========
Net loss per share................................. $ (0.03) $ (0.06) $ (0.28) $ (0.18)
======== ======== ======== ========
Weighted average common shares outstanding......... 169,200 190,468 56,453 190,468
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-18
<PAGE> 131
HERMES EUROPE RAILTEL B.V.
CONDENSED, CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1997 1998 1997 1998
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Operating Activities
Net loss....................................... $ (5,645) $(11,427) $(15,675) $(35,170)
Adjustments to reconcile net loss to net cash
Provided by (used in) operating activities:
Depreciation and amortization............... 1,030 8,035 1,862 16,896
Fair value adjustment for foreign currency
Instruments............................... -- 18,016 -- 21,240
Minority interest........................... -- 564 604
Non-cash compensation....................... -- 468 -- 996
Changes in assets and liabilities:
Accounts receivable....................... 251 (3,647) (414) (15,477)
Deposits.................................. 319 (2,644) 319 (2,831)
Accounts payable and accrued expenses..... 6,693 26,817 7,871 28,815
Other changes in assets and liabilities... 4,829 (2,646) 234 5,454
-------- -------- -------- --------
Net cash provided by (used in)
operating activities................. 7,477 33,536 (5,803) 20,527
Investing Activities
Purchases of property and equipment............ (14,839) (45,102) (19,316) (75,946)
Acquisitions -- cash acquired.................. -- -- -- 13,352
Restricted cash................................ (57,558) 14,755 (54,860) 28,367
Other investing activities..................... -- (314) -- (314)
-------- -------- -------- --------
Net cash used in investing
activities........................... (72,397) (30,661) (74,176) (34,541)
Financing Activities
Proceeds from debt............................. 270,849 -- 270,849 --
Repayments of debt............................. -- (2,231) -- (12,952)
Payment of debt issue costs.................... (13,238) -- (13,238) (825)
Net proceeds from issuance of common stock..... 52,015 -- 52,015 --
Proceeds from shareholders' loans.............. -- -- 13,311 --
Due to affiliated companies, net............... (4,782) 14,769 (1,964) 14,270
-------- -------- -------- --------
Net cash provided by financing
activities........................... 304,844 12,538 320,973 493
Effect of exchange rate changes on cash and cash
equivalents.................................... (3,433) (5,713) (5,466) (5,772)
-------- -------- -------- --------
Net increase (decrease) in cash and cash
equivalents.................................... 236,491 9,700 235,528 (19,293)
Cash and cash equivalents at beginning of
period......................................... 1,050 175,334 2,013 204,327
-------- -------- -------- --------
Cash and cash equivalents at end of period....... $237,541 $185,034 $237,541 $185,034
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE> 132
HERMES EUROPE RAILTEL B.V.
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL PRESENTATION
The financial statements of Hermes Europe Railtel B.V. (the "Company")
included herein are unaudited and have been prepared in accordance with
generally accepted accounting principles for interim financial reporting and
Securities and Exchange Commission regulations. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. Material intercompany affiliate account
transactions have been eliminated; however, other adjustments may have been
required had an audit been performed. In the opinion of management, the
financial statements reflect all adjustments of a normal and recurring nature
necessary to present fairly the Company's financial position, results of
operations and cash flows for the interim periods. These financial statements
should be read in conjunction with the Company's 1997 audited consolidated
financial statements and the notes related thereto. The results of operations
for the three months and nine months ended September 30, 1998 may not be
indicative of the operating results for the full year.
The Company is developing and operating segments of a pan-European high
capacity fiber optic network that is designed to interconnect a majority of the
largest Western and Central European cities and to transport international
voice, data and multimedia/image traffic for other carriers throughout Western
and Central Europe.
The Company's objective is to become the leading pan-European carriers'
carrier by providing centrally managed cross-border telecommunications
transmission capacity to telecommunications companies including traditional
public telecommunications operators and new entrants, such as alternative
carriers, global consortia of telecommunications operators, international
carriers, Internet backbone networks, resellers, value-added networks and other
service providers.
2. POLICIES AND PROCEDURES
On January 1, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income," which establishes
standards for reporting and display of comprehensive income (loss) and its
components in a full set of general purpose financial statements. Comprehensive
income (loss) is defined as the change in equity of a business enterprise during
a period from nonowner sources. Comprehensive loss was $6.6 million and $18.9
million for the three and nine months ended September 30, 1997, respectively,
and was comprised of net losses of $5.6 million and $15.7 million and foreign
currency translation losses of $1.0 million and $3.2 million for the three and
nine months ended September 30, 1997, respectively. Comprehensive loss was $9.6
million and $34.0 million for the three and nine months ended September 30,
1998, respectively, and was comprised of net losses of $11.4 million and $35.2
million and foreign currency translation income of $1.8 million and $1.2 million
for the three and nine months ended September 30, 1998.
During 1997, the Company adopted SFAS No. 128, "Earnings Per Share," which
requires the Company to present basic and diluted earnings per share for all
periods presented. The Company's net loss per share calculation (basic and
diluted) is based upon the weighted average common shares issued. There are no
reconciling items in the numerator or denominator of the Company's net loss per
share calculation. Employee stock options have been excluded from the net loss
per share calculation because their effect would be anti-dilutive.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", which is
required to be adopted by January 1, 2000. This statement establishes accounting
and reporting standards requiring that every derivative instrument be recorded
in the balance sheet as either an asset or liability measured at its fair value.
The statement also requires that changes in the derivatives' fair value be
recognized in earnings (losses) unless specific hedge
F-20
<PAGE> 133
HERMES EUROPE RAILTEL B.V.
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
accounting criteria are met. The Company is currently assessing the impact of
this new statement on its consolidated financial position and results of
operations.
Certain reclassifications have been made to the December and September 1997
condensed, consolidated financial statements in order to conform to the 1998
presentation.
3. CAPITAL LEASE OBLIGATIONS
During the nine months ended September 30, 1998, HER entered into
additional contractual commitments to lease fiber pairs, including facilities
and maintenance and utilizing the partial routes for laying fiber optic cable.
Based on the contract provisions, these commitments are currently estimated to
aggregate approximately $83.5 million. The commitments have expected lease terms
of eight and one-half to twenty-five years with options for renewal rights of
one to eight additional years. Subsequent to September 30, 1998, HER entered
into an additional contractual commitment for $36.8 million, payable within
twelve months, to lease an indefeasable right of use to transatlantic capacity
for a term of twenty-five years.
4. ACQUISITION
On June 24, 1998, the Company completed the acquisition for ECU 90 million
(approximately $99.5 million) of a 75% interest in Ebone A/S ("Ebone"). The
Company funded the acquisition with proceeds of a short-term bank loan, which
has been repaid. Ebone is a Tier 1 Internet backbone provider that principally
serves as a carriers' carrier for European Internet service providers. As part
of the transaction, Ebone will purchase, under a transmission capacity
agreement, long-term capacity rights on the Company's network valued at ECU 90
million. In addition to the majority interest held by the Company, Ebone's new
ownership structure will continue to include many of Ebone's existing customers,
which own the balance of Ebone's shares through an association. The members of
the association were offered the right to buy shares of Ebone in the third
quarter of 1998; however, the Company's ownership interest in Ebone was not
reduced as a result of the acceptances of this offer.
The acquisition has been accounted for using the purchase method of
accounting. The excess purchase price over the fair value of assets acquired of
ECU 15.7 million (approximately $17.2 million) was allocated to goodwill and is
being amortized over 5 years. The results of Ebone have been included in the
accompanying consolidated financial statements from the date of the acquisition.
The following summarized unaudited pro forma financial information assumes
the acquisition had occurred on January 1 of each year:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1997 1998
----------- -----------
(IN THOUSANDS, EXCEPT LOSS
PER SHARE)
<S> <C> <C>
Revenues.................................................... $ 17,556 $ 53,316
Net loss.................................................... (17,199) (34,843)
Net loss per share.......................................... (0.30) (0.18)
</TABLE>
The pro forma results include amortization of the goodwill, elimination of
intercompany revenue and costs of revenues on transactions between the Company
and Ebone and the recording of the 25% minority interest. The pro forma data is
for informational purposes only and does not purport to be indicative of the
results that would have been obtained had this acquisition actually occurred at
the beginning of the periods presented, nor is it intended to be a projection of
the results which may be achieved in the future.
F-21
<PAGE> 134
HERMES EUROPE RAILTEL B.V.
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. FOREIGN CURRENCY TRANSACTIONS
On April 19, 1998, the Company entered into a foreign currency swap
transaction agreement (the "Swap") with Rabobank International ("Rabo") in order
to minimize the foreign currency exposure resulting from the issuance in August
1997 of $265 million aggregate principal amount 11.5% Senior Notes due 2007 (the
"Notes"). The Company has marked the Swap to its fair value as of September 30,
1998 and the resulting adverse change in the fair value of $20.4 million has
been recorded as a Noncurrent Liability on the balance sheet and recognized as a
foreign currency loss in the statement of operations. In addition, in July 1998,
the Company entered into several forward exchange contracts, with terms ranging
from thirty to ninety days, to limit the Company's exposure to foreign currency
transactions. The Company has marked the outstanding contracts to their fair
value as of September 30,1998 and the resulting adverse change in the fair value
of $2.1 million has been recorded as an Other Current Liability on the balance
sheet and recognized as a foreign currency loss in the statement of operations.
6. SUBSEQUENT EVENTS
On October 16, 1998, 6,248 shares of common stock were issued as a result
of certain employees exercising vested options under the Company's stock option
plan. On October 31, 1998, GTS Hermes, Inc. acquired AB Swed Carrier's ownership
interest of 6,551 common shares in the Company for approximately $5.8 million.
In connection with this purchase, GTS Hermes, Inc. paid approximately $5.3
million to a company, which is affiliated with a board member, for negotiating
with AB Swed Carrier and SNCB/NMBS on behalf of GTS Hermes, Inc., to purchase
their respective ownership interest in the Company. Further, on October 26,
1998, the name of GTS Hermes, Inc. was changed to GTS Carrier Services, Inc.
The ownership of the Company as a result of the subsequent events is as
follows:
<TABLE>
<CAPTION>
SHARES OWNERSHIP %
------- -----------
<S> <C> <C>
GTS Carrier Services, Inc. ................................. 176,858 89.9
NMBS........................................................ 13,610 6.9
Officers.................................................... 6,248 3.2
------- -----
196,716 100.0%
======= =====
</TABLE>
F-22
<PAGE> 135
HERMES EUROPE RAILTEL B.V.
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY
HERMES EUROPE RAILTEL B.V.
Terhulpsesteenweg 6A
1560 Hoeilaart, Belgium
OFFICE IN COUNTRY OF ORGANIZATION
HERMES EUROPE RAILTEL B.V.
Strawinskylaan 305
1077 XX Amsterdam
The Netherlands
INDEPENDENT AUDITORS
ERNST & YOUNG REVISEURS D'ENTREPRISES S.C.C.
Avenue Marcel Thirty 204
B-1200 Brussels, Belgium
LEGAL ADVISERS
SHEARMAN & STERLING
599 Lexington Avenue
New York, New York 10022-6069
As to Dutch Company Law Matters
LOEFF CLAEYS VERBEKE
Apollolaan 15
P.O. Box 75088
1070AB
Amsterdam, The Netherlands
EXCHANGE AND INFORMATION AGENT
THE BANK OF NEW YORK
101 Barclay Street
New York, New York 10286
LISTING AGENT, PAYING AND TRANSFER AGENT
BANQUE INTERNATIONALE A LUXEMBOURG S.A.
69 route d'Esch
L-1470 Luxembourg
<PAGE> 136
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HERMES EUROPE RAILTEL B.V.
OFFER TO EXCHANGE
10 3/8% SENIOR NOTES DUE 2009
FOR ALL OUTSTANDING
10 3/8% SENIOR NOTES DUE 2009
AND
10 3/8% SENIOR NOTES DUE 2006
FOR ALL OUTSTANDING
10 3/8% SENIOR NOTES DUE 2006
[HERMES EUROPE RAILTEL LOGO]
[HERMES EUROPE RAILTEL LOGO]
--------------------
PROSPECTUS
--------------------
UNTIL , ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 137
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Netherlands law does not prohibit indemnification of directors, employees
and agents of corporations. The Company is in the process of obtaining liability
insurance for its directors, employees and agents. Under Netherlands law, the
legal reasonableness and fairness test means that such indemnity cannot be
relied on where the individual has been grossly negligent, fraudulent or
dishonest.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S>
3.1* -- Deed of Incorporation and Articles of Association (as
amended) of the Company
4.1 -- Form of Outstanding Dollar Note for the Registrant's
10 3/8% Senior Notes due 2009 (contained in Dollar
Indenture filed as Exhibit 4.5)
4.2 -- Form of Outstanding Euro Note for the Registrant's
10 3/8% Senior Notes due 2006 (contained in Euro
Indenture filed as Exhibit 4.6)
4.3 -- Form of Dollar Exchange Note for the Registrant's 10 3/8%
Senior Notes due 2009 (contained in Dollar Indenture
filed as Exhibit 4.5)
4.4 -- Form of Euro Exchange Note for the Registrant's 10 3/8%
Senior Notes due 2006 (contained in Euro Indenture filed
as Exhibit 4.6)
4.5 -- Dollar Indenture, dated as of January 4, 1999, between
the Company and The Bank of New York of New York, as
Trustee
4.6 -- Euro Indenture dated as of January 4, 1999, between the
Company and The Bank of New York, as Trustee
4.7 -- Dollar Registration Rights Agreement, dated as of January
4, 1999, between the Company and Initial Purchasers
4.8 -- Euro Registration Rights Agreement dated as of January 4,
1999, between the Company and Initial Purchasers
5.1 -- Opinion of Shearman & Sterling regarding the legality of
the securities being registered
5.2 -- Opinion of Loeff Claeys Verbeke regarding the legality of
the securities being registered
8.1 -- Opinion of Shearman & Sterling regarding tax matters
10.1* -- Indenture, dated August 19, 1997, among Hermes Europe
Railtel B.V., as Issuer, Global TeleSystems Group, Inc.
and The Bank of New York, as Trustee.
10.2* -- Registration Rights Agreement, dated August 19, 1997,
between the Company and Donaldson, Lufkin & Jenrette
Securities Corporation, UBS Securities LLC and Lehman
Brothers Inc.
10.3* -- Escrow Agreement, dated August 19, 1997, among the
Company and The Bank of New York, as Trustee and as
Escrow Agent.
10.4* -- Shareholders Agreement among the Company, GTS-Hermes
Inc., HIT Rail B.V., SNCB/NMBS and AB Swed Carrier.
10.5* -- Employment Agreement between the Company and Peter
Magnus.
10.6* -- Employment Agreement, dated as of September 26, 1995,
between the Company and J.A. Shearing.
10.7* -- License, dated December 18, 1996, granted by the
Secretary of State for Trade and Industry relating to the
United Kingdom.
</TABLE>
II-1
<PAGE> 138
<TABLE>
<C> <S>
10.8* -- Registration, dated July 26, 1996, granted by IBPT
relating to Belgium.
10.9* -- Authorization Letter, dated August 1, 1996, granted by
Hoofdirectie Telecommunicate & Post relating to the
Netherlands.
10.10* -- License, dated May 28, 1997, granted by BMPT relating to
Germany.
10.11* -- Agreement, dated April 1, 1997, between Eastern Group
Telecoms Limited and the Company.
10.12* -- Agreement, dated January 16, 1997, between SNCB/NMBS and
the Company.
10.13* -- Agreement, dated February 3, 1997, between SANEF and the
Company.
10.14* -- License, dated October 22, 1997, granted by the Secretary
of State of Industry relating to France.
10.15+ -- Agreement, dated November 24, 1997, between COLT and the
Company.
10.16* -- Authorization Letter, dated March 16, 1998, granted by
the Deputy Director of Federal Communication Office
relating to Switzerland.
10.17+ -- Agreement, dated April 3, 1998, between AT&T Unisource
and the Company.
10.18+ -- Agreement, dated November 3, 1998, between Cable &
Wireless and the Company.
12.1 -- Statements re Computation of Deficiency of Earnings to
Fixed Charges
21.1 -- List of subsidiaries
23.1 -- Consent of Shearman & Sterling (included as part of
Exhibit 5.1)
23.2 -- Consent of Ernst & Young Reviseurs d'Entreprises S.C.C.,
Independent Auditors
23.3 -- Consent of Loeff Claeys Verbeke (included as part of
Exhibit 5.2)
24.1 -- Power of Attorney (included on the signature pages of
this Registration Statement)
25.1 -- Statement of Eligibility of The Bank of New York, Trustee
</TABLE>
- ---------------
* Previously filed.
+ Confidential material has been redacted and filed separately with the
Securities and Exchange Commission.
II-2
<PAGE> 139
The financial statements filed as part of this Registration Statement are
listed in the Index to Financial Statements on page F-1.
(2) Schedules
The financial statement schedules of the Company have been omitted because
the information required to be set forth therein is not applicable or is shown
in the Financial Statements or Notes thereto.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers for sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this section
do not apply if the registration statement is on Form S-3, Form S-8 or Form
F-3, and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with
or furnished to the Commission by the registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) If the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any
financial statement required by sec. 210.3-19 of this chapter at the start
of any delayed offering or throughout a continuous offering. Financial
statements and information otherwise required by Section 10(a)(3) of the
Act need not be furnished, provided that the registrant includes in the
prospectus, by means of a post-effective amendment, financial statements
required pursuant to this paragraph (a)(4) and other information necessary
to ensure that all other information in the prospectus is at least as
current as the date of those financial statements. Notwithstanding the
foregoing, with respect to registration statements on Form F-3, a
post-effective amendment need not be filed to include financial statements
and information required by Section 10(a)(3) of the Act or sec. 210.3-19 of
this chapter if such financial statements and information are contained in
periodic reports filed with or furnished to the
II-3
<PAGE> 140
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
Form F-3.
The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
The undersigned registrant hereby undertakes that every prospectus (i) that
is filed pursuant to paragraph (1) immediately preceding, or (ii) that purports
to meet the requirement of section 10(a)(3) of the Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned registrant hereby undertakes: (i) to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11, or 13 of this Form, 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 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 the registration statement through the date
of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
Insofar as indemnification arising under the Securities Act of 1933 may be
permitted to directors, officers, or persons controlling the registrant pursuant
to the foregoing provisions, the registrant has been informed 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 is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-4
<PAGE> 141
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing a Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Hoeilaart, Belgium, on the 15th day of January, 1999.
Hermes Europe Railtel B.V.
By: /s/ JAN LOEBER
----------------------------------
R. Jan Loeber
Managing Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the th day of January, 1999. Each person whose
signature appears below hereby authorizes Jan Loeber and Francois Note, and each
of them, with full power of substitution, to execute in the name and on behalf
of such person any amendment or any post-effective amendment to this
Registration Statement and to file the same, with any exhibits thereto and other
documents in connection therewith, making such changes in this Registration
Statement as the Registrant deems appropriate, and appoints each of Jan Loeber
and Francois Note, and each of them, with full power of substitution,
attorney-in-fact to sign any amendment and any post-effective amendment to this
Registration Statement and to file the same, with any exhibits thereto and other
documents in connection therewith.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ JAN LOEBER Managing Director (principal executive
- ----------------------------------------------------- officer)
Jan Loeber
/s/ FRANCOIS NOTE Corporate Financial Director -- Chief
- ----------------------------------------------------- Financial Officer (principal financial and
Francois Note accounting officer)
/s/ BERNARD J. MCFADDEN Supervisory Director
- -----------------------------------------------------
Bernard McFadden
/s/ BO C.O. HAMNELL Supervisory Director
- -----------------------------------------------------
Bo C.O. Hamnell
/s/ LARS STIG M. LARSSON Supervisory Director
- -----------------------------------------------------
Lars Stig M. Larsson
/s/ JOSEPH SURMONT Supervisory Director
- -----------------------------------------------------
Joseph Surmont
/s/ BRUNO d'AVANZO Supervisory Director
- -----------------------------------------------------
Bruno d'Avanzo
/s/ MIKEL WILLIAMS Supervisory Director
- -----------------------------------------------------
Mikel Williams
</TABLE>
II-5
<PAGE> 142
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
3.1* -- Deed of Incorporation and Articles of Association (as
amended) of the Company
4.1 -- Form of Outstanding Dollar Note for the Registrant's
10 3/8% Senior Notes due 2009 (contained in Dollar
Indenture filed as Exhibit 4.5)
4.2 -- Form of Outstanding Euro Note for the Registrant's
10 3/8% Senior Notes due 2006 (contained in Euro
Indenture filed as Exhibit 4.6)
4.3 -- Form of Dollar Exchange Note for the Registrant's 10 3/8%
Senior Notes due 2009 (contained in Dollar Indenture
filed as Exhibit 4.5)
4.4 -- Form of Euro Exchange Note for the Registrant's 10 3/8%
Senior Notes due 2006 (contained in Euro Indenture filed
as Exhibit 4.6)
4.5 -- Dollar Indenture, dated as of January 4, 1999, between
the Company and The Bank of New York of New York, as
Trustee
4.6 -- Euro Indenture dated as of January 4, 1999, between the
Company and The Bank of New York, as Trustee
4.7 -- Dollar Registration Rights Agreement, dated as of January
4, 1999, between the Company and Initial Purchasers
4.8 -- Euro Registration Rights Agreement dated as of January 4,
1999, between the Company and Initial Purchasers
5.1 -- Opinion of Shearman & Sterling regarding the legality of
the securities being registered
5.2 -- Opinion of Loeff Claeys Verbeke regarding the legality of
the securities being registered
8.1 -- Opinion of Shearman & Sterling regarding tax matters
10.1* -- Indenture, dated August 19, 1997, among Hermes Europe
Railtel B.V., as Issuer, Global TeleSystems Group, Inc.
and The Bank of New York, as Trustee.
10.2* -- Registration Rights Agreement, dated August 19, 1997,
between the Company and Donaldson, Lufkin & Jenrette
Securities Corporation, UBS Securities LLC and Lehman
Brothers Inc.
10.3* -- Escrow Agreement, dated August 19, 1997, among the
Company and The Bank of New York, as Trustee and as
Escrow Agent.
10.4* -- Shareholders Agreement among the Company, GTS-Hermes
Inc., HIT Rail B.V., SNCB/NMBS and AB Swed Carrier.
10.5* -- Employment Agreement between the Company and Peter
Magnus.
10.6* -- Employment Agreement, dated as of September 26, 1995,
between the Company and J.A. Shearing.
10.7* -- License, dated December 18, 1996, granted by the
Secretary of State for Trade and Industry relating to the
United Kingdom.
10.8* -- Registration, dated July 26, 1996, granted by IBPT
relating to Belgium.
10.9* -- Authorization Letter, dated August 1, 1996, granted by
Hoofdirectie Telecommunicate & Post relating to the
Netherlands.
10.10* -- License, dated May 28, 1997, granted by BMPT relating to
Germany.
10.11* -- Agreement, dated April 1, 1997, between Eastern Group
Telecoms Limited and the Company.
10.12* -- Agreement, dated January 16, 1997, between SNCB/NMBS and
the Company.
</TABLE>
<PAGE> 143
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.13* -- Agreement, dated February 3, 1997, between SANEF and the
Company.
10.14* -- License, dated October 22, 1997, granted by the Secretary
of State of Industry relating to France.
10.15+ -- Agreement, dated November 24, 1997, between COLT and the
Company.
10.16* -- Authorization Letter, dated March 16, 1998, granted by
the Deputy Director of Federal Communication Office
relating to Switzerland.
10.17+ -- Agreement, dated April 3, 1998, between AT&T Unisource
and the Company.
10.18+ -- Agreement, dated November 3, 1998, between Cable &
Wireless and the Company.
12.1 -- Statements re Computation of Deficiency of Earnings to
Fixed Charges
21.1 -- List of subsidiaries
23.1 -- Consent of Shearman & Sterling (included as part of
Exhibit 5.1)
23.2 -- Consent of Ernst & Young Reviseurs d'Entreprises S.C.C.,
Independent Auditors
23.3 -- Consent of Loeff Claeys Verbeke (included as part of
Exhibit 5.2)
24.1 -- Power of Attorney (included on the signature pages of
this Registration Statement)
25.1 -- Statement of Eligibility of The Bank of New York, Trustee
</TABLE>
- ---------------
* Previously filed.
+ Confidential material has been redacted and filed separately with the
Securities and Exchange Commission.
<PAGE> 1
EXHIBIT 4.5
INDENTURE
DATED AS OF JANUARY 4, 1999
BETWEEN
HERMES EUROPE RAILTEL B.V., AS ISSUER
AND
THE BANK OF NEW YORK, AS TRUSTEE
--------------------
$200,000,000
10 3/8% SENIOR NOTES DUE 2009
10 3/8% SENIOR NOTES DUE 2009, SERIES B
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TRUST INDENTURE INDENTURE
ACT SECTION SECTION
- ---------------- ---------
<S> <C>
Sections 310(a)(1) 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
(a)(5) 7.08, 7.10.
(b) 7.08; 7.10; 10.02
(c) N.A.
Sections 311(a) 7.11
(b) 7.11
(c) N.A.
Sections 312(a) 2.05
(b) 10.03
(c) 10.03
Sections 313(a) 7.06
(b)(1) 7.06
(b)(2) 7.06
(c) 7.06; 10.02
(d) 7.06
Sections 314(a) 4.07; 4.09; 10.02
(b) N.A.
(c)(1) 10.04
(c)(2) 10.04
(c)(3) N.A.
(d) N.A.
(e) 10.05
(f) N.A.
Sections 315(a) 7.01(b)
(b) 7.05; 10.02
(c) 7.01(a)
(d) 7.01(c)
(e) 6.11
Sections 316(a)(last sentence) 2.09
(a)(1)(A) 6.05
(a)(1)(B) 6.04
(a)(2) N.A.
(b) 6.07
(c) 9.04
Sections 317(a)(1) 6.08
(a)(2) 6.09
(b) 2.04
Sections 318(a) 10.01
</TABLE>
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions
SECTION 1.02. Incorporation by Reference of Trust Indenture Act
SECTION 1.03. Rules of Construction
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating
SECTION 2.02. Execution and Authentication
SECTION 2.03. Registrar and Paying Agent
SECTION 2.04. Paying Agent To Hold Assets in Trust
SECTION 2.05. Securityholder Lists
SECTION 2.06. Transfer and Exchange
SECTION 2.07. Replacement Securities
SECTION 2.08. Outstanding Securities
SECTION 2.09. Treasury Securities
SECTION 2.10. Temporary Securities
SECTION 2.11. Cancellation
SECTION 2.12. Defaulted Interest
SECTION 2.13. CUSIP Number
SECTION 2.14. Deposit of Moneys
SECTION 2.15. Book-Entry Provisions for Global Securities
SECTION 2.16. Registration of Transfers and Exchanges
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee
SECTION 3.02. Selection of Securities To Be Redeemed
SECTION 3.03. Notice of Redemption
SECTION 3.04. Effect of Notice of Redemption
SECTION 3.05. Deposit of Redemption Price
SECTION 3.06. Securities Redeemed in Part
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities
SECTION 4.02. Maintenance of Office or Agency
SECTION 4.03. Corporate Existence
SECTION 4.04. Payment of Taxes and Other Claims
SECTION 4.05. Notice of Defaults
SECTION 4.06. Maintenance of Properties and Insurance
SECTION 4.07. Compliance Certificate
SECTION 4.08. Waiver of Stay, Extension or Usury Laws
SECTION 4.09. Provision of Financial Information
SECTION 4.10. Change of Control
SECTION 4.11. Limitation on Restricted Payments
SECTION 4.12. Limitation on Incurrence of Indebtedness
SECTION 4.13. Limitations on Restrictions Affecting Restricted Subsidiaries
SECTION 4.14. Designation of Unrestricted Subsidiaries
SECTION 4.15. Limitation on Liens
SECTION 4.16. Limitation on Asset Sales
SECTION 4.17. Limitation on Transactions with Affiliates
SECTION 4.18. Limitation on Issuances of Guarantees by Restricted Subsidiaries
SECTION 4.19. Limitation on the Issuance and Sale of Capital Stock of Restricted
Subsidiaries
SECTION 4.20. Additional Amounts
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Sale of Assets, etc
SECTION 5.02. Successor Corporation Substituted
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default
SECTION 6.02. Acceleration
SECTION 6.03. Other Remedies
SECTION 6.04. Waiver of Past Default
SECTION 6.05. Control by Majority
SECTION 6.06. Limitation on Suits
SECTION 6.07. Rights of Holders To Receive Payment
SECTION 6.08. Collection Suit by Trustee
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
SECTION 6.09. Trustee May File Proofs of Claim
SECTION 6.10. Priorities
SECTION 6.11. Undertaking for Costs
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee
SECTION 7.02. Rights of Trustee
SECTION 7.03. Individual Rights of Trustee
SECTION 7.04. Trustee's Disclaimer
SECTION 7.05. Notice of Defaults
SECTION 7.06. Reports by Trustee to Holders
SECTION 7.07. Compensation and Indemnity
SECTION 7.08. Replacement of Trustee
SECTION 7.09. Successor Trustee by Merger, etc.
SECTION 7.10. Eligibility; Disqualification
SECTION 7.11. Preferential Collection of Claims Against Company
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations
SECTION 8.02. Application of Trust Money
SECTION 8.03. Repayment to Company
SECTION 8.04. Reinstatement
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders
SECTION 9.02. With Consent of Holders
SECTION 9.03. Compliance with Trust Indenture Act
SECTION 9.04. Revocation and Effect of Consents
SECTION 9.05. Notation on or Exchange of Securities
SECTION 9.06. Trustee To Sign Amendments, etc.
ARTICLE TEN
MISCELLANEOUS
SECTION 10.01. Trust Indenture Act Controls
SECTION 10.02. Notices
SECTION 10.03. Communications by Holders with Other Holders
SECTION 10.04. Certificate and Opinion as to Conditions Precedent
SECTION 10.05. Statements Required in Certificate or Opinion
SECTION 10.06. Rules by Trustee, Paying Agent, Registrar
SECTION 10.07. Governing Law
SECTION 10.08. No Recourse Against Others
SECTION 10.09. Successors
SECTION 10.10. Counterpart Originals
SECTION 10.11. Severability
SECTION 10.12. No Adverse Interpretation of Other Agreements
SECTION 10.13. Legal Holidays
SECTION 10.14. Agent for Service; Submission to Jurisdiction; Waiver of Immunities
SECTION 10.15. Judgment Currency
SIGNATURES S-1
EXHIBIT A Form of Series A Security A-1
EXHIBIT B Form of Series B Security B-1
EXHIBIT C Form of Legend for Global Securities C-1
EXHIBIT D Form of Transfer Certificate D-1
EXHIBIT E Form of Transfer Certificate for Institutional Accredited Investors E-1
EXHIBIT F Form of Transfer Certificate for Regulation S Transfers F-1
INDENTURE dated as of January 4, 1999, between HERMES EUROPE
RAILTEL B.V., a Netherlands limited company (the "Company")
and THE BANK OF NEW YORK, a New York banking corporation, as
Trustee. Each party hereto agrees as follows for the benefit
of each other party and for the equal and ratable benefit of
the Holders of the Securities:
</TABLE>
<PAGE> 4
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions.
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed in
connection with an Acquisition from such Person or (b) existing at the time
such Person becomes a Restricted Subsidiary or is merged or consolidated
with or into the Company or any Restricted Subsidiary; provided, however,
that such Indebtedness was not Incurred in connection with, or in
contemplation of, such Acquisition, such Person becoming a Restricted
Subsidiary or such merger or consolidation.
"Acquired Person" means, with respect to any specified Person, any other
Person which merges with or into or becomes a Subsidiary of such specified
Person.
"Acquisition" means (i) any 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) by the Company or any
Restricted Subsidiary to any other Person, or any acquisition or purchase
of Equity Interests of any other Person by the Company or any Restricted
Subsidiary, in either case pursuant to which such Person shall become a
Restricted Subsidiary or shall be consolidated, merged with or into the
Company or any Restricted Subsidiary or (ii) any acquisition by the Company
or any Restricted Subsidiary of the assets of any Person which constitute
substantially all of an operating unit or line of business of such Person
or which is otherwise outside of the ordinary course of business.
"Additional Interest" has the meaning provided in Section 4(a) of the
Registration Rights Agreement.
"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. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to
any person, shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of such
person, whether through the ownership of voting securities, by agreement or
otherwise.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease
(that has the effect of a disposition) or other disposition (including,
without limitation, any merger, consolidation or sale-leaseback
transaction) to any Person other than the Company or a Restricted
Subsidiary, in one transaction or a series of related transactions, of (i)
any Equity Interest of any Restricted Subsidiary; (ii) any material
license, franchise or other authorization of the Company or any Restricted
Subsidiary; (iii) any assets of the Company or any Restricted Subsidiary
which constitute substantially all of an operating unit or line of business
of the Company or any Restricted Subsidiary; or (iv) any other property or
asset of the Company or any Restricted Subsidiary outside of the ordinary
course of business (including the receipt of proceeds paid on account of
the loss of or damage to any property or asset and awards of compensation
for any asset taken by condemnation, eminent domain or similar
proceedings). For the purposes of this definition, the term "Asset Sale"
shall not include (a) any transaction consummated in compliance with
Section 5.01 and the creation of any Lien not prohibited by Section 4.15;
provided, however, that any transaction consummated in compliance with
Section 5.01 involving a sale, conveyance, assignment, transfer, lease or
other disposal of less than all of the properties or assets of the Company
and the Restricted Subsidiaries shall be deemed to be an Asset Sale with
respect to the properties or assets of the Company and Restricted
Subsidiaries that are not so sold, conveyed, assigned, transferred, leased
or otherwise disposed of in such transaction; (b) sales of property or
equipment that has become worn out, obsolete or damaged or otherwise
unsuitable for use in connection with the business of the Company or any
Restricted Subsidiary, as the case may be; and (c) any transaction
consummated in compliance with Section 4.11. In addition, solely for
purposes of Section 4.16, any sale, conveyance, transfer, lease or other
disposition of any property or asset, whether in one transaction or a
series of related transactions, involving assets with a Fair Market Value
not in excess of $1.0 million in any fiscal year shall be deemed not to be
an Asset Sale.
"Bankruptcy Law" see Section 6.01.
"Basket" see Section 4.11.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person (or comparable governing body), or any authorized
committee of that Board (it being understood that the Board of Directors of
the Company shall be its Board of Supervisory Directors).
"Board Resolution" means, with respect to any Person, a duly adopted
resolution of the Board of Directors of such Person.
"Business Day" means a day (other than a Saturday or Sunday) on which the
Depository and banks in the place of payment are open for business.
<PAGE> 5
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be so required to be capitalized on the balance sheet in
accordance with GAAP.
"Cash Equivalents" means: (a) U.S. dollars; (b) securities issued or
directly and fully guaranteed or insured by the U.S. government or any
agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition; (c) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the
date of acquisition, bankers' acceptances with maturities not exceeding six
months and overnight bank deposits, in each case with any commercial bank
having capital and surplus in excess of $500 million; (d) repurchase
obligations with a term of not more than seven days for underlying
securities of the types described in clauses (b) and (c) entered into with
any financial institution meeting the qualifications specified in clause
(c) above; and (e) commercial paper rated P-1, A-1 or the equivalent
thereof by Moody's Investors Service, Inc. or Standard & Poor's Ratings
Group, respectively, and in each case maturing within six months after the
date of acquisition.
"Change of Control" shall mean the occurrence of any of the following
events (whether or not approved by the Board of Directors of the Company):
(a) any Person or group, excluding Permitted Holders, is or becomes the
beneficial owner, directly or indirectly, of Voting Equity Interests
representing 35% or more of the total voting power of the Voting Equity
Interests of the Company at a time when the Permitted Holders together (x)
own Voting Equity Interests representing a lesser percentage of the total
voting power of the Voting Equity Interests of the Company, than such
Person or group (for purposes of determining the percentage of the Voting
Equity Interests of such Person or group, the holdings of the Permitted
Holders who are part of such Person or group shall not be counted in the
Voting Equity Interests of such Person or group) or (y) do not hold the
power to elect a majority of the members of the Board of Directors of the
Company; (b) any Person or group is or becomes the beneficial owner
directly or indirectly, of Voting Equity Interests representing 50% or more
of the total voting power of the Voting Equity Interests of GTS or has the
power, directly or indirectly, to elect a majority of the members of the
Board of Directors of GTS; (c) the Company consolidates with, or merges
with or into, another Person or the Company or one or more Restricted
Subsidiaries sell, assign, convey, transfer, lease or otherwise dispose of
all or substantially all of the assets of the Company and the Restricted
Subsidiaries, taken as a whole, to any Person (other than a Wholly Owned
Restricted Subsidiary), or any Person consolidates with, or merges with or
into, the Company, in any such event other than pursuant to a transaction
in which the Person or Persons that "beneficially owned," directly or
indirectly, Voting Equity Interests representing a majority of the total
voting power of the Voting Equity Interests of the Company immediately
prior to such transaction, "beneficially own," directly or indirectly,
Voting Equity Interests representing a majority of the total voting power
of the Voting Equity Interests of the surviving or transferee Person; (d)
GTS consolidates with, or merges with or into, another Person or GTS or one
or more of its Subsidiaries sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of the assets of GTS and its
Subsidiaries, taken as a whole, to any Person (other than a wholly owned
Subsidiary of GTS), or any Person consolidates with, or merges with or
into, GTS, in any such event other than pursuant to a transaction in which
the Person or Persons that "beneficially owned," directly or indirectly,
Voting Equity Interests representing a majority of the total voting power
of the Voting Equity Interests of GTS immediately prior to such
transaction, "beneficially own," directly or indirectly Voting Equity
Interests representing a majority of the total voting power of the Voting
Equity Interests of the surviving or transferee Person; (e) during any
consecutive two-year period, individuals who at the beginning of such
period constituted the Board of Directors of the Company (together with any
new directors whose election by the Board of Directors of the Company or
whose nomination for election by the stockholders of the Company was
approved by a vote of a majority 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) cease for any reason
(other than by action of the Permitted Holders) to constitute a majority of
the Board of Directors of the Company, then in office; (f) during any
consecutive two year period, individuals who at the beginning of such
period constituted the Board of Directors of GTS (together with any new
directors whose election by the Board of Directors of GTS or whose
nomination for election by the stockholders of GTS was approved by a vote
of a majority 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) cease for any reason to constitute
a
<PAGE> 6
majority of the Board of Directors of GTS then in office; or (g) there
shall occur the liquidation or dissolution of the Company or GTS. For
purposes of this definition, (I) "group" has the meaning under Section
13(d) and 14(d) of the Exchange Act or any successor provision to either of
the foregoing, including any group acting for the purpose of acquiring,
holding or disposing of securities within the meaning of Rule 13d-5(b)(1)
under the Exchange Act, and (II) "beneficial ownership" has the meaning set
forth in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person
shall be deemed to have "beneficial ownership" of all securities that such
Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time, upon the happening of an
event or otherwise.
"Change of Control Date" see Section 4.10.
"Company" means the Person named as the "Company" in the first paragraph of
this Indenture until a successor shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Company" shall
mean such successor.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by two Officers or by an Officer and an
Assistant Treasurer or an Assistant Secretary, and delivered to the
Trustee.
"Consolidated Income Tax Expense" means, with respect to any period, the
provision for federal, state, local and foreign income taxes payable by the
Company and the Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any period, without
duplication, the sum of (i) the interest expense of the Company and the
Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP, including, without limitation, (a) any
amortization of debt discount, (b) the net cost under Interest Rate
Protection Obligations (including any amortization of discounts), (c) the
interest portion of any deferred payment obligation, (d) all commissions,
discounts and other fees and charges owed with respect to letters of credit
and bankers' acceptance financing and (e) all capitalized interest and all
accrued interest, (ii) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by the
Company and the Restricted Subsidiaries during such period as determined on
a consolidated basis in accordance with GAAP and (iii) dividends and
distributions in respect of Disqualified Equity Interests actually paid in
cash by the Company or any Restricted Subsidiary (other than to the Company
or another Restricted Subsidiary) during such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any period, the net income
of the Company and the Restricted Subsidiaries for such period determined
on a consolidated basis in accordance with GAAP, adjusted, to the extent
included in calculating such net income, by excluding, without duplication,
(a) other than for purposes of calculating the Basket, all extraordinary
gains or losses for such period, (b) other than for purposes of calculating
the Basket, all gains or losses from the sales or other dispositions of
assets out of the ordinary course of business (net of taxes, fees and
expenses relating to the transaction giving rise thereto) for such period;
(c) that portion of such net income derived from or in respect of
investments in Persons other than Restricted Subsidiaries, except to the
extent actually received in cash by the Company or any Restricted
Subsidiary (subject, in the case of any Restricted Subsidiary, to the
provisions of clause (f) of this definition); (d) the portion of such net
income (or loss) allocable to minority interests in any Person (other than
a Restricted Subsidiary) for such period, except to the extent the
Company's allocable portion of such Person's net income for such period is
actually received in cash by the Company or any Restricted Subsidiary
(subject, in the case of any Restricted Subsidiary, to the provisions of
clause (f) of this definition); (e) the net income (or loss) of any other
Person combined with the Company or any Restricted Subsidiary on a "pooling
of interests" basis attributable to any period prior to the date of
combination; and (f) the net income of any Restricted Subsidiary to the
extent that the declaration of dividends or similar distributions by that
Restricted Subsidiary of that income is not at the time (regardless of any
waiver) permitted, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulations applicable to that Restricted Subsidiary
or its Equity Interest holders.
"Consolidated Operating Cash Flow" means, with respect to any period,
Consolidated Net Income for such period increased (without duplication), to
the extent deducted in calculating such Consolidated Net Income, by (a)
Consolidated Income Tax Expense for such period; (b) Consolidated Interest
Expense for such period; and (c) depreciation, amortization and any other
non-cash items for such period (other than any non-cash
<PAGE> 7
item which requires the accrual of, or a reserve for, cash charges for any
future period) of the Company and the Restricted Subsidiaries, including,
without limitation, amortization of capitalized debt issuance costs for
such period, all of the foregoing determined on a consolidated basis in
accordance with GAAP minus non-cash items to the extent they increase
Consolidated Net Income (including the partial or entire reversal of
reserves taken in prior periods) for such period.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 10.02 or such other address as the Trustee may
give notice to the Company.
"CT Corporation System" see Section 10.14.
"Cumulative Operating Cash Flow" means, as at any date of determination,
the positive cumulative Consolidated Operating Cash Flow realized during
the period commencing on the Issue Date and ending on the last day of the
most recent fiscal quarter immediately preceding the date of determination
for which consolidated financial information of the Company is available
or, if such cumulative Consolidated Operating Cash Flow for such period is
negative, the negative amount by which cumulative Consolidated Operating
Cash Flow is less than zero.
"Currency Agreement" shall mean any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement, which may include
the use of derivatives, designed to protect the Company or any Restricted
Subsidiary against fluctuations in currency values.
"Custodian" see Section 6.01.
"Debt to Annualized Operating Cash Flow Ratio" means the ratio of (a) the
Total Consolidated Indebtedness as of the date of calculation (the
"Determination Date") to (b) two times the Consolidated Operating Cash Flow
for the latest two fiscal quarters for which financial information is
available immediately preceding such Determination Date (the "Measurement
Period"). For purposes of calculating Consolidated Operating Cash Flow for
the Measurement Period immediately prior to the relevant Determination
Date, (I) any Person that is a Restricted Subsidiary on the Determination
Date (or would become a Restricted Subsidiary on such Determination Date in
connection with the transaction that requires the determination of such
Consolidated Operating Cash Flow) will be deemed to have been a Restricted
Subsidiary at all times during such Measurement Period, (II) any Person
that is not a Restricted Subsidiary on such Determination Date (or would
cease to be a Restricted Subsidiary on such Determination Date in
connection with the transaction that requires the determination of such
Consolidated Operating Cash Flow) will be deemed not to have been a
Restricted Subsidiary at any time during such Measurement Period, and (III)
if the Company or any Restricted Subsidiary shall have in any manner (x)
acquired (through an Acquisition or the commencement of activities
constituting such operating business) or (y) disposed of (by way of an
Asset Sale or the termination or discontinuance of activities constituting
such operating business) any operating business during such Measurement
Period or after the end of such period and on or prior to such
Determination Date, such calculation will be made on a pro forma basis in
accordance with GAAP as if, in the case of an Acquisition or the
commencement of activities constituting such operating business, all such
transactions had been consummated on the first day of such Measurement
Period and, in the case of an Asset Sale or termination or discontinuance
of activities constituting such operating business, all such transactions
had been consummated prior to the first day of such Measurement Period (it
being understood that in calculating Consolidated Operating Cash Flow the
exclusions set forth in clauses (a) through (f) of the definition of
Consolidated Net Income shall apply to an Acquired Person as if it were a
Restricted Subsidiary).
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Depository" means, with respect to the Securities issued in the form of
one or more Global Securities, The Depository Trust Company or another
Person designated as Depository by the Company, which must be a clearing
agency registered under the Exchange Act.
"Designation" see Section 4.14.
"Designation Amount" see Section 4.14.
"Determination Date" has the meaning set forth in the definition of "Debt
to Annualized Operating Cash Flow Ratio" above.
"Disinterested Director" means a member of the Board of Directors of the
Company who does not have any material direct or indirect financial
interest in or with respect to the transaction being considered.
"Disposition" means, with respect to any Person, any merger, consolidation
or other business combination involving such Person (whether or not such
Person is the
<PAGE> 8
Surviving Person) or the sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of such Person's assets.
"Disqualified Equity Interest" means any Equity Interest which, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable, at the option of the
holder thereof, in whole or in part, on or prior to the Maturity Date;
provided, however, that any Equity Interests that would not constitute
Disqualified Equity Interests but for provisions thereof giving holders
thereof the right to require the Company to repurchase or redeem such
Equity Interests upon the occurrence of a change in control occurring prior
to the Maturity Date shall not constitute Disqualified Equity Interests if
the change in control provisions applicable to such Equity Interests are no
more favorable to the holders of such Equity Interests than the provisions
under Section 4.10 and such Equity Interests specifically provide that the
Company will not repurchase or redeem any such Equity Interests pursuant to
such provisions prior to the Company's repurchase of Securities as are
required to be repurchased pursuant to the provisions under Section 4.10.
"Dollar Equivalent" shall mean, with respect to a 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 other
currency involved in such computation into U.S. dollars at the rate for the
purchase of U.S. dollars with the applicable currency as set forth in the
Key Currency Cross Rates table of The Wall Street Journal (or a successor
table) on the date that is two Business Days prior to such determination.
"Equity Interest" in any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or
limited, in such Person, including any Preferred Equity Interests.
"Euro Notes" means (1) Euro 85,000,000 aggregate principal amount of 10
3/8% Senior Notes due 2006 of the Company and (2) the 10 3/8% Senior Notes
due 2006, Series B, of the Company issued in exchange for the securities
referred to in clause (1).
"Event of Default" see Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC thereunder.
"Expiration Date" has the meaning set forth in the definition of "Offer to
Purchase" below.
"Fair Market Value" means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) which could be
negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing and able buyer, neither of which is under any
compulsion to complete the transaction; provided, however, that the Fair
Market Value of any such asset or assets shall be determined conclusively
by the Board of Directors of the Company acting in good faith, which
determination shall be evidenced by a resolution of such Board delivered to
the Trustee.
"GAAP" means, at any date of determination, generally accepted accounting
principles in effect in the United States which are applicable at the date
of determination and which are consistently applied for all applicable
periods.
"Global Security" means a security evidencing all or a portion of the
Securities issued to the Depository or its nominee in accordance with
Section 2.01 and bearing the legend set forth in Exhibit C hereto.
"GTS" means Global TeleSystems Group, Inc., a Delaware corporation, and its
successors.
"guarantee" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner, of any
part or all of such obligation and (ii) an agreement, direct or indirect,
contingent or otherwise, the practical effect of which is to assure in any
way the payment or performance (or payment of damages in the event of
non-performance) of all or any part of such obligation, including, without
limiting the foregoing, the payment of amounts drawn down by letters of
credit. A guarantee shall include, without limitation, any agreement to
maintain or preserve any other person's financial condition or to cause any
other Person to achieve certain levels of operating results.
"Holder," "holder of Securities," "Securityholders" or other similar terms
mean the registered holder of any Security.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume,
<PAGE> 9
guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or
otherwise, of any such Indebtedness or other obligation on the balance
sheet of such Person (and "Incurrence," "Incurred" and "Incurring" shall
have meanings correlative to the foregoing). Indebtedness of a Person
existing at the time such Person becomes a Restricted Subsidiary or is
merged or consolidated with or into the Company or any Restricted
Subsidiary shall be deemed to be Incurred at such time.
"Indebtedness" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and
whether or not contingent, (a) every obligation of such Person for money
borrowed; (b) every obligation of such Person evidenced by bonds,
debentures, notes or other similar instruments, including obligations
incurred in connection with the acquisition of property, assets or
businesses; (c) every reimbursement obligation of such Person with respect
to letters of credit, bankers' acceptances or similar facilities issued for
the account of such Person; (d) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but
excluding trade accounts payable incurred in the ordinary course of
business and payable in accordance with industry practices, or other
accrued liabilities arising in the ordinary course of business which are
not overdue or which are being contested in good faith); (e) every Capital
Lease Obligation of such Person; (f) every net obligation under interest
rate swap or similar agreements or foreign currency hedge, exchange or
similar agreements of such Person; (g) every obligation of the type
referred to in clauses (a) through (f) of another Person and all dividends
of another Person the payment of which, in either case, such Person has
guaranteed or is responsible or liable for, directly or indirectly, as
obligor, guarantor or otherwise; and (h) any and all Refinancings of, or
amendments, modifications or supplements to, any liability of the kind
described in any of the preceding clauses (a) through (g) above.
Indebtedness (i) shall never be calculated taking into account any cash and
cash equivalents held by such Person; (ii) shall not include obligations of
any Person (x) arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently drawn
against insufficient funds in the ordinary course of business, provided
that such obligations are extinguished within two Business Days of their
incurrence unless covered by an overdraft line, (y) resulting from the
endorsement of negotiable instruments for collection in the ordinary course
of business and consistent with past business practices and (z) under
stand-by letters of credit to the extent collateralized by cash or Cash
Equivalents; (iii) which provides that an amount less than the principal
amount thereof shall be due upon any declaration of acceleration thereof
shall be deemed to be Incurred or outstanding in an amount equal to the
accreted value thereof at the date of determination determined in
accordance with GAAP; and (iv) shall include the liquidation preference and
any mandatory redemption payment obligations in respect of any Disqualified
Equity Interests of the Company or any Preferred Equity Interests of any
Restricted Subsidiary.
"Indenture" means this Indenture as amended or supplemented from time to
time.
"Independent Financial Advisor" means a recognized, accounting, appraisal,
investment banking firm or consultant with experience in a
Telecommunications Business (i) which does not, and whose directors,
officers and employees or Affiliates do not, have a material direct or
indirect financial interest in the Company and (ii) which, in the judgment
of the Board of Directors of the Company, is otherwise independent and
qualified to perform the task for which it is to be engaged.
"Initial Purchasers" means Donaldson, Lufkin & Jenrette Securities
Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bear,
Stearns & Co. Inc., BT Alex. Brown Incorporated and Lehman Brothers Inc.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act.
"interest" means, with respect to the Securities, the sum of any cash
interest and any Additional Interest on the Securities.
"Interest Payment Date" means each semiannual interest payment date on
January 15 and July 15 of each year, commencing July 15, 1999.
"Interest Rate Protection Obligations" means, with respect to any Person,
the Obligations of such Person under (i) interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements, and (ii)
other agreements or arrangements designed to protect such Person against
fluctuations in interest rates.
"Interest Record Date" for the interest payable on any Interest Payment
Date (except a date for payment of defaulted interest) means the January 1
or July 1 (whether or not a Business Day), as the case may be, immediately
preceding such Interest Payment Date.
<PAGE> 10
"Investment" means, with respect to any Person, any direct or indirect
loan, advance, guarantee or other extension of credit or capital
contribution to (by means of transfers of cash or other property or assets
to others or payments for property or services for the account or use of
others, or otherwise), or purchase or acquisition of capital stock, bonds,
notes, debentures or other securities or evidences of Indebtedness issued
by, any other Person. The amount of any Investment shall be the original
cost of such Investment, plus the cost of all additions thereto, and minus
the amount of any portion of such Investment repaid to such Person in cash
as a repayment of principal or a return of capital, as the case may be, but
without any other adjustments for increases or decreases in value, or
write-ups, write-downs or write-offs with respect to such Investment. In
determining the amount of any investment involving a transfer of any
property or asset other than cash, such property shall be valued at its
Fair Market Value at the time of such transfer. "Investments" shall exclude
extensions of trade credit in the ordinary course of business in accordance
with normal trade practices.
"Issue Date" means the original issue date of the Securities.
"Judgment Currency" see Section 10.15.
"Latest Balance Sheet" means, of any Person, the latest consolidated
balance sheet of such Person reported on by a recognized firm of
independent accountants without qualification as to scope; provided,
however, that such balance sheet is as of a date within the past 135 days.
"Lien" means any lien, mortgage, charge, security interest, hypothecation,
assignment for security or encumbrance of any kind (including any
conditional sale or capital lease or other title retention agreement, any
lease in the nature thereof, and any agreement to give any security
interest).
"Maturity Date" means the date, which is set forth on the face of the
Securities, on which the Securities will mature.
"Measurement Period" has the meaning set forth in the definition of "Debt
to Annualized Operating Cash Flow Ratio" above.
"Monetization Sale" see Section 4.16.
"Net Cash Proceeds" means the aggregate proceeds in the form of cash or
Cash Equivalents received by the Company or any Restricted Subsidiary in
respect of any Asset Sale, including all cash or Cash Equivalents received
upon any sale, liquidation or other exchange of proceeds of Asset Sales
received in a form other than cash or Cash Equivalents, net of (a) the
direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and
any relocation expenses incurred as a result thereof; (b) taxes paid or
payable as a result thereof (after taking into account any available tax
credits or deductions and any tax sharing arrangements); (c) amounts
required to be applied to the repayment of Indebtedness secured by a Lien
on the asset or assets that were the subject of such Asset Sale; (d)
amounts deemed, in good faith, appropriate by the Board of Directors of the
Company to be provided as a reserve, in accordance with GAAP, against any
liabilities associated with such assets which are the subject of such Asset
Sale (provided that the amount of any such reserves shall be deemed to
constitute Net Cash Proceeds at the time such reserves shall have been
released or are not otherwise required to be retained as a reserve); and
(e) with respect to Asset Sales by Subsidiaries, the portion of such cash
payments attributable to Persons holding a minority interest in such
Subsidiary.
"Note Amount" see Section 4.16.
"Note Portion of Excess Proceeds" see Section 4.16.
"Obligations" means any principal, interest (including, without limitation,
post-petition interest), penalties, fees, indemnifications, reimbursement
obligations, damages and other liabilities payable under the documentation
governing any Indebtedness.
"Offer" has the meaning set forth in the definition of "Offer to Purchase"
below.
"Offer to Purchase" means a written offer (the "Offer") sent by or on
behalf of the Company by first-class mail, postage prepaid, to each holder
at his address appearing in the register for the Securities on the date of
the Offer offering to purchase up to the principal amount of Securities
specified in such Offer at the purchase price specified in such Offer (as
determined pursuant to this Indenture). Unless otherwise required by
applicable law, the Offer shall specify an expiration date (the "Expiration
Date") of the Offer to Purchase, which shall be not less than 20 Business
Days nor more than 90 days after the date of such Offer, and a settlement
date (the "Purchase Date") for purchase of Securities to occur no later
than five Business Days after the Expiration Date. The Company shall notify
the Trustee at least 15 Business Days (or such shorter period as is
acceptable to the Trustee) prior to the mailing of the Offer of the
Company's obligation to make an Offer to Purchase, and the Offer shall be
mailed by the Company or, at the
<PAGE> 11
Company's request, by the Trustee in the name and at the expense of the
Company. The Offer shall contain all the information required by applicable
law to be included therein. The Offer shall contain all instructions and
materials necessary to enable such Holders to tender Securities pursuant to
the Offer to Purchase. The Offer shall also state:
(1) the Section of this Indenture pursuant to which the Offer to
Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the outstanding Securities
offered to be purchased by the Company pursuant to the Offer to
Purchase (including, if less than 100%, the manner by which such amount
has been determined pursuant to the Section of this Indenture requiring
the Offer to Purchase) (the "Purchase Amount");
(4) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Securities accepted for payment (as
specified pursuant to this Indenture) (the "Purchase Price");
(5) that the holder may tender all or any portion of the Securities
registered in the name of such holder and that any portion of a
Security tendered must be tendered in an integral multiple of $1,000
aggregate principal amount;
(6) the place or places where Securities are to be surrendered for
tender pursuant to the Offer to Purchase;
(7) that interest on any Security not tendered or tendered but not
purchased by the Company pursuant to the Offer to Purchase will
continue to accrue;
(8) that on the Purchase Date the Purchase Price will become due and
payable upon each Security being accepted for payment pursuant to the
Offer to Purchase and that interest thereon shall cease to accrue on
and after the Purchase Date;
(9) that each holder electing to tender all or any portion of a
Security pursuant to the Offer to Purchase will be required to
surrender such Security at the place or places specified in the Offer
prior to the close of business on the Expiration Date (such Security
being, if the Company or the Trustee so requires, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the holder thereof or his
attorney duly authorized in writing);
(10) that holders will be entitled to withdraw all or any portion of
Securities tendered if the Company (or its Paying Agent) receives, not
later than the close of business on the fifth Business Day next
preceding the Expiration Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the holder, the
principal amount of the Security the holder tendered, the certificate
number of the Security the holder tendered and a statement that such
holder is withdrawing all or a portion of his tender;
(11) that (a) if Securities in an aggregate principal amount less than
or equal to the Purchase Amount are duly tendered and not withdrawn
pursuant to the Offer to Purchase, the Company shall purchase all such
Securities and (b) if Securities in an aggregate principal amount in
excess of the Purchase Amount are tendered and not withdrawn pursuant
to the Offer to Purchase, the Company shall purchase Securities having
an aggregate principal amount equal to the Purchase Amount on a pro
rata basis (with such adjustments as may be deemed appropriate so that
only Securities in denominations of $1,000 aggregate principal amount
or integral multiples thereof shall be purchased); and
(12) that in the case of any holder whose Security is purchased only in
part, the Company shall execute and the Trustee shall authenticate and
deliver to the holder of such Security without service charge, a new
Security or Securities, of any authorized denomination as requested by
such holder, in an aggregate principal amount equal to and in exchange
for the unpurchased portion of the Security so tendered.
An Offer to Purchase shall be governed by and effected in accordance with
the provisions above pertaining to any Offer.
"Officer" means the Chairman, any Vice Chairman, the President, any Vice
President, the Chief Financial Officer, the Treasurer, or the Secretary of
the Company.
"Officer's Certificate" means a certificate signed by an Officer of the
Company complying with Sections 10.04 and 10.05.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company.
"Other Debt" see Section 4.16.
"Participant" see Section 2.15.
"Paying Agent" see Section 2.03.
"Permitted Holders" means GTS or any of its Affiliates.
"Permitted Investments" means (a) Cash Equivalents; (b) Investments in
prepaid expenses, negotiable instruments held for collection and lease,
utility and workers'
<PAGE> 12
compensation, performance and other similar deposits; (c) loans and
advances to employees made in the ordinary course of business not to exceed
$3,000,000 in the aggregate at any one time outstanding; (d) Interest Rate
Protection Obligations and Currency Agreements permitted under Section
4.12; (e) bonds, notes, debentures or other securities received as a result
of Asset Sales permitted under Section 4.16; (f) transactions with
officers, directors and employees of the Company or any Restricted
Subsidiary entered into in the ordinary course of business (including
compensation or employee benefit arrangements with any such director or
employee) and consistent with past business practices; (g) Investments made
in the ordinary course of business and on ordinary business terms as
partial payment for constructing a network relating principally to a
Telecommunications Business; (h) Investments in any Restricted Subsidiary;
(i) intercompany Indebtedness to the extent permitted under Section
4.12(b)(v); (i) Investments by the Company or any Restricted Subsidiary in
another Person, if as a result of such Investment (x) such other Person
becomes a Restricted Subsidiary or (y) such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially all
of its assets to, the Company or a Restricted Subsidiary; and (j)
Investments in evidences of Indebtedness, securities or other property
received from another Person by the Company or any Restricted Subsidiary in
connection with any bankruptcy proceeding or by reason of a composition or
readjustment of debt or a reorganization of such Person or as a result of
foreclosure, perfection or enforcement of any Lien in exchange for
evidences of Indebtedness, securities or other property of such Person held
by the Company or any Restricted Subsidiary, or for other liabilities or
obligations of such other Person to the Company or any Restricted
Subsidiary that were created in accordance with the terms of this
Indenture.
"Permitted Liens" means (a) Liens on property of a Person existing at the
time such Person is merged into or consolidated with the Company or any
Restricted Subsidiary; provided, however, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not
secure any property or assets of the Company or any Restricted Subsidiary
other than the property or assets subject to the Liens prior to such merger
or consolidation; (b) Liens existing on the Issue Date; (c) Liens securing
Indebtedness consisting of Capitalized Lease Obligations, mortgage
financings, industrial revenue bonds or other monetary obligations, in each
case incurred solely for the purpose of financing all or any part of the
purchase price or cost of construction or installation of assets used in
the business of the Company or any Restricted Subsidiary, or repairs,
additions or improvements to such assets; provided, however, that (I) such
Liens secure Indebtedness in an amount not in excess of the original
purchase price or the original cost of any such assets or repair, addition
or improvement thereto (plus an amount equal to the reasonable fees and
expenses in connection with the Incurrence of such Indebtedness), (II) such
Liens do not extend to any other assets of the Company or any Restricted
Subsidiary (and, in the case of repair, addition or improvements to any
such assets, such Lien extends only to the assets (and improvements thereto
or thereon) repaired, added to or improved), (III) the Incurrence of such
Indebtedness is permitted by Section 4.12 and (IV) such Liens attach within
90 days of such purchase, construction, installation, repair, addition or
improvement; (d) Liens to secure any Refinancings, in whole or in part, of
any Indebtedness secured by Liens referred to in the clauses above so long
as such Lien does not extend to any other property (other than improvements
thereto); (e) Liens securing letters of credit entered into in the ordinary
course of business and consistent with past business practice; (f) Liens on
and pledges of the capital stock of any Unrestricted Subsidiary securing
any Indebtedness of such Unrestricted Subsidiary; (g) Liens on any property
or assets of a Restricted Subsidiary granted in favor of and held by the
Company or any Restricted Subsidiary; (h) Liens on any property or assets
of the Company or any Restricted Subsidiary securing on a pari passu basis
all of the Securities and the Euro Notes; (i) statutory Liens of landlords
and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or
other like Liens arising in the ordinary course of business of the Company
or any Restricted Subsidiary and with respect to amounts not yet delinquent
or being contested in good faith by appropriate proceedings; (j) Liens for
taxes, assessments, government charges or claims that are being contested
in good faith by appropriate proceedings promptly instituted and diligently
conducted; provided that any reserve or other appropriate provision as
shall be required in conformity with GAAP shall have been made therefor;
(k) Liens incurred or deposits made to secure the performance of tenders,
bids, leases, statutory obligations, surety and appeal bonds, government
contracts, performance bonds and other obligations of a like nature
incurred in the ordinary course of business (other than contracts for the
payment of money); (l) easements, rights-of-way,
<PAGE> 13
restrictions and other similar charges or encumbrances not interfering in
any material respect with the business of the Company or any Restricted
Subsidiary incurred in the ordinary course of business; (m) Liens arising
by reason of judgment, decree or order of any court so long as such Lien is
adequately bonded and any appropriate legal proceedings that may have been
duly initiated for the review of such judgment, decree or order shall not
have been finally terminated or the period within which such proceedings
may be initiated shall not have expired; (n) Liens securing Qualified
Subsidiary Indebtedness to the extent permitted to be Incurred under
Section 4.12; (o) Liens securing Indebtedness under Interest Rate
Protection Obligations or Indebtedness under Currency Agreements to the
extent permitted to be Incurred under Section 4.12; and (p) Liens incurred
or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security.
"Permitted Refinancing" means, with respect to any Indebtedness,
Indebtedness to the extent representing a Refinancing of such Indebtedness;
provided, however, that (1) the Refinancing Indebtedness shall not exceed
the sum of the amount of the Indebtedness being Refinanced, plus the amount
of accrued interest or dividends thereon, the amount of any reasonably
determined prepayment premium necessary to accomplish such Refinancing and
reasonable fees and expenses incurred in connection therewith; (2) the
Refinancing Indebtedness shall have a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced and shall not permit redemption or other
retirement (including pursuant to any required offer to purchase to be made
by the Company or any Restricted Subsidiary) of such Indebtedness at the
option of the holder thereof prior to the final stated maturity of the
Indebtedness being Refinanced, other than a redemption or other retirement
at the option of the holder of such Indebtedness (including pursuant to a
required offer to purchase made by the Company or a Restricted Subsidiary)
upon a change of control of the Company pursuant to provisions
substantially similar to those under Section 4.10; (3) Indebtedness that
ranks pari passu with the Securities may be Refinanced only with
Indebtedness that is made pari passu with or subordinate in right of
payment to the Securities, and Indebtedness that is subordinated in right
of payment to the Securities may be Refinanced only with Indebtedness that
is subordinate in right of payment to the Securities on terms no less
favorable to the Holders than those contained in the Indebtedness being
Refinanced; and (4) the Refinancing Indebtedness shall be Incurred by the
obligor on the Indebtedness being Refinanced or by the Company.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, limited
liability partnership, limited partnership, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Physical Securities" has the meaning set forth in Section 2.01.
"Preferred Equity Interest" in any Person, means an Equity Interest of any
class or classes (however designated) which is preferred as to the payment
of dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over
Equity Interests of any other class in such Person.
"principal" of a debt security means the principal of the security, plus,
when appropriate, the premium, if any, on the security.
"Private Placement Legend" means the legend initially set forth on the
Series A Securities in the form set forth on Exhibit A hereto.
"Public Equity Offering" means an underwritten public offering of common
Equity Interests of the Company pursuant to an effective registration
statement filed under the Securities Act (excluding registration statements
filed on Form S-8).
"Purchase Amount" has the meaning set forth in the definition of "Offer to
Purchase" above.
"Purchase Date" has the meaning set forth in the definition of "Offer to
Purchase" above.
"Purchase Price" has the meaning set forth in the definition of "Offer to
Purchase" above.
"QIB Global Security" see Section 2.01.
"Qualified Equity Interest" means any Equity Interest of the Company other
than any Disqualified Equity Interest.
"Qualified Institutional Buyer" or "QIB" means a "qualified institutional
buyer" as that term is defined in Rule 144A under the Securities Act.
"Qualified Subsidiary Indebtedness" means (i) Indebtedness of Restricted
Subsidiaries
<PAGE> 14
under one or more senior credit agreements, senior loan agreements or
similar senior facilities, secured or unsecured, entered into from time to
time, including any related notes, guarantees collateral documents,
instruments and agreements executed in connection therewith or (ii)
Indebtedness of Restricted Subsidiaries in an aggregate principal amount
not to exceed $25.0 million in the aggregate at any time outstanding.
"Redemption Date," when used with respect to any Security to be redeemed,
means the date fixed for such redemption pursuant to this Indenture.
"Redemption Price," when used with respect to any Security to be redeemed,
means the price fixed for such redemption pursuant to this Indenture as set
forth in the form of Security annexed hereto as Exhibit A or Exhibit B
hereto.
"Refinance" means refinance, renew, extend, replace, defease or refund; and
"Refinancing" and "Refinanced" have correlative meanings.
"Registered Exchange Offer" means the offer to exchange the Series B
Securities for all of the outstanding Series A Securities in accordance
with the Registration Rights Agreement.
"Registrar" see Section 2.03.
"Registration" means the Registered Exchange Offer by the Company or other
registration of the Series A Securities under the Securities Act pursuant
to and in accordance with the terms of the Registration Rights Agreement.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of January 4, 1999 relating to the Securities between the Company
and the Initial Purchasers.
"Registration Statement" means the registration statement(s) as defined and
described in the Registration Rights Agreement.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Security" see Section 2.01.
"Replacement Assets" means (x) properties and assets (other than cash or
any Equity Interests or other security) that will be used in a
Telecommunications Business of the Company and the Restricted Subsidiaries
or (y) Equity Interests of any Person engaged primarily in a
Telecommunications Business, which Person will become on the date of
acquisition thereof a Restricted Subsidiary as a result of the Company's
acquiring such Equity Interests.
"Required Filing Date" see Section 4.09.
"Restricted Payments" see Section 4.11.
"Restricted Security" has the meaning set forth in Rule 144(a)(3) under the
Securities Act or any successor to such rule; provided, however, that the
Trustee shall be entitled to request and conclusively rely upon an Opinion
of Counsel with respect to whether any Security is a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company that has not
been designated by the Board of Directors of the Company, by a resolution
of the Board of Directors of the Company delivered to the Trustee, as an
Unrestricted Subsidiary pursuant to Section 4.14. Any such designation may
be revoked by a resolution of the Board of Directors of the Company
delivered to the Trustee, subject to the provisions of such covenant.
"Revocation" see Section 4.14.
"Rule 144A" means Rule 144A under the Securities Act or any successor
thereto.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Series A Securities and the Series B Securities
treated as a single class of securities, as amended or supplemented from
time to time in accordance with the terms of this Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.
"Series A Securities" means the 10 3/8% Senior Notes due 2009 of the
Company issued pursuant to this Indenture and sold pursuant to the Purchase
Agreement.
"Series B Securities" means the 10 3/8% Senior Notes due 2009, Series B, of
the Company to be issued pursuant to this Indenture in exchange for the
Series A Securities pursuant to the Registered Exchange Offer and the
Registration Rights Agreement.
"Share Capital" shall mean, at any time of determination, the stated
capital of the Equity Interests (other than Disqualified Stock) and
additional paid-in capital of the Company at such time, all as determined
in accordance with GAAP.
"Significant Restricted Subsidiary" means, at any date of determination,
(a) any Restricted Subsidiary that, together with its Subsidiaries that
constitute Restricted Subsidiaries (i) for the most recent fiscal year of
the Company accounted for more than 10.0% of the consolidated revenues of
the Company and the Restricted Subsidiaries or (ii) as of the end of such
fiscal year, owned more than 10.0% of the consolidated assets
<PAGE> 15
of the Company and the Restricted Subsidiaries, all as set forth on the
consolidated financial statements of the Company and the Restricted
Subsidiaries for such year prepared in conformity with GAAP, and (b) any
Restricted Subsidiary which, when aggregated with all other Restricted
Subsidiaries that are not otherwise Significant Restricted Subsidiaries and
as to which any event described in Section 6.01(8) or (9) has occurred and
is continuing, would constitute a Significant Restricted Subsidiary under
clause (a) of this definition.
"Stated Maturity", when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security
as the fixed date on which the principal of such Security or such
installment of interest is due and payable.
"Strategic Equity Investments" means the issuance and sale of Qualified
Equity Interests to a Person that has an equity market capitalization, a
net asset value or annual revenues of at least $1.5 billion and owns and
operates business primarily in a Telecommunication Business.
"Subordinated Indebtedness" means any Indebtedness of the Company which is
expressly subordinated in right of payment to the Securities.
"Subsidiary" means, with respect to any Person, (a) any corporation of
which the outstanding Voting Equity Interests having at least a majority of
the votes entitled to be cast in the election of directors shall at the
time be owned, directly or indirectly, by such Person, or (b) any other
Person of which at least a majority of Voting Equity Interests are at the
time, directly or indirectly, owned by such first named Person.
"Surviving Person" means, with respect to any Person involved in or that
makes any Disposition, the Person formed by or surviving such Disposition
or the Person to which such Disposition is made.
"Tax" shall mean any tax, duty, levy, impost, assessment or other
governmental charge (including penalties, interest and any other
liabilities related thereto).
"Taxing Authority" shall mean any government or political subdivision or
territory or possession of any government or any authority or agency
therein or thereof having power to tax.
"Telecommunications Acquisition" means an Acquisition of properties or
assets to be used in a Telecommunications Business or of the Equity
Interests of any Person that becomes a Restricted Subsidiary; provided,
however, that such Person's properties and assets shall consist principally
of properties or assets that will be used in a Telecommunications Business.
"Telecommunications Business" means any business owning, constructing,
financing and operating a telephone and/or communications system located
entirely in countries located in Western and Central Europe, or any
business reasonably related thereto, including, without limitation, any
business conducted by the Company or any Restricted Subsidiary on the Issue
Date.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb), as amended, as in effect on the date of this Indenture until
such time as this Indenture is qualified under the TIA, and thereafter as
in effect on the date on which this Indenture is qualified under the TIA,
except in each case as provided in Section 9.03.
"Total Consolidated Indebtedness" means, as at any date of determination,
an amount equal to the aggregate amount of all Indebtedness of the Company
and the Restricted Subsidiaries, on a consolidated basis, outstanding as of
such date of determination, after giving effect to any Incurrence of
Indebtedness and the application of the proceeds therefrom giving rise to
such determination.
"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 such successor.
"Trust Officer" means any officer within the corporate trust department (or
any successor group of the Trustee) including any vice president, assistant
vice president, assistant secretary or any other officer or assistant
officer of the Trustee customarily performing functions similar to those
performed by the persons who at that time shall be such officers, and also
means, with respect to a particular corporate trust matter, any other
officer to whom such trust matter is referred because of his knowledge of
and familiarity with the particular subject, and who shall have direct
responsibility for the administration of this Indenture.
"Unrestricted Subsidiary" means any Subsidiary of the Company designated as
such pursuant to Section 4.14. Any such designation may be revoked by a
resolution of the Board of Directors of the Company delivered to the
Trustee, subject to the provisions of Section 4.14.
"Unutilized Net Cash Proceeds" see Section 4.16(a).
"U.S. Government Obligations" means direct non-callable obligations of, or
obligations guaranteed by, the United States of America for the payment of
which guarantee or obligations the full faith and credit of the United
States is pledged.
<PAGE> 16
"U.S. Person" means a "U.S. person" as defined in Rule 902 under the
Securities Act or any successor to such Rule.
"Voting Equity Interests" means Equity Interests in a corporation or other
Person with voting power under ordinary circumstances entitling the holders
thereof to elect the Board of Directors or other governing body of such
corporation or Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the sum of the
products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled
payment of principal, including payment of final maturity, in respect
thereof, by (ii) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment, by (b) the then outstanding aggregate principal amount of such
Indebtedness.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary all of
the outstanding Voting Equity Interests (other than directors' qualifying
shares) of which are owned, directly or indirectly, by the Company.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or any other
obligor on the Securities.
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 and not
otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. 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 generally accepted accounting principles in effect from
time to time, and any other reference in this Indenture to "generally
accepted accounting principles" refers to GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
The Series A Securities and the Trustee's certificate of authentication
thereof shall be substantially in the form of Exhibit A hereto, which is
hereby incorporated in and expressly made a part of this Indenture. The
Series B Securities and the Trustee's certificate of authentication thereof
shall be substantially in the form of Exhibit B hereto, which is hereby
incorporated in and expressly made a part of this Indenture. The Securities
may have notations, legends or endorsements required by law, stock exchange
rule or usage. The Company and the Trustee shall approve the form of the
Securities and any notation, legend or endorsement on them. Each Security
shall be dated the date of its issuance and shall show the date of its
authentication.
Securities initially offered and sold by the Initial Purchasers shall,
unless the applicable Holder requests Securities in the form of
certificated Securities in registered form ("Physical Securities"), which
shall be in substantially the form set forth in Exhibit A hereto, be issued
initially in the form of one or more permanent Global Securities in
registered form, substantially in the form set forth in Exhibit A hereto,
deposited with the Trustee, as custodian for the Depository, and shall bear
the legend set forth in Exhibit C hereto. One or more separate Global
Securities shall be issued to represent Securities held by (i) Qualified
Institutional Buyers (a "QIB Global Security") and (ii) Persons acquiring
Securities in offshore transactions in reliance on Regulation S (a
<PAGE> 17
"Regulation S Global Security"). The Company shall cause the QIB Global
Securities and Regulation S Global Securities to have separate CUSIP
numbers.
Upon consummation of the Registration, Series B Securities may be issued in
the form of one or more permanent Global Securities in registered form,
substantially in the form set forth in Exhibit B hereto, deposited with the
Trustee, as custodian for the Depository, and shall bear the legend set
forth on Exhibit C hereto.
The aggregate principal amount of any Global Security may from time to time
be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depository, as hereinafter provided.
SECTION 2.02. Execution and Authentication.
An Officer or an Assistant Secretary (who shall, in either case, have been
duly authorized by all requisite corporate actions) shall sign the
Securities for the Company by manual or facsimile signature.
If an Officer whose signature is on a Security was an Officer at the time
of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate (i) Series A Securities for original issue
in the aggregate principal amount not to exceed $200,000,000 and (ii)
Series B Securities from time to time only in exchange for a like principal
amount of Series A Securities in accordance with the Registration Rights
Agreement, in each case upon a written order of the Company in the form of
an Officer's Certificate. The Officer's Certificate shall specify the
amount of Securities to be authenticated, the series of Securities and the
date on which the Securities are to be authenticated. The aggregate
principal amount of Securities outstanding at any time may not exceed
$200,000,000, except as provided in Section 2.07. Upon receipt of a written
order of the Company in the form of an Officer's Certificate, the Trustee
shall authenticate Securities in substitution for Securities originally
issued to reflect any name change of the Company.
The Trustee may appoint an authenticating agent reasonably acceptable to
the Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities 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 an Agent to deal with the Company and
Affiliates of the Company.
The Securities shall be issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency in the Borough of Manhattan,
The City of New York, and, so long as the Securities are listed on the
Luxembourg Stock Exchange and the rules of such stock exchange require, in
Luxembourg where (a) Securities may be presented or surrendered for
registration of transfer or for exchange ("Registrar"), (b) Securities may
be presented or surrendered for payment ("Paying Agent") and (c) notices
and demands in respect of the Securities and this Indenture may be served.
The Registrar shall keep a register or registers of the Securities and of
their transfer and exchange. The Company, upon notice to the Trustee, may
appoint one or more co-Registrars and one or more additional Paying Agents.
The term "Paying Agent" includes any additional Paying Agent. Except as
provided herein, the Company, or any Subsidiary may act as Paying Agent,
Registrar or co-Registrar.
The Company shall enter into an appropriate agency agreement with any Agent
not a party to this Indenture, which shall incorporate the provisions of
the TIA. The agreement shall implement the provisions of this Indenture
that relate to such Agent. The Company shall promptly notify the Trustee of
the name and address of any such Agent. If the Company fails to maintain a
Registrar or Paying Agent, or fails to give the foregoing notice, the
Trustee shall act as such and shall be entitled to appropriate compensation
in accordance with Section 7.07.
The Company initially appoints the Trustee as Registrar and Paying Agent
until such time as the Trustee has resigned or a successor has been
appointed.
SECTION 2.04. Paying Agent to Hold Assets in Trust.
The Company shall require each Paying Agent other than the Trustee to agree
in writing that each Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all assets held by the Paying Agent for the payment
of principal of, or interest on, the Securities, and shall promptly notify
the Trustee of any Default by the Company
<PAGE> 18
in making any such payment. The Company at any time may require a Paying
Agent to distribute all assets held by it to the Trustee and account for
any assets disbursed and the Trustee may at any time during the continuance
of any payment Default, upon written request to a Paying Agent, require
such Paying Agent to distribute all assets held by it to the Trustee and to
account for any assets distributed. Upon distribution to the Trustee of all
assets that shall have been delivered by the Company to the Paying Agent
(if other than the Company), the Paying Agent shall have no further
liability for such assets. If the Company, any Subsidiary or any of their
respective Affiliates acts as Paying Agent, it shall, on or before each due
date of the principal of or interest on the Securities, segregate and hold
in trust for the benefit of the Persons entitled thereto a sum sufficient
to pay the principal or interest 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.
SECTION 2.05. Securityholder Lists.
The Trustee 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 Company shall furnish
to the Trustee before each Interest Record Date and at such other times as
the Trustee may request in writing a list as of such date and in such form
as the Trustee may reasonably require of the names and addresses of
Holders, which list may be conclusively relied upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
Subject to the provisions of Sections 2.15 and 2.16, when Securities are
presented to the Registrar or a co-Registrar with a request to register the
transfer of such Securities or to exchange such Securities for an equal
principal amount of Securities of other authorized denominations of the
same series, the Registrar or co-Registrar shall register the transfer or
make the exchange as requested if its requirements for such transaction are
met; provided, however, that the Securities surrendered for transfer or
exchange shall be duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Registrar or
co-Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing. To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall authenticate Securities at
the Registrar's or co-Registrar's written request. No service charge shall
be made for any registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer taxes or other governmental charge payable upon exchanges or
transfers pursuant to Section 2.02, 2.10, 3.06, 4.10, 4.16 or 9.05). The
Registrar or co-Registrar shall not be required to register the transfer or
exchange of any Security (i) during a period beginning at the opening of
business 15 days before the mailing of a notice of redemption of Securities
and ending at the close of business on the day of such mailing and (ii)
selected for redemption in whole or in part pursuant to Article Three
hereof, except the unredeemed portion of any Security being redeemed in
part.
Prior to the registration of any transfer by a Holder as provided herein,
the Company, the Trustee, and any Agent of the Company shall treat the
person in whose name the Security is registered as the owner thereof for
all purposes whether or not the Security shall be overdue, and neither the
Company, the Trustee, nor any such Agent shall be affected by notice to the
contrary. Any Holder of a Global Security shall, by acceptance of such
Global Security, agree that transfers of beneficial interests in such
Global Security may be effected only through a book-entry system maintained
by the Depository (or its agent), and that ownership of a beneficial
interest in a Global Security shall be required to be reflected in a book
entry.
SECTION 2.07. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if the Holder of a
Security claims that the Security has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee shall authenticate a
replacement Security if the Trustee's requirements for replacement of
Securities are met. Such Holder must provide an indemnity bond or other
indemnity, sufficient in the judgment of both the Company and the Trustee,
to protect the Company, the Trustee and any Agent from any loss which any
of them may suffer if a Security is replaced and evidence to their
satisfaction of the apparent loss, destruction or theft of such Security.
The Company may charge such Holder for its reasonable out-of-pocket
expenses in replacing a Security, including reasonable fees and expenses of
counsel.
Every replacement Security is an additional obligation of the Company.
SECTION 2.08. Outstanding Securities.
Securities outstanding at any time are all the Securities that have been
authenticated by
<PAGE> 19
the Trustee except those cancelled by it, those delivered to it for
cancellation and those described in this Section 2.08 as not outstanding.
Subject to Section 2.09, a Security does not cease to be outstanding
because the Company or any of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other than a mutilated
Security surrendered for replacement), it ceases to be outstanding unless
the Trustee receives proof satisfactory to it that the replaced Security is
held by a bona fide purchaser. A mutilated Security ceases to be
outstanding upon surrender of such Security and replacement thereof
pursuant to Section 2.07.
If on a Redemption Date, Purchase Date or the Maturity Date the Paying
Agent holds money sufficient to pay all of the principal and interest due
on the Securities payable on that date, then on and after that date such
Securities cease to be outstanding and interest on them ceases to accrue.
SECTION 2.09. Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities
owned by the Company or any of its Affiliates shall be disregarded, except
that, for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, waiver or consent, only
Securities that a Trust Officer of the Trustee actually knows are so owned
shall be disregarded.
SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but
may have variations that the Company considers appropriate for temporary
Securities. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate upon receipt of a written order of the Company
pursuant to Section 2.02 definitive Securities in exchange for temporary
Securities.
SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the
Trustee any Securities surrendered to them for transfer, exchange or
payment. The Trustee, or at the direction of the Trustee, the Registrar or
the Paying Agent, and no one else, shall cancel all Securities surrendered
for transfer, exchange, payment or cancellation and deliver to the Company
such cancelled Securities for disposal. Subject to Section 2.07, the
Company may not issue new Securities to replace Securities that it has paid
or delivered to the Trustee for cancellation. If the Company shall acquire
any of the Securities, such acquisition shall not operate as a redemption
or satisfaction of the Indebtedness represented by such Securities unless
and until the same are surrendered to the Trustee for cancellation pursuant
to this Section 2.11. The Trustee shall cancel all Securities surrendered
for transfer, exchange, payment or cancellation and shall dispose of them
in accordance with its normal procedure.
SECTION 2.12. Defaulted Interest.
If the Company defaults in a payment of principal or interest on the
Securities, it shall pay interest on overdue principal and on overdue
installments of interest (without regard to any applicable grace periods)
from time to time on demand at the rate per annum borne by the Securities,
to the extent lawful.
SECTION 2.13. CUSIP Number.
The Company in issuing the Securities will use one or more "CUSIP" numbers
and the Trustee shall use the appropriate CUSIP number in notices of
redemption or exchange as a convenience to Holders; provided, however, that
any such notice may state that no representation is made as to the
correctness or accuracy of the CUSIP number printed in the notice or on the
Securities, and that reliance may be placed only on the other
identification numbers printed on the Securities. The Company shall
promptly notify the Trustee of any changes in CUSIP numbers.
SECTION 2.14. Deposit of Moneys.
Prior to 10:00 a.m. New York City time on each Interest Payment Date,
Redemption Date, Purchase Date and the Maturity Date, the Company shall
deposit with the Paying Agent in immediately available funds money
sufficient to make cash payments, if any, due on such Interest Payment
Date, Redemption Date, Purchase Date or Maturity Date, as the case may be,
in a timely manner which permits the Paying Agent to remit payment to the
Holders on such Interest Payment Date, Redemption Date, Purchase Date or
Maturity Date, as the case may be.
SECTION 2.15. Book-Entry Provisions for Global Securities.
(a) The Global Securities initially shall (i) be registered in the name of
the Depository
<PAGE> 20
or the nominee of such Depository, (ii) be delivered to the Trustee as
custodian for such Depository and (iii) bear legends as set forth in
Exhibit C hereto.
Members of, or participants in, the Depository ("Participants") shall have
no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository, or the Trustee as its custodian, or under
such Global Security, and the Depository may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner
of such Global Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any
agent of the Company or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depository or
impair, as between the Depository and Participants, the operation of
customary practices governing the exercise of the rights of a beneficial
owner of any Security.
(b) Transfers of Global Securities shall be limited to transfers in whole,
but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Securities may be
transferred or exchanged for Physical Securities in accordance with the
rules and procedures of the Depository and the provisions of Section 2.16.
In addition, Physical Securities shall be transferred to all beneficial
owners in exchange for their beneficial interests in Global Securities if
(i) the Depository notifies the Company that it is unwilling or unable to
continue as Depository for any Global Security and a successor Depository
is not appointed by the Company within 90 days of such notice or (ii) an
Event of Default has occurred and is continuing and the Registrar has
received a request from the Depository to issue Physical Securities.
(c) In connection with the transfer of Global Securities as an entirety to
beneficial owners pursuant to paragraph (b) of this Section 2.15, the
Global Securities shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall upon
written instructions from the Company authenticate and make available for
delivery, to each beneficial owner identified by the Depository in exchange
for its beneficial interest in the Global Securities, an equal aggregate
principal amount of Physical Securities of authorized denominations.
(d) Any Physical Security constituting a Restricted Security delivered in
exchange for an interest in a Global Security pursuant to paragraph (b) of
this Section 2.15 shall, except as otherwise provided by Section 2.16, bear
the Private Placement Legend.
(e) The Holder of any Global Security may grant proxies and otherwise
authorize any Person, including Participants and Persons that may hold
interests through Participants, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
SECTION 2.16. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Physical Securities. When Physical Securities
are presented to the Registrar or co-Registrar with a request:
(i) to register the transfer of the Physical Securities; or
(ii) to exchange such Physical Securities for an equal principal
amount of Physical Securities of other authorized denominations, the
Registrar or co-Registrar shall register the transfer or make the
exchange as requested if the requirements under this Indenture as set
forth in this Section 2.16 for such transactions are met; provided,
however, that the Physical Securities presented or surrendered for
registration of transfer or exchange:
(I) shall be duly endorsed or accompanied by a written instrument
of transfer in form satisfactory to the Registrar or co-Registrar,
duly executed by the Holder thereof or his attorney duly authorized in
writing; and
(II) in the case of Physical Securities of Series A Securities,
such Physical Securities shall be accompanied, in the sole discretion
of the Company, by the following additional information and documents,
as applicable:
(A) if such Physical Security is being delivered to the
Registrar or co-Registrar by a Holder for registration in
the name of such Holder, without transfer, a certification
from such Holder to that effect (substantially in the form
of Exhibit D hereto); or
(B) if such Physical Security is being transferred to a
Qualified Institutional Buyer in accordance with Rule 144A,
a certification to that effect (substantially in the form of
Exhibit D hereto); or
(C) if such Physical Security is being transferred to an
Institutional Accredited Investor, delivery of a
certification to that effect (substantially in the form of
Exhibit D hereto) and a transferee certificate for
Institutional Accredited Investors substantially in the form
of Exhibit E hereto and an Opinion of Counsel reasonably
satisfactory to the Company to the effect that such transfer
is in compliance with the Securities Act; or
<PAGE> 21
(D) if such Physical Security is being transferred in reliance
on Regulation S, delivery of a certification to that effect
(substantially in the form of Exhibit D hereto) and a
transferor certificate for Regulation S transfers
substantially in the form of Exhibit F hereto and an Opinion
of Counsel reasonably satisfactory to the Company to the
effect that such transfer is in compliance with the
Securities Act; or
(E) if such Physical Security is being transferred in reliance
on Rule 144 under the Securities Act, delivery of a
certification to that effect (substantially in the form of
Exhibit D hereto) and an Opinion of Counsel reasonably
satisfactory to the Company to the effect that such transfer
is in compliance with the Securities Act; or
(F) if such Physical Security is being transferred in reliance
on another exemption from the registration requirements of
the Securities Act, a certification to that effect
(substantially in the form of Exhibit D hereto) and an
Opinion of Counsel reasonably acceptable to the Company to
the effect that such transfer is in compliance with the
Securities Act.
(b) Restrictions on Transfer of a Physical Security for a
Beneficial Interest in a Global Security. A Physical Security may
not be exchanged for a beneficial interest in a Global Security
except upon satisfaction of the requirements set forth below.
Upon receipt by the Registrar or co-Registrar of a Physical
Security, duly endorsed or accompanied by appropriate instruments
of transfer, in form satisfactory to the Registrar or
co-Registrar, together with:
(A) in the case of Series A Securities, certification,
substantially in the form of Exhibit D hereto, that such
Physical Security is being transferred (I) to a Qualified
Institutional Buyer, (II) to an Institutional Accredited
Investor or (III) in an offshore transaction in reliance on
Regulation S and, with respect to (II) or (III), an Opinion
of Counsel reasonably acceptable to the Company to the
effect that such transfer is in compliance with the
Securities Act; and
(B) written instructions directing the Registrar or co-Registrar
to make, or to direct the Depository to make, an endorsement
on the applicable Global Security to reflect an increase in
the aggregate amount of the Securities represented by the
Global Security,
then the Registrar or co-Registrar shall cancel such Physical Security and
cause, or direct the Depository to cause, in accordance with the standing
instructions and procedures existing between the Depository and the Registrar or
co-Registrar, the principal amount of Securities represented by the applicable
Global Security to be increased accordingly. If no Global Security representing
Securities held by Qualified Institutional Buyers, Institutional Accredited
Investors or Persons acquiring Securities in offshore transactions in reliance
on Regulation S, as the case may be, is then outstanding, the Company shall
issue and the Trustee shall, upon written instructions from the Company in
accordance with Section 2.02, authenticate such a Global Security in the
appropriate principal amount.
(c) Transfer and Exchange of Global Securities. The transfer and
exchange of Global Securities or beneficial interests therein
shall be effected through the Depository in accordance with this
Indenture (including the restrictions on transfer set forth
herein) and the procedures of the Depository therefor. Upon
receipt by the Registrar or Co-Registrar of written instructions,
or such other instruction as is customary for the Depository,
from the Depository or its nominee, requesting the registration
of transfer of an interest in a QIB Global Security, an
Accredited Investor Global Security or Regulation S Global
Security, as the case may be, to another type of Global Security,
together with the applicable Global Securities (or, if the
applicable type of Global Security required to represent the
interest as requested to be transferred is not then outstanding,
only the Global Security representing the interest being
transferred), the Registrar or Co-Registrar shall cancel such
Global Securities (or Global Security) and the Company shall
issue and the Trustee shall, upon written instructions from the
Company in accordance with Section 2.02, authenticate new Global
Securities of the types so cancelled (or the type so cancelled
and applicable type required to represent the interest as
requested to be transferred) reflecting the applicable increase
and decrease of the principal amount of Securities represented by
such types of Global Securities, giving effect to such transfer.
If the applicable type of Global Security required to represent
the interest as requested to be transferred is not outstanding at
the time of such request, the Company shall issue and the Trustee
shall, upon written instructions from the Company in accordance
with Section 2.02, authenticate a new Global Security of such
type in principal amount equal to the principal amount of the
interest requested to be transferred.
(d) Transfer of a Beneficial Interest in a Global Security for a
Physical Security.
<PAGE> 22
(i) Any Person having a beneficial interest in a Global Security
may upon request exchange such beneficial interest for a Physical
Security. Upon receipt by the Registrar or co-Registrar of written
instructions, or such other form of instructions as is customary for
the Depository, from the Depository or its nominee on behalf of any
Person having a beneficial interest in a Global Security and upon
receipt by the Trustee of a written order or such other form of
instructions as is customary for the Depository or the Person
designated by the Depository as having such a beneficial interest
containing registration instructions and, in the case of any such
transfer or exchange of a beneficial interest in Series A Securities,
the following additional information and documents:
(A) if such beneficial interest is being transferred to the
Person designated by the Depository as being the beneficial
owner, a certification from such Person to that effect
(substantially in the form of Exhibit D hereto); or
(B) if such beneficial interest is being transferred to a
Qualified Institutional Buyer in accordance with Rule l44A,
a certification to that effect (substantially in the form of
Exhibit D hereto); or
(C) if such beneficial interest is being transferred to an
Institutional Accredited Investor, delivery of a
certification to that effect (substantially in the form of
Exhibit D hereto) and a transferee certificate for
Institutional Accredited Investors substantially in the form
of Exhibit E hereto and an Opinion of Counsel reasonably
satisfactory to the Company to the effect that such transfer
is in compliance with the Securities Act; or
(D) if such beneficial interest is being transferred in reliance
on Regulation S, delivery of a certification to that effect
(substantially in the form of Exhibit D hereto) and a
transferor certificate for Regulation S transfers
substantially in the form of Exhibit F hereto and an Opinion
of Counsel reasonably satisfactory to the Company to the
effect that such transfer is in compliance with the
Securities Act; or
(E) if such beneficial interest is being transferred in reliance
on Rule 144 under the Securities Act, delivery of a
certification to that effect (substantially in the form of
Exhibit D hereto) and an Opinion of Counsel reasonably
satisfactory to the Company to the effect that such transfer
is in compliance with the Securities Act; or
(F) if such beneficial interest is being transferred in reliance
on another exemption from the registration requirements of
the Securities Act, a certification to that effect
(substantially in the form of Exhibit D hereto) and an
Opinion of Counsel reasonably satisfactory to the Company to
the effect that such transfer is in compliance with the
Securities Act,
then the Registrar or co-Registrar will cause, in accordance with the
standing instructions and procedures existing between the Depository
and the Registrar or co-Registrar, the aggregate principal amount of
the applicable Global Security to be reduced and, following such
reduction, the Company will execute and, upon receipt of an
authentication order in the form of an Officers' Certificate in
accordance with Section 2.02, the Trustee will authenticate and make
available for delivery to the transferee a Physical Security in the
appropriate principal amount.
(ii) Securities issued in exchange for a beneficial interest in a
Global Security pursuant to this Section 2.16(d) shall be registered
in such names and in such authorized denominations as the Depository,
pursuant to instructions from its direct or indirect participants or
otherwise, shall instruct the Registrar or co-Registrar in writing.
The Registrar or co-Registrar shall deliver such Physical Securities
to the Persons in whose names such Physical Securities are so
registered.
(e) Restrictions on Transfer and Exchange of Global Securities.
Notwithstanding any other provisions of this Indenture, a Global
Security may not be transferred as a whole except by the
Depository to a nominee of the Depository or by a nominee of the
Depository to the Depository or another nominee of the
Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(f) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement
Legend, the Registrar or co-Registrar shall deliver Securities
that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar or co-Registrar shall
deliver only Securities that bear the Private Placement Legend
unless, and the Trustee is hereby authorized to deliver
Securities without the Private Placement Legend if, (i) there is
delivered to the Trustee an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of
the Securities Act or (ii) such Security has been sold
<PAGE> 23
pursuant to an effective registration statement under the Securities
Act (including pursuant to a Registration).
(g) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in this Indenture
and in the Private Placement Legend and agrees that it will transfer
such Security only as provided in this Indenture.
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 of any interest in any Security (including any transfers
between or among Participants or beneficial owners of interest in any
Global Security) 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, and to examine the same to determine substantial compliance
as to form with the express requirements hereof.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.15 or this
Section 2.16. The Company shall have the right to inspect and make
copies of all such letters, notices or other written communications at
any reasonable time upon the giving of reasonable written notice to
the Registrar.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company elects to redeem Securities pursuant to paragraph 5 of
the Securities at the applicable redemption price set forth thereon,
it shall notify the Trustee in writing of the Redemption Date and the
principal amount of Securities to be redeemed. The Company shall give
such notice to the Trustee at least 45 days before the Redemption Date
(unless a shorter notice shall be agreed to by the Trustee), together
with an Officers' Certificate stating that such redemption will comply
with the conditions contained herein.
SECTION 3.02. Selection of Securities To Be Redeemed.
If less than all of the Securities are to be redeemed pursuant to
paragraph 5(a) or (b) of the Securities, the Trustee shall select the
Securities to be redeemed in compliance with the requirements of the
national securities exchange, if any, on which the Securities are
listed or, if the Securities are not then listed on a national
securities exchange, on a pro rata basis, by lot or in such other
manner as the Trustee shall deem fair and appropriate. The Trustee
shall make the selection from the Securities then outstanding, subject
to redemption and not previously called for redemption.
The Trustee may select for redemption pursuant to paragraph 5(a) or
(b) of the Securities portions of the principal amount of Securities
that have denominations equal to or larger than $1,000 principal
amount. Securities and portions of them the Trustee so selects shall
be in amounts of $1,000 principal amount or integral multiples
thereof. Provisions of this Indenture that apply to Securities called
for redemption also apply to portions of Securities called for
redemption.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail a notice of redemption by first-class mail to
each Holder whose Securities are to be redeemed at such Holder's
registered address; provided, however, that notice of a redemption
pursuant to paragraph 5(b) of the Securities shall be mailed to each
Holder whose Securities are to be redeemed no later than 60 days
following the consummation of the last Public Equity Offering or
Strategic Equity Investment resulting in gross cash proceeds to the
Company, when aggregated with all prior Public Equity Offerings and
Strategic Equity Investments, of at least $75.0 million. The Company
will cause a notice of such redemption to be published in a daily
newspaper with general circulation in Luxembourg (which is expected to
be the Luxemburger Wort).
Each notice of redemption shall identify the Securities to be redeemed
(including the CUSIP number thereon) and shall state:
(1) the Redemption Date;
(2) the redemption price;
(3) the name and address of the Paying Agent to which the Securities
are to be surrendered for redemption;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue
on and after the Redemption Date
<PAGE> 24
and the only remaining right of the Holders is to receive payment of
the redemption price upon surrender to the Paying Agent; and
(6) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
Redemption Date, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion thereof
will be issued.
At the Company's request, the Trustee shall give the notice of
redemption on behalf of the Company, in the Company's name and at the
Company's expense.
SECTION 3.04. Effect of Notice of Redemption.
Once a notice of redemption is mailed, Securities called for
redemption become due and payable on the Redemption Date and at the
redemption price. Upon surrender to the Paying Agent, such Securities
shall be paid at the redemption price, plus accrued interest thereon,
if any, to the Redemption Date, but interest installments whose
maturity is on such Redemption Date shall be payable to the Holders of
record at the close of business on the relevant Interest Record Date.
SECTION 3.05. Deposit of Redemption Price.
Prior to 10:00 a.m. New York City time on the Redemption Date, the
Company shall deposit with the Paying Agent (or if the Company is its
own Paying Agent, shall, on or before the Redemption Date, segregate
and hold in trust) money sufficient to pay the redemption price of and
accrued interest, if any, on all Securities to be redeemed on that
date other than Securities or portions thereof called for redemption
on that date which have been delivered by the Company to the Trustee
for cancellation.
If any Security surrendered for redemption in the manner provided in
the Securities shall not be so paid on the Redemption Date due to the
failure of the Company to deposit with the Paying Agent money
sufficient to pay the redemption price thereof, the principal and
accrued and unpaid interest, if any, thereon shall, until paid or duly
provided for, bear interest as provided in Sections 2.12 and 4.01 with
respect to any payment default.
SECTION 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the Trustee
shall authenticate for the Holder a new Security equal in principal
amount to the unredeemed portion of the Security surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
The Company shall pay the principal of and interest on the Securities
in the manner provided in the Securities and the Registration Rights
Agreement. An installment of principal or interest shall be considered
paid on the date due if the Trustee or Paying Agent (other than the
Company, a Subsidiary or an Affiliate of the Company) holds on that
date money designated for and sufficient to pay the installment in
full and is not prohibited from paying such money to the Holders of
the Securities pursuant to the terms of this Indenture.
The Company shall pay cash interest on overdue principal at the same
rate per annum borne by the Securities. The Company shall pay cash
interest on overdue installments of interest at the same rate per
annum borne by the Securities, to the extent lawful, as provided in
Section 2.12.
SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, The City of
New York, and, so long as the Securities are listed on the Luxembourg
Stock Exchange and the rules of such stock exchange require, in
Luxembourg the office or agency required under Section 2.03. The
Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If
at any time the Company 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 address of the Trustee set forth in Section
10.02 hereof. The Company hereby initially designates (i) the Trustee
at its address set forth in Section 10.02 hereof as its office or
agency in The Borough of Manhattan, The City of New York, for such
purposes and (ii) Banque Internationale a Luxembourg S.A., at 69,
route d'Esch, L-1470 Luxembourg, as its office or agency in Luxembourg
for such purposes.
SECTION 4.03. Corporate Existence.
Subject to Article Five, the Company shall do or shall cause to be
done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate, partnership or other
existence of each Restricted Subsidiary in accordance
<PAGE> 25
with the respective organizational documents of each such Restricted
Subsidiary and the rights (charter and statutory) and material
franchises of the Company and the Restricted Subsidiaries; provided,
however, that the Company shall not be required to preserve any such
right or franchise, or the corporate existence of any Restricted
Subsidiary, if the Board of Directors of the Company shall determine
that the preservation thereof is no longer desirable in the conduct of
the business of the Company and the Restricted Subsidiaries, taken as
a whole, and that the loss thereof is not, and will not be, adverse in
any material respect to the Holders; provided, further, however, that
a determination of the Board of Directors of the Company shall not be
required in the event of a merger of one or more Wholly Owned
Restricted Subsidiaries of the Company with or into another Wholly
Owned Restricted Subsidiary of the Company or another Person, if the
surviving Person is a Wholly Owned Restricted Subsidiary of the
Company organized under the laws of the United States or a State
thereof or of the District of Columbia.
SECTION 4.04. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all material taxes,
assessments and governmental charges levied or imposed upon the
Company or any Restricted Subsidiary or upon the income, profits or
property of the Company or any Restricted Subsidiary and (2) all
lawful claims for labor, materials and supplies which, in each case,
if unpaid, might by law become a material liability, or Lien upon the
property, of the Company or any Restricted Subsidiary; provided,
however, that the Company shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings and for which appropriate
provision has been made.
SECTION 4.05. Notice of Defaults.
(a) In the event that any Indebtedness of the Company or any of its
Subsidiaries is declared due and payable before its maturity because
of the occurrence of any default (or any event which, with notice or
lapse of time, or both, would constitute such a default) under such
Indebtedness, the Company shall promptly give written notice to the
Trustee of such declaration, the status of such default or event and
what action the Company is taking or proposes to take with respect
thereto.
(b) Upon becoming aware of any Default, the Company shall promptly
deliver an Officers' Certificate to the Trustee specifying the
Default.
SECTION 4.06. Maintenance of Properties and Insurance.
(a) The Company shall cause all material properties owned by or leased
to it or any Restricted Subsidiary and used or useful in the conduct
of its business or the business of any Restricted Subsidiary to be
maintained and kept in normal condition, repair and working order and
supplied with all necessary equipment and shall cause to be made all
necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Company may be
necessary, so that the business carried on in connection therewith may
be properly and advantageously conducted at all times; provided,
however, that nothing in this Section 4.06 shall prevent the Company
or any Restricted Subsidiary from discontinuing the use, operation or
maintenance of any of such properties, or disposing of any of them, if
such discontinuance or disposal is, in the judgment of the Board of
Directors or of the board of directors of the Restricted Subsidiary
concerned, or of an officer (or other agent employed by the Company or
of any Restricted Subsidiary) of the Company or such Restricted
Subsidiary having managerial responsibility for any such property,
desirable in the conduct of the business of the Company or any
Restricted Subsidiary, and if such discontinuance or disposal is not
adverse in any material respect to the Holders.
(b) The Company shall maintain, and shall cause the Restricted
Subsidiaries to maintain, insurance with responsible carriers against
such risks and in such amounts, and with such deductibles, retentions,
self-insured amounts and co-insurance provisions, as are customarily
carried by similar businesses of similar size, including property and
casualty loss, and workers' compensation insurance.
SECTION 4.07. Compliance Certificate.
The Company shall deliver to the Trustee within 120 days after the
close of each fiscal year a certificate signed by the principal
executive officer, principal financial officer or principal accounting
officer stating that a review of the activities of the Company has
been made under the supervision of the signing officers with a view to
determining whether a Default has occurred and whether or not the
signers know of any Default by the Company that occurred during such
fiscal year. If they do know of such a Default, the certificate shall
describe all such Defaults, their status and the action the Company is
taking or proposes to take with respect thereto. The first certificate
to be delivered by the Company pursuant to this Section 4.07 shall be
for the fiscal year ending December 31, 1998.
<PAGE> 26
SECTION 4.08 Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law, which would prohibit or
forgive the Company from paying all or any portion of the principal of
and/or interest, if any, on the Securities as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture; and (to the
extent that it may lawfully do so) the Company hereby expressly waives
all benefit or advantage of any such law, and covenants that it shall
not hinder, delay or impede the execution of any power herein granted
to the Trustee, but shall suffer and permit the execution of every
such power as though no such law had been enacted.
SECTION 4.09. Provision of Financial Information.
Whether or not the Company is subject to Section 13(a) or 15(d) of the
Exchange Act, or any successor provision thereto, the Company shall
file with the SEC (if permitted by SEC practice and applicable law and
regulations) the annual reports, quarterly reports and other documents
which the Company would have been required to file with the SEC
pursuant to such Section 13(a) or 15(d) or any successor provision
thereto if the Company were so required, such documents to be filed
with the SEC on or prior to the respective dates (the "Required Filing
Dates") by which the Company would have been required so to file such
documents if the Company were so required; provided, however, that
until the Company is subject to Section 13(a) or Section 15(d) of the
Exchange Act or any successor provisions thereto, the Required Filing
Dates for such quarterly reports shall be 75 days following the end of
the applicable fiscal quarter. The Company shall also in any event (a)
within 15 days of each Required Filing Date (whether or not permitted
or required to be filed with the SEC but subject to the proviso in the
previous sentence) (i) transmit (or cause to be transmitted) by mail
to all Holders, as their names and addresses appear in the Note
register, without cost to such Holders, and (ii) file with the
Trustee, copies of the annual reports, quarterly reports and other
documents which the Company is required to file with the SEC pursuant
to the preceding sentence, or, if such filing is not so permitted,
information and data of a similar nature, and (b) if, notwithstanding
the preceding sentence, filing such documents by the Company with the
SEC is not permitted by SEC practice or applicable law or regulations,
promptly upon written request supply copies of such documents to any
Holder. In addition, for so long as any Securities remain outstanding,
the Company will furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to
be delivered pursuant to Rule 144A(d)(4) under the Securities Act,
and, to any beneficial holder of Securities, if not obtainable from
the SEC, information of the type that would be filed with the SEC
pursuant to the foregoing provisions, upon the request of any such
holder. Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt
of such shall not constitute constructive notice of any information
contained therein or determinable from information contained therein,
including the Company's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).
SECTION 4.10. Change of Control.
(a) Following the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Company shall
notify the Trustee and Holders of the Securities of such occurrence in
the manner prescribed by this Indenture and shall, within 30 days
after the Change of Control Date, make an Offer to Purchase all
Securities then outstanding at a purchase price in cash equal to 101%
of the aggregate principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the Purchase Date. The Company will cause
a copy of such notice to be published in a daily newspaper with
general circulation in Luxembourg (which is expected to be the
Luxemburger Wort). The Company's obligations may be satisfied if a
third party makes the Offer to Purchase in the manner, at the times
and otherwise in compliance with the requirements of this Indenture
applicable to an Offer to Purchase made by the Company and purchases
all Securities validly tendered and not withdrawn under such Offer to
Purchase. Each Holder shall be entitled to tender all or any portion
of the Securities owned by such Holder pursuant to the Offer to
Purchase, subject to the requirement that any portion of a Security
tendered must be tendered in an integral multiple of $1,000 principal
amount.
(b) On or prior to the Purchase Date specified in the Offer to
Purchase, the Company shall (i) accept for payment all Securities or
portions thereof validly tendered pursuant
<PAGE> 27
to the Offer, (ii) deposit with the Paying Agent or, if the Company is
acting as its own Paying Agent, segregate and hold in trust as
provided in Section 2.04) money sufficient to pay the Purchase Price
of all Securities or portions thereof so accepted and (iii) deliver or
cause to be delivered to the Trustee for cancellation all Securities
so accepted together with an Officers' Certificate stating the
Securities or portions thereof accepted for payment by the Company.
The Paying Agent (or the Company, if so acting) shall promptly mail or
deliver to Holders of Securities so accepted, payment in an amount
equal to the Purchase Price for such Securities, and the Trustee shall
promptly authenticate and mail or deliver to each Holder of Securities
a new Security or Securities equal in principal amount to any
unpurchased portion of the Security surrendered as requested by the
Holder. Any Security not accepted for payment shall be promptly mailed
or delivered by the Company to the Holder thereof. The Company shall
publicly announce the results of the Offer on or as soon as
practicable after the Purchase Date.
(c) If the Company makes an Offer to Purchase, the Company will comply
with all applicable tender offer laws and regulations, including, to
the extent applicable, Section 14(e) and Rule 14e-1 under the Exchange
Act, and any other applicable Federal or state securities laws and
regulations and any applicable requirements of any securities exchange
on which the Securities are listed, and any violation of the
provisions of this Indenture relating to such Offer to Purchase
occurring as a result of such compliance shall not be deemed a
Default.
SECTION 4.11. Limitation on Restricted Payments.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly,
(i) declare or pay any dividend or any other distribution on any
Equity Interests of the Company or any Restricted Subsidiary or make
any payment or distribution to the direct or indirect holders of
Equity Interests of the Company or any Restricted Subsidiary (other
than any dividends, distributions and payments made to the Company or
any Restricted Subsidiary and dividends or distributions payable to
any Person solely in Qualified Equity Interests or in options,
warrants or other rights to purchase Qualified Equity Interests);
(ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any Restricted Subsidiary (other
than any such Equity Interests owned by the Company or any Restricted
Subsidiary);
(iii) purchase, redeem, defease or retire for value, or make any
principal payment on, prior to any scheduled maturity, scheduled
repayment or scheduled sinking fund payment, any Subordinated
Indebtedness (other than any Subordinated Indebtedness held by any
Restricted Subsidiary); or
(iv) make any Investment (other than Permitted Investments)
(any of the foregoing, a "Restricted Payment"), unless
(a) no Default shall have occurred and be continuing at the time of or
after giving effect to such Restricted Payment;
(b) immediately after giving effect to such Restricted Payment, the
Company would be able to Incur $1.00 of additional Indebtedness under
Section 4.12(a); and
(c) immediately after giving effect to such Restricted Payment, the
aggregate amount of all Restricted Payments (including the Fair Market
Value of any non-cash Restricted Payment) declared or made on or after
the Issue Date (excluding any Restricted Payment described in clauses
(ii), (iii) or (iv) of the next paragraph) does not exceed an amount
equal to the sum of the following (the "Basket"):
(1) (x) the Cumulative Operating Cash Flow determined at the time
of such Restricted Payment less (y) 150% of cumulative Consolidated
Interest Expense determined for the period (treated as one accounting
period) commencing on the Issue Date and ending on the last day of the
most recent fiscal quarter immediately preceding the date of such
Restricted Payment for which consolidated financial information of the
Company is required to be available, plus
(2) the aggregate net cash proceeds received by the Company
either (x) as capital contributions to the Company after the Issue
Date or (y) from the issue and sale (other than to a Subsidiary) of
Qualified Equity Interests after the Issue Date (other than any
issuance and sale of Qualified Equity Interests financed (A) directly
or indirectly, using funds (I) borrowed from the Company or any
Subsidiary until and to the extent such borrowing is repaid or (II)
contributed, extended, guaranteed or advanced by the Company or any
Subsidiary (including, without limitation, in respect of any employee
stock ownership or benefit plan) or (B) the proceeds of which are used
to effect any transaction permitted by clauses (ii), (iii) or (iv) of
the next paragraph), plus
(3) the aggregate amount by which Indebtedness (other than any
Subordinated Indebtedness) of the Company or any Restricted Subsidiary
is reduced on
<PAGE> 28
the Company's balance sheet upon the conversion or exchange (other
than by a Subsidiary of the Company) subsequent to the Issue Date into
Qualified Equity Interests (less the amount of any cash, or the fair
value of property, distributed by the Company or any Restricted
Subsidiary upon such conversion or exchange), plus
(4) in the case of the disposition or repayment of any Investment
that was treated as a Restricted Payment made after the Issue Date, an
amount (to the extent not included in the computation of Cumulative
Operating Cash Flow) equal to the lesser of: (x) the return of capital
with respect to such Investment and (y) the amount of such Investment
that was treated as a Restricted Payment, in either case, less the
cost of the disposition of such Investment and net of taxes, plus
(5) so long as the Designation thereof was treated as a
Restricted Payment made after the Issue Date, with respect to any
Unrestricted Subsidiary that has been redesignated as a Restricted
Subsidiary after the Issue Date in accordance with Section 4.14, the
Company's proportionate interest in an amount equal to the excess of
(x) the total assets of such Subsidiary, valued on an aggregate basis
at the lesser of book value and Fair Market Value, over (y) the total
liabilities of such Subsidiary, determined in accordance with GAAP
(and provided that such amount shall not in any case exceed the
Designation Amount with respect to such Restricted Subsidiary upon its
Designation), minus
(6) with respect to each Subsidiary of the Company which has been
designated as an Unrestricted Subsidiary after the Issue Date in
accordance with Section 4.14, the greater of (x) $0 and (y) the
Designation Amount thereof (measured as of the Date of Designation).
The foregoing provisions will not prevent (i) the payment of any
dividend or distribution on, or redemption of, Equity Interests within
60 days after the date of declaration of such dividend or distribution
or the giving of formal notice of such redemption, if at the date of
such declaration or giving of formal notice such payment or redemption
would comply with the provisions of this Indenture; (ii) the purchase,
redemption, retirement or other acquisition of any Equity Interests of
the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent (A) common equity capital contribution to the
Company from any Person (other than a Subsidiary) or (B) issue and
sale (other than to a Subsidiary) of, Qualified Equity Interests;
(iii) any Investment to the extent that the consideration therefor
consists of the net proceeds of the substantially concurrent issue and
sale (other than to a Subsidiary) of Qualified Equity Interests; (iv)
the purchase, redemption, retirement, defeasance or other acquisition
of Subordinated Indebtedness made in exchange for, or out of the net
cash proceeds of, a substantially concurrent issue and sale (other
than to a Subsidiary) of, (x) Qualified Equity Interests or (y) other
Subordinated Indebtedness having no stated maturity for the payment of
principal thereof prior to the Maturity Date; or (v) any Investment in
any Person principally engaged in a Telecommunications Business;
provided, however, that Investments pursuant to this clause (v) shall
not exceed $25.0 million in the aggregate at any time outstanding;
provided, further, however, that in the case of each of clauses (ii),
(iii), (iv) and (v), no Default shall have occurred and be continuing
or would arise therefrom.
SECTION 4.12. Limitation on Incurrence of Indebtedness.
(a) The Company shall not, and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly, Incur any
Indebtedness; provided, however, that the Company may Incur
Indebtedness if, at the time of such Incurrence, the Debt to
Annualized Operating Cash Flow Ratio would be less than or equal to
6.0 to 1.0.
(b) The foregoing limitations of paragraph (a) of this covenant will
not apply to any of the following, each of which shall be given
independent effect:
(i) the Securities and the Euro Notes, and Permitted Refinancings
thereof;
(ii) Indebtedness of the Company or any Restricted Subsidiary to the
extent outstanding on the date of this Indenture, and Permitted
Refinancings thereof;
(iii) Indebtedness of the Company or Qualified Subsidiary
Indebtedness, in each case, to the extent that the proceeds of or
credit support provided by such Indebtedness is used to finance the
cost (including the cost of design, development, construction,
installation or integration) of network assets, equipment or inventory
acquired by the Company or a Restricted Subsidiary after the Issue
Date, and Permitted Refinancings thereof;
(iv) (1) Indebtedness of the Company or Qualified Subsidiary
Indebtedness, in each case, to the extent that the proceeds of or
credit support provided by such Indebtedness is used to finance a
Telecommunications Acquisition, or working capital for, or to finance
the construction of, the business or network acquired and (2) Acquired
Indebtedness, and, in each case, Permitted Refinancings thereof, but
in each case only to the extent that (x) the aggregate amount of
Indebtedness outstanding of the Company and the Restricted
Subsidiaries after giving effect
<PAGE> 29
to the Incurrence of such Indebtedness and the application of the
proceeds therefrom does not exceed the product of 2.0 and the Share
Capital of the Company at the date of Incurrence of such Indebtedness
or (y) the aggregate amount of such Indebtedness or Acquired
Indebtedness, together with all Indebtedness of the Person, if any,
that is to become a Restricted Subsidiary or be merged or consolidated
with or into the Company or any Restricted Subsidiary in the
contemplated transaction outstanding at the time of such transaction
(whether or not Incurred in connection with, or in contemplation of,
such transaction), does not exceed the net sum of the plant, property
and equipment set forth on the Latest Balance Sheet of such Person;
(v) (1) Indebtedness of any Restricted Subsidiary owed to and held by
the Company or any Restricted Subsidiary and (2) Indebtedness of the
Company owed to and held by any Restricted Subsidiary which is
unsecured and subordinated in right of payment to the payment and
performance of the Company's obligations under the Securities;
provided, however, that an Incurrence of Indebtedness that is not
permitted by this clause (v) shall be deemed to have occurred upon (x)
any sale or other disposition of any Indebtedness of the Company or
any Restricted Subsidiary referred to in this clause (v) to any Person
other than the Company or any Restricted Subsidiary or (y) any
Restricted Subsidiary that holds Indebtedness of the Company or
another Restricted Subsidiary ceasing to be a Restricted Subsidiary;
(vi) Interest Rate Protection Obligations of the Company or any
Restricted Subsidiary relating to Indebtedness of the Company or such
Restricted Subsidiary, as the case may be (which Indebtedness (x)
bears interest at fluctuating interest rates and (y) is otherwise
permitted to be Incurred under this covenant); provided, however, that
the notional principal amount of such Interest Rate Protection
Obligations does not exceed the principal amount of the Indebtedness
to which such Interest Rate Protection Obligations relate;
(vii) Indebtedness of the Company or any Restricted Subsidiary under
Currency Agreements to the extent relating to (x) Indebtedness of the
Company or such Restricted Subsidiary, as the case may be, and/or (y)
obligations to purchase assets, properties or services incurred in the
ordinary course of business of the Company or such Restricted
Subsidiary, as the case may be; provided, however, that such Currency
Agreements do not increase the Indebtedness or other obligations of
the Company and the Restricted Subsidiaries outstanding other than as
a result of fluctuations in foreign currency exchange rates or by
reason of fees, indemnities or compensation payable thereunder;
(viii) Indebtedness of the Company and/or any Restricted Subsidiary in
respect of performance bonds of the Company or any Restricted
Subsidiary or surety bonds provided by the Company or any Restricted
Subsidiary incurred in the ordinary course of business and on ordinary
business terms in connection with the construction or operation of a
Telecommunications Business; and
(ix) in addition to the items referred to in clauses (i) through
(viii) above, Indebtedness of the Company or Qualified Subsidiary
Indebtedness in an aggregate amount not to exceed $15.0 million at any
time outstanding.
(c) For purposes of determining any particular amount of Indebtedness
under this covenant, guarantees, Liens or obligations with respect to
letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included;
provided, however, that the foregoing shall not in any way be deemed
to limit the provisions of Section 4.18.
(d) For purposes of determining compliance with this covenant, in the
event that an item of Indebtedness may be Incurred through the first
paragraph of this covenant or by meeting the criteria of one or more
of the types of Indebtedness described in the second paragraph of this
covenant (or the definitions of the terms used therein), the Company,
in its sole discretion may, at the time of such Incurrence, (i)
classify such item of Indebtedness under and comply with either of
such paragraphs (or any of such definitions), as applicable, (ii)
classify and divide such item of Indebtedness into more than one of
such paragraphs (or definitions), as applicable, and (iii) elect to
comply with such paragraphs (or definitions), as applicable, in any
order.
SECTION 4.13. Limitations on Restrictions Affecting Restricted Subsidiaries.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (x) pay dividends or make
any other distributions to the Company or any other Restricted
Subsidiary on its Equity Interests or with respect to any other
interest or participation in, or measured by, its profits, or pay any
Indebtedness owed to the Company or any other Restricted Subsidiary,
(y) make loans or advances to, or guarantee any Indebtedness or other
obligations of, the Company or any other Restricted Subsidiary or (z)
transfer any of its properties or assets to the Company or any other
Restricted Subsidiary.
The foregoing shall not prohibit (a) any encumbrance or restriction
existing under or by
<PAGE> 30
reason of any agreement in effect on the Issue Date, as any such
agreement is in effect on such date or as thereafter amended or
supplemented but only if such encumbrance or restriction is no more
restrictive than in the agreement being amended; (b) customary
provisions contained in an agreement that has been entered into for
the sale or disposition of all or substantially all of the Capital
Stock or assets of a Restricted Subsidiary; provided, however, that
(x) such encumbrance or restriction is applicable only to such
Restricted Subsidiary or assets and (y) such sale or disposition is
made in accordance with Section 4.16; (c) any encumbrance or
restriction existing under or by reason of applicable law; (d)
customary provisions restricting subletting or assignment of any lease
governing any leasehold interest of any Restricted Subsidiary; (e)
covenants in purchase money obligations for property acquired in the
ordinary course of business restricting transfer of such property; (f)
covenants in security agreements securing Indebtedness of a Restricted
Subsidiary (to the extent that such Liens were otherwise incurred in
accordance with Section 4.15) that restrict the transfer of property
subject to such agreements; (g) any agreement or other instrument of a
Person acquired by the Company or any Restricted Subsidiary in
existence at the time of such acquisition, which encumbrance or
restriction (x) is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the properties or
assets of the Person so acquired, and (y) is not incurred in
connection with or in contemplation of such acquisition; or (h)
contained in any agreement entered into after the Issue Date, so long
as such encumbrance or restriction is not materially more
disadvantageous to the Holders than the encumbrances and restrictions
in existence at the Issue Date.
SECTION 4.14. Designation of Unrestricted Subsidiaries.
(a) The Company may designate any Subsidiary of the Company as an
"Unrestricted Subsidiary" under this Indenture (a "Designation") only
if:
(i) no Default shall have occurred and be continuing at the time
of or after giving effect to such Designation; and
(ii) the Company would be permitted to make an Investment (other
than a Permitted Investment) at the time of Designation (assuming
the effectiveness of such Designation) pursuant to the first
paragraph of Section 4.11 in an amount (the "Designation Amount")
equal to the Fair Market Value of the Company's proportionate
interest in the net worth of such Subsidiary on such date
calculated in accordance with GAAP.
All Subsidiaries of Unrestricted Subsidiaries shall be Unrestricted
Subsidiaries.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, at any time (x) provide credit
support for, subject any of its properties or assets (other than the
Equity Interests of any Unrestricted Subsidiary) to the satisfaction
of, or guarantee, any Indebtedness of any Unrestricted Subsidiary
(including any undertaking, agreement or instrument evidencing such
Indebtedness), (y) be liable for any Indebtedness of any Unrestricted
Subsidiary or (z) be liable for any Indebtedness which provides that
the holder thereof may (upon notice, lapse of time or both) declare a
default thereon or cause the payment thereof to be accelerated or
payable prior to its final scheduled maturity upon the occurrence of a
default with respect to any Indebtedness of any Unrestricted
Subsidiary.
(b) The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation") only if:
(i) no Default shall have occurred and be continuing at the time
of and after giving effect to such Revocation;
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if
Incurred at such time, have been permitted to be Incurred for all
purposes of this Indenture; and
(iii) any transaction (or series of related transactions) between
such Subsidiary and any of its Affiliates that occurred while
such Subsidiary was an Unrestricted Subsidiary would be permitted
by Section 4.17 as if such transaction (or series of related
transactions) had occurred at the time of such Revocation (after
giving effect to any modification to such transaction (or series
of related transactions) effective at such time).
All Designations and Revocations must be evidenced by resolutions of
the Board of Directors of the Company, delivered to the Trustee
certifying compliance with the foregoing provisions.
SECTION 4.15. Limitation on Liens.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, Incur any Lien (other than any
Permitted Lien) of any kind against or upon any of their respective
properties or assets now owned or hereafter acquired, or any proceeds,
income or profits therefrom, unless contemporaneously therewith or
prior thereto, (i) in the case of any Lien securing an obligation that
ranks pari passu with the Securities, effective provision is made to
secure the Securities
<PAGE> 31
equally and ratably with or prior to such obligation with a Lien on
the same collateral and (ii) in the case of any Lien securing an
obligation that is subordinated in right of payment to the Securities,
effective provision is made to secure the Securities with a Lien on
the same collateral that is prior to the Lien securing such
subordinated obligation, in each case, for so long as such obligation
is secured by such Lien.
SECTION 4.16. Limitation on Asset Sales.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, make any Asset Sale, unless (x)
the Company 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 assets sold or otherwise disposed of
and (y) at least 75% of such consideration consists of (i) cash or
Cash Equivalents, (ii) Replacement Assets, (iii) publicly traded
Equity Interests of a Person who is engaged primarily in a
Telecommunications Business; provided, however, that the Company or
such Restricted Subsidiary shall sell (a "Monetization Sale"), for
cash or Cash Equivalents, such Equity Interests to a third Person
(other than to the Company or a Subsidiary thereof) at a price not
less than the Fair Market Value thereof within 365 days of the
consummation of such Asset Sale, or (iv) any combination of the
foregoing clauses (i) through (iii). The amount of any (x)
Indebtedness (other than any Subordinated Indebtedness) of the Company
or any Restricted Subsidiary that is actually assumed by the
transferee in such Asset Sale and from which the Company and the
Restricted Subsidiaries are fully released shall be deemed to be cash
for purposes of determining the percentage of cash consideration
received by the Company or such Restricted Subsidiary and (y) notes or
other similar obligations received by the Company or any Restricted
Subsidiary from such transferee that are immediately converted, sold
or exchanged (or are converted, sold or exchanged within 365 days of
the related Asset Sale) by the Company or any Restricted Subsidiary
into cash shall be deemed to be cash, in an amount equal to the net
cash proceeds realized upon such conversion, sale or exchange for
purposes of determining the percentage of cash consideration received
by the Company or such Restricted Subsidiary. Any Net Cash Proceeds
from any Asset Sale or any Monetization Sale that are not invested in
Replacement Assets or used to repay and permanently reduce the
commitments under Indebtedness of any Restricted Subsidiary within 365
days of the consummation of such Asset Sale or Monetization Sale shall
constitute "Excess Proceeds" subject to disposition as provided below.
Within 40 days after the aggregate amount of Excess Proceeds equals or
exceeds $10.0 million, the Company shall make an Offer to Purchase,
from all Holders on a pro rata basis, that aggregate principal amount
of Securities as can be purchased with the Note Portion of Excess
Proceeds at a price in cash equal to 100% of the principal amount
thereof, plus accrued and unpaid interest, if any, to any purchase
date. To the extent that the aggregate amount of principal and accrued
interest of Securities validly tendered and not withdrawn pursuant to
an Offer to Purchase is less than the Excess Proceeds, the Company may
use such surplus for general corporate purposes. If the aggregate
amount of principal and accrued interest of Securities validly
tendered and not withdrawn by Holders thereof exceeds the amount of
Securities that can be purchased with the Note Portion of Excess
Proceeds, Securities to be purchased will be selected pro rata based
on the aggregate principal amount of Securities tendered by each
Holder. Upon completion of an Offer to Purchase, the amount of Excess
Proceeds with respect to the applicable Asset Sale or Monetization
Sale shall be reset to zero.
In the event that any other Indebtedness of the Company that ranks
pari passu with the Securities (the "Other Debt") requires an offer to
purchase to be made to repurchase such Other Debt upon the
consummation of an Asset Sale, the Company may apply the Excess
Proceeds otherwise required to be applied to an Offer to Purchase to
offer to purchase such Other Debt and to an Offer to Purchase so long
as the amount of such Excess Proceeds applied to purchase the
Securities is not less than the Note Portion of Excess Proceeds. With
respect to any Excess Proceeds, the Company shall make the Offer to
Purchase in respect thereof at the same time as the analogous offer to
purchase is made pursuant to any Other Debt and the Purchase Date in
respect thereof shall be the same as the purchase date in respect
thereof pursuant to any Other Debt.
For purposes of this covenant, "Note Portion of Excess Proceeds" means
(1) if no Other Debt is being offered to be purchased, the amount of
the Excess Proceeds and (2) if Other Debt is being offered to be
purchased, the amount of the Excess Proceeds equal to the product of
(x) the Excess Proceeds and (y) a fraction the numerator of which is
the aggregate amount of all Securities tendered pursuant to the Offer
to Purchase related to such Excess Proceeds (the "Note Amount") and
the denominator of which is the sum of the Note Amount and the
aggregate amount as of the relevant purchase date
<PAGE> 32
of all Other Debt tendered and purchased pursuant to a concurrent
offer to purchase such Other Debt made at the time of such Offer to
Purchase.
In the event that the Company makes an Offer to Purchase the
Securities, the Company shall comply with any applicable securities
laws and regulations, including any applicable requirements of Section
14(e) of, and Rule 14e-1 under, the Exchange Act, and any violation of
the provisions of this Indenture relating to such Offer to Purchase
occurring as a result of such compliance shall not be deemed a Default
or an Event of Default.
SECTION 4.17. Limitation on Transactions with Affiliates.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, conduct any business or enter
into any transaction or series of related transactions with or for the
benefit of any Affiliate, any holder of 5% or more of any class of
Equity Interests or any officer, director or employee of the Company
or any Restricted Subsidiary (each, an "Affiliate Transaction"),
unless such Affiliate Transaction is on terms that are no less
favorable to the Company or such Restricted Subsidiary, as the case
may be, than could reasonably be obtained at such time in a comparable
transaction with an unaffiliated third party. For any such transaction
that involves value in excess of $5.0 million, the Company shall
deliver to the Trustee an Officers' Certificate stating that a
majority of the Disinterested Directors has determined that the
transaction satisfies the above criteria and shall evidence such a
determination by a Board Resolution delivered to the Trustee. For any
such transaction that involves value in excess of $12.5 million, the
Company shall also obtain a written opinion from an Independent
Financial Advisor to the effect that such transaction is fair, from a
financial point of view, to the Company or such Restricted Subsidiary,
as the case may be.
Notwithstanding the foregoing, the restrictions set forth in this
covenant shall not apply to (i) transactions between or among the
Company and one or more Restricted Subsidiaries or between or among
Restricted Subsidiaries; (ii) customary directors' fees,
indemnification and similar arrangements, employee salaries, bonuses
or employment agreements, compensation or employee benefit
arrangements and incentive arrangements with any officer, director or
employee of the Company or any Restricted Subsidiary entered into in
the ordinary course of business (including customary benefits
thereunder); (iii) transactions pursuant to agreements in effect on
the Issue Date, as such agreements are in effect on the Issue Date or
as thereafter amended or supplemented in a manner not adverse to the
Holders; (iv) loans and advances to officers, directors and employees
of the Company or any Restricted Subsidiary for travel, entertainment,
moving and other relocation expenses, in each case made in the
ordinary course of business and consistent with past business
practices; (v) any transactions between the Company or any Restricted
Subsidiary, on the one hand, and any Affiliate of the Company engaged
primarily in a Telecommunications Business, on the other hand, (x) in
the ordinary course of business and consistent with commercially
reasonable practices or (y) approved by a majority of the
Disinterested Directors; (vi) any payment pursuant to any tax sharing
agreement between the Company and any other Person with which the
Company files a consolidated tax return or with which the Company is
part of a consolidated group for tax purposes; provided that such
payment is not greater than that which the Company would be required
to pay as a stand-alone taxpayer; (vii) the pledge of Equity Interests
of Unrestricted Subsidiaries to support the Indebtedness thereof; and
(viii) payment of dividends in respect of Equity Interests of the
Company or any Restricted Subsidiary permitted under Section 4.11.
SECTION 4.18. Limitation on Issuances of Guarantees by Restricted Subsidiaries.
The Company shall not cause or permit any Restricted Subsidiary,
directly or indirectly, to guarantee any Indebtedness of the Company
("Guaranteed Indebtedness"), unless (i) such Restricted Subsidiary
simultaneously executes and delivers a supplemental indenture to this
Indenture pursuant to which such Restricted Subsidiary guarantees (a
"Subsidiary Guarantee") all of the Company's obligations under the
Securities and this Indenture and (ii) such Restricted Subsidiary
waives and will not in any manner whatsoever claim or take the benefit
or advantage of, any rights of reimbursement, indemnity or subrogation
or any other rights against the Company or any other Restricted
Subsidiary as a result of any payment by such Restricted Subsidiary
under its Subsidiary Guarantee. If the Guaranteed Indebtedness is (A)
pari passu with the Securities, then the guarantee of such Guaranteed
Indebtedness shall be pari passu with, or subordinated to, the
Subsidiary Guarantee or (B) subordinated to the Securities, then the
guarantee of such Guaranteed Indebtedness shall be subordinated to the
Subsidiary Guarantee at least to the extent that the Guaranteed
Indebtedness is subordinated to the Securities.
<PAGE> 33
Any Subsidiary Guarantee by a Restricted Subsidiary shall provide by
its terms that it shall be automatically and unconditionally released
and discharged upon (i) any sale, exchange or transfer, to any Person
not an Affiliate of the Company, of all of the Equity Interests of the
Company or any Restricted Subsidiary in, or all or substantially all
the assets of, such Restricted Subsidiary (which sale, exchange or
transfer is made in accordance with this Indenture) or (ii) the
release or discharge of the guarantee which resulted in the creation
of such Subsidiary Guarantee, except a discharge or release by or as a
result of payment under such guarantee.
SECTION 4.19. Limitation on the Issuance and Sale of Capital Stock of Restricted
Subsidiaries.
The Company shall not sell, and shall not cause or permit any
Restricted Subsidiary, directly or indirectly, to issue or sell, any
Equity Interests of a Restricted Subsidiary, except (i) to the Company
or a Wholly Owned Restricted Subsidiary; (ii) if, immediately after
giving effect to such issuance or sale, such Restricted Subsidiary
would no longer constitute a Restricted Subsidiary; or (iii) in the
case of issuance of Equity Interests by a non-Wholly Owned Restricted
Subsidiary if, after giving effect to such issuance, the Company
maintains its direct or indirect percentage of beneficial and economic
ownership of such non-Wholly Owned Restricted Subsidiary.
SECTION 4.20. Additional Amounts.
(a) All payments made by the Company under or with respect to the
Securities will be made free and clear of and without withholding or
deduction for or on account of any present of future Taxes imposed or
levied by or on behalf of any Taxing Authority within the Netherlands,
or within any other jurisdiction in which the Company is organized or
engaged in business for tax purposes, unless the Company is required
to withhold or deduct Taxes by law or by the interpretation or
administration thereof. If the Company is required to withhold or
deduct any amount for or on account of Taxes imposed by a Taxing
Authority within the Netherlands, or within any other jurisdiction in
which the Company is organized or engaged in business for tax
purposes, from any payment made under or with respect to the
Securities, the Company will pay such additional amounts ("Additional
Amounts") as may be necessary so that the net amount received by each
holder of Securities (including Additional Amounts) after such
withholding or deduction will equal the amount the holder would have
received if such Taxes had not been withheld or deducted; provided,
however, that no Additional Amounts will be payable with respect to
any Tax that would not have been imposed, payable or due (i) but for
the existence of any present or former connection between the holder
(or the beneficial owner of, or person ultimately entitled to obtain
an interest in, such Securities) and the Netherlands or other
jurisdiction in which the Company is organized or engaged in business
for tax purposes other than the mere holding of the Securities; (ii)
but for the failure to satisfy any certification, identification or
other reporting requirements whether imposed by statute, treaty,
regulation or administrative practice, provided that the Company has
delivered a request to the holder to comply with such requirements at
least 30 days prior to the date by which such compliance is required;
(iii) if the presentation of Securities (where presentation is
required) for payment has occurred within 30 days after the date such
payment was due and payable or was duly provided for, whichever is
later; or (iv) if the beneficial owner of, or person ultimately
entitled to obtain an interest in, such Securities had been the holder
of the Securities and would not be entitled to the payment of
Additional Amounts (excluding the impact of the book-entry procedures
described in Section 2.15). In addition, Additional Amounts will not
be payable with respect to any Tax which is payable otherwise than by
withholding from payments of, or in respect of principal of, or any
interest on, the Securities.
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Sale of Assets, etc.
The Company shall not consolidate with or merge with or into (whether
or not the Company is the Surviving Person) any other Person and the
Company shall not, and shall not cause or permit any Restricted
Subsidiary to, sell, convey, assign, transfer, lease or otherwise
dispose of all or substantially all of the property and assets of the
Company and the Restricted Subsidiaries, taken as a whole, to any
Person or Persons (other than any Restricted Subsidiary), in each
case, in a single transaction or series of related transactions,
unless: (i) either (x) the Company shall be the Surviving Person or
(y) the Surviving Person (if other than the Company) shall be a
corporation organized and validly existing under the laws of The
Netherlands, the United States of America or any State thereof or the
District of Columbia, and shall, in any such case, expressly assume by
a supplemental indenture, the due and punctual payment of the
principal of
<PAGE> 34
and interest on the Securities and the performance and observance of
every covenant of this Indenture and the Registration Rights Agreement
to be performed or observed on the part of the Company; (ii)
immediately after giving effect to such transaction, no Default shall
have occurred and be continuing; and (iii) immediately after giving
effect to such transaction, the Surviving Person (as the Company)
could Incur at least $1.00 of additional Indebtedness under Section
4.12(a).
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions)
of all or substantially all the properties and assets of one or more
Restricted Subsidiaries the Equity Interests of which constitutes all
or substantially all the properties and assets of the Company shall be
deemed to be the transfer of all or substantially all the properties
and assets of the Company.
SECTION 5.02. Successor Corporation Substituted.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the first paragraph of this
covenant in which the Company is not the Surviving Person and the
Surviving Person is to assume all the Obligations of the Company under
the Securities, this Indenture and the Registration Rights Agreement
pursuant to a supplemental indenture, such Surviving Person shall
succeed to, and be substituted for, and may exercise every right and
power of, the Company and the Company shall be discharged from its
Obligations under the Securities, this Indenture and the Registration
Rights Agreement.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
Each of the following shall be an "Event of Default" for purposes of
this Indenture:
(1) failure to pay principal of any Security when due;
(2) failure to pay any interest on any Security when due,
continued for 30 days or more;
(3) failure to pay on the Purchase Date the Purchase Price for
any Security validly tendered pursuant to an Offer to Purchase;
(4) failure to perform or comply with any of the provisions of
Section 5.01;
(5) failure to perform any other covenant, warranty or agreement
of the Company under this Indenture or in the Securities, and the
Default continues for the period and after the notice specified in the
last paragraph of this Section 6.01;
(6) there shall be, with respect to any issue or issues of
Indebtedness of the Company or any Restricted Subsidiary having an
outstanding principal amount of $10.0 million or more in aggregate for
such issues of all such Persons, whether such Indebtedness now exists
or shall hereafter be created, (x) an event of default that has caused
the holders thereof (or their representative) (I) to declare such
Indebtedness to be due and payable prior to its scheduled maturity and
such Indebtedness has not been discharged in full or such acceleration
has not been rescinded or annulled within 45 days following such
acceleration and/or (II) to commence judicial proceeding to foreclose
upon, or to exercise remedies under applicable law or applicable
security documents to take ownership of, the property or assets
securing such Indebtedness and/or (y) the failure to make a principal
payment at the final (but not any interim) fixed maturity and such
defaulted payment shall not have been made, waived or extended within
45 days of such payment default;
(7) there shall have been any final judgment or judgments against
the Company or any Restricted Subsidiary in an amount of $10.0 million
or more which remain undischarged or unstayed for a period of 60
consecutive days;
(8) the Company or any Significant Restricted Subsidiary pursuant
to or within the meaning of any Bankruptcy Law:
(A) admits in writing its inability to pay its debts
generally as they become due,
(B) commences a voluntary case or proceeding,
(C) consents to the entry of an order for relief against it
in an involuntary case or proceeding,
(D) consents or acquiesces in the institution of a
bankruptcy or insolvency proceeding against it,
(E) consents to the appointment of a Custodian of it or for
all or substantially all of its property, or
(F) makes a general assignment for the benefit of its
creditors, or any of them takes any action to authorize or
effect any of the foregoing; or
(9) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Restricted Subsidiary in an involuntary case or proceeding,
<PAGE> 35
(B) appoints a Custodian of the Company or any Significant
Restricted Subsidiary or for all or substantially all of its
property, or
(C) orders the liquidation of the Company or any Significant
Restricted Subsidiary, and in each case the order or decree
remains unstayed and in effect for 60 days; provided,
however, that if the entry of such order or decree is
appealed and dismissed on appeal, then the Event of Default
hereunder by reason of the entry of such order or decree
shall be deemed to have been cured.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
A Default under clause (5) is not an Event of Default until the
Trustee notifies the Company, or the Holders of at least 25% in
aggregate principal amount of the outstanding Securities notify the
Company and the Trustee, of the Default in writing and the Company
does not cure the Default within 30 days after receipt of the notice.
The notice must specify the Default, demand that it be remedied and
state that the notice is a "Notice of Default." Such notice shall be
given by the Trustee if so requested by the Holders of at least 25% in
principal amount of the Securities then outstanding. When a Default is
cured, it ceases.
SECTION 6.02. Acceleration.
If an Event of Default with respect to the Securities (other than an
Event of Default specified in clause (8) or (9) of Section 6.01 with
respect to the Company) occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of the
outstanding Securities by notice in writing to the Company may declare
the unpaid principal of and accrued interest to the date of
acceleration on all outstanding Securities to be due and payable
immediately and, upon any such declaration, such principal amount and
accrued interest, notwithstanding anything contained in this Indenture
or the Securities to the contrary, shall become immediately due and
payable.
If an Event of Default specified in clause (8) or (9) of Section 6.01
with respect to the Company occurs, all unpaid principal of and
accrued interest on all outstanding Securities shall ipso facto become
immediately due and payable without any declaration or other act on
the part of the Trustee or any Holder.
After a declaration of acceleration, but before a judgment or decree
of the money due in respect of the Securities has been obtained, the
Holders of not less than a majority in aggregate principal amount of
the Securities then outstanding by written notice to the Trustee may
rescind an acceleration and its consequences if all existing Events of
Default (other than the nonpayment of principal of and interest on the
Securities which has become due solely by virtue of such acceleration)
have been cured or waived and if the rescission would not conflict
with any judgment or decree. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to
collect the payment of principal of or interest on the Securities or
to enforce the performance of any provision of the Securities or this
Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Securityholder in exercising
any right or remedy maturing upon an Event of Default shall not impair
the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. No remedy is exclusive of any other remedy. All
available remedies are cumulative to the extent permitted by law.
Upon a declaration of acceleration of the Securities in accordance
with Section 6.02, the Trustee shall foreclose on all Collateral and
take all other actions permitted of a secured party under the UCC or
otherwise.
SECTION 6.04. Waiver of Past Default.
Subject to Sections 2.09, 6.07 and 9.02, prior to the declaration of
acceleration of the Securities, the Holders of not less than a
majority in aggregate principal amount of the outstanding Securities
by written notice to the Trustee may waive an existing Default and its
consequences, except a Default in the payment of principal of or
interest on any Security as specified in Section 6.01(1) or (2) or a
Default in respect of any term or provision of this Indenture that may
not be amended or modified without the consent of each Holder affected
as provided in Section 9.02. The Company shall deliver to the Trustee
an Officers' Certificate stating that the requisite percentage of
Holders have consented to such waiver and attaching copies of such
consents. In case of any such waiver, the Company, the Trustee and the
Holders shall be restored to their former positions and rights
hereunder and under the Securities, respectively. This paragraph of
<PAGE> 36
this Section 6.04 shall be in lieu of Section 316(a)(1)(B) of the TIA
and such Section 316(a)(1)(B) of the TIA is hereby expressly excluded
from this Indenture and the Securities, as permitted by the TIA.
Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default
arising therefrom shall be deemed to have been cured and not to have
occurred for every purpose of this Indenture and the Securities, but
no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.
SECTION 6.05. Control by Majority.
Subject to Section 2.09, the Holders of a majority in principal amount
of the outstanding Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it. However, the Trustee
may refuse to follow any direction that conflicts with law or this
Indenture that the Trustee determines may be unduly prejudicial to the
rights of another Securityholder, or that may involve the Trustee in
personal liability; provided, however, that the Trustee may take any
other action deemed proper by the Trustee which is not inconsistent
with such direction. In the event the Trustee takes any action or
follows any direction pursuant to this Indenture, the Trustee shall be
entitled to indemnification satisfactory to it in its sole discretion
against any loss or expense caused by taking such action or following
such direction. This Section 6.05 shall be in lieu of Section.
316(a)(1)(A) of the TIA, and such Section 316(a)(1)(A) of the TIA is
hereby expressly excluded from this Indenture and the Securities, as
permitted by the TIA.
SECTION 6.06. Limitation on Suits.
A Securityholder may not pursue any remedy with respect to this
Indenture or the Securities unless:
(i) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount
of the outstanding Securities make a written request to the
Trustee to pursue a remedy;
(iii) such Holder or Holders offer and, if requested, provide to
the Trustee indemnity reasonably satisfactory to the Trustee
against any loss, liability or expense;
(iv) the Trustee does not comply with the request within 60 days
after receipt of the request; and
(v) during such 60-day period the Holders of a majority in
principal amount of the outstanding Securities (excluding
Affiliates of the Company) do not give the Trustee a direction
which, in the opinion of the Trustee, is inconsistent with the
request.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over such
other Securityholder.
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 or interest on a
Security, on or after the respective due dates therefor, 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 the Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal or interest specified
in Section 6.01(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust
against the Company or any other obligor on the Securities for the
whole amount of principal and accrued interest remaining unpaid,
together with interest overdue on principal and to the extent that
payment of such interest is lawful, interest on overdue installments
of interest, in each case at the rate per annum borne by the
Securities and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel.
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 (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and
counsel) and the Securityholders allowed in any judicial proceedings
relative to the Company (or any other obligor upon the Securities),
its creditors or its property and shall be entitled and empowered to
collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same, and any
Custodian in any such judicial proceedings is hereby authorized by
each Securityholder to make such payments to the Trustee and, in the
event that the Trustee shall consent to the making of such payments
directly to the Securityholders, to pay to the Trustee any amount due
to it for the reasonable compensation, expenses, disbursements and
<PAGE> 37
advances of the Trustee, its agent and counsel, and any other amounts
due the Trustee under Section 7.07. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept
or adopt on behalf of any Securityholder any plan of reorganization,
arrangement, adjustment or composition affecting the Securities or the
rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Securityholder in any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money or property pursuant to this Article
Six 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 Holders for amounts due and unpaid on the Securities for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Securities for
principal and interest, respectively; and
Third: to the Company.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Securityholders
pursuant to this Section 6.10.
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 and expenses,
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 6.11 shall not apply to a suit by the Trustee,
a suit by a Holder or group of Holders of more than 10% in aggregate
principal amount of the outstanding Securities, or to any suit
instituted by any Holder for the enforcement or the payment of the
principal or interest on any Securities on or after the respective due
dates therefor.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If a Default has occurred and is continuing, 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 a Default:
(1) The Trustee shall not be liable except for the performance of
such duties as are specifically set forth herein 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 conforming to the requirements of this Indenture;
however, in the case of any such certificates or opinions which by
any provision hereof are specifically required to be furnished to
the Trustee, the Trustee shall examine such certificates and
opinions to determine whether or not 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 shall not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
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) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or to take or omit to
take any action under this Indenture or take any action at the request
or direction of Holders if it shall have reasonable grounds for
believing that repayment of such funds is not assured to it or it does
not receive from such Holders an indemnity or security satisfactory to
it in its sole discretion against such risk, liability, loss, fee or
expense which might be incurred by it in compliance with such request
or direction.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section
7.01.
<PAGE> 38
(f) The Trustee shall not be liable for interest on any money received
by it. Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(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.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate and/or an Opinion of Counsel, which shall
conform to the provisions of Section 10.05. The Trustee shall not be
liable for any action it takes or omits to take in good faith in
reliance on such certificate or opinion.
(c) The Trustee may act through attorneys and agents of its selection
and shall not be responsible for the misconduct or negligence of any
agent or attorney (other than an agent who is an employee of the
Trustee) 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 reasonably believes to be authorized or
within its rights or powers.
(e) The Trustee may consult with counsel of its selection and the
advice or opinion of such counsel as to matters of law shall be full
and complete authorization and protection from liability in respect of
any action taken, omitted or suffered by it hereunder in good faith
and in accordance with the advice or opinion of such counsel.
(f) Any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by
a Board Resolution.
(g) 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 Securityholders pursuant to this Indenture,
unless such Securityholders 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.
(h) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may
see fit, and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or
attorney.
(i) The Trustee shall not be deemed to have notice of any Event of
Default unless a Trust Officer of the Trustee has actual knowledge
thereof or unless the Trustee shall have received written notice
thereof at the Corporate Trust Office of the Trustee, and such notice
references the Securities and this Indenture.
(j) The rights, privileges, protections, immunities and benefits given
to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and shall be enforceable by, the Trustee
in each of its capacities hereunder, and to each agent, custodian and
other Person employed to act hereunder.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not
Trustee, subject to Section 7.10 hereof. Any Agent may do the same
with like rights. However, the Trustee is subject to 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 or the Securities, it
shall not be accountable for the Company's use of the proceeds from
the Securities, and it shall not be responsible for any statement of
the Company in this Indenture or any document issued in connection
with the sale of Securities or any statement in the Securities other
than the Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults.
If a Default occurs and is continuing and the Trustee actually knows
of such Default, the Trustee shall mail to each Securityholder notice
of the Default within 30 days after the occurrence thereof. Except in
the case of a Default in payment of principal of or interest on any
Security 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 interest of Securityholders. This
Section 7.05 shall be in lieu of the proviso to
<PAGE> 39
Section 315(b) of the TIA and such proviso to Section 315(b) of the
TIA is hereby expressly excluded from this Indenture and the
Securities, as permitted by the TIA.
SECTION 7.06. Reports by Trustee to Holders.
If required by TIA Section 313(a), within 60 days after each September
1 beginning with September 1, 1999, the Trustee shall mail to each
Securityholder a report dated as of such September 1 that complies
with TIA Section 313(a). The Trustee also shall comply with TIA
Section 313(b), (c) and (d).
A copy of each such report at the time of its mailing to
Securityholders shall be filed with the SEC and each stock exchange,
if any, on which the Securities are listed.
The Company shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange or of any delisting
thereof.
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time such
compensation as the Company and the Trustee shall from time to time
agree in writing for its services. The Trustee's compensation shall
not be limited by any law on compensation of a trustee of an express
trust. The Company shall reimburse the Trustee upon request for all
reasonable disbursements, expenses and advances (including fees,
disbursements and expenses of its agents and counsel) incurred or made
by it in addition to the compensation for its services except any such
disbursements, expenses and advances as may be attributable to the
Trustee's negligence or bad faith. Such expenses shall include the
reasonable compensation, disbursements and expenses of the Trustee's
agents, accountants, experts and counsel and any taxes or other
expenses incurred by a trust created pursuant to Section 8.01 hereof.
The Company shall indemnify the Trustee, its agents and officers, for,
and hold it harmless against any and all loss, damage, claims,
liability or expense, including taxes (other than franchise taxes
imposed on the Trustee and taxes based upon, measured by or determined
by the income of the Trustee), arising out of or in connection with
the acceptance or administration of the trust or trusts hereunder,
including the costs and expenses of defending itself against any claim
or liability in connection with the exercise or performance of any of
its powers or duties hereunder, except to the extent that such loss,
damage, claim, liability or expense is due to its own negligence or
bad faith. The Trustee shall notify the Company promptly of any claim
asserted against the Trustee for which it may seek indemnity. However,
the failure by the Trustee to so notify the Company shall not relieve
the Company of its obligations hereunder. The Company shall defend the
claim and the Trustee shall cooperate in the defense (and may employ
its own counsel) at the Company's expense; provided, however, that the
Company's reimbursement obligation with respect to counsel employed by
the Trustee will be limited to the reasonable fees and expenses of
such counsel.
The Company need not pay for any settlement made without its written
consent, which consent shall not be unreasonably withheld.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a Lien prior to the Securities against all money or
property held or collected by the Trustee, in its capacity as Trustee,
except money or property held in trust to pay principal of or interest
on particular Securities or the Purchase Price or redemption price of
any Securities to be purchased or pursuant to an Offer to Purchase or
redeemed.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(8) or (9) occurs, the expenses
(including the reasonable fees and expenses of its agents and counsel)
and the compensation for the services shall be preferred over the
status of the Holders in a proceeding under any Bankruptcy Law and are
intended to constitute expenses of administration under any Bankruptcy
Law. The Company's obligations under this Section 7.07 and any claim
arising hereunder shall survive the resignation or removal of any
Trustee, the discharge of the Company's obligations pursuant to
Article Eight and any rejection or termination under any Bankruptcy
Law, and the termination of this Indenture.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign at any time by so notifying the Company in
writing. The Holders of a majority in principal amount of the
outstanding Securities may remove the Trustee by so notifying the
Trustee and the Company in writing and may appoint a successor Trustee
with the Company's consent. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent under any
Bankruptcy Law;
(3) a custodian or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
<PAGE> 40
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being
referred to herein as the retiring Trustee), the Company shall
promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal
amount of the Securities may appoint a successor Trustee to replace
the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. As promptly as
practicable after that, the retiring Trustee shall transfer, after
payment of all sums then owing to the Trustee pursuant to Section
7.07, all property held by it as Trustee to the successor Trustee,
subject to the Lien provided in Section 7.07, the resignation or
removal of the retiring Trustee shall become effective, and the
successor Trustee shall have the rights, powers and duties of the
Trustee under this Indenture. A successor Trustee shall mail notice of
its succession to each Securityholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of at least 10% in principal amount of the
outstanding Securities may petition, at the expense of the Company,
any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to,
another corporation or banking corporation, the resulting, surviving
or transferee corporation or banking corporation without any further
act shall be the successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee which shall be eligible to
act as Trustee under TIA Sections 310(a)(1), 310(a)(2) and 310(a)(5).
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. If the Trustee has or shall acquire any "conflicting
interest" within the meaning of TIA Section 310(b), the Trustee and
the Company shall comply with the provisions of TIA Section 310(b);
provided, however, that there shall be excluded from the operation of
TIA Section 310(b)(1) any indenture or indentures under which other
securities or certificates of interest or participation in other
securities of the Company are outstanding if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met. If at any time
the Trustee shall cease to be eligible in accordance with the
provisions of this Section 7.10, the Trustee shall resign immediately
in the manner and with the effect hereinbefore specified in this
Article Seven.
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the
extent indicated therein.
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations.
The Company may terminate its substantive obligations in respect of
the Securities by delivering all outstanding Securities to the Trustee
for cancellation and paying all sums payable by it on account of
principal of and interest on all Securities or otherwise. In addition
to the foregoing, the Company may terminate its obligation under
Sections 4.04, 4.06, 4.08, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16,
4.17, 4.18, 4.19 and 4.20 (and no Default with respect to such
Sections under Section 6.01(5) shall thereafter apply), by (i)
depositing with the Trustee, under the terms of an irrevocable trust
agreement, money or U. S. Government Obligations sufficient (without
reinvestment) to pay all remaining indebtedness on the Securities at
maturity or an earlier redemption, (ii) delivering to the Trustee
either an Opinion of Counsel or a ruling directed to the Trustee from
the Internal Revenue Service to the effect that the Holders of the
Securities will not recognize income, gain or loss for federal income
tax purposes as a result of such deposit and termination of
obligations, (iii) delivering to the Trustee an Opinion of Counsel to
the effect that the Company's exercise of its option under this
<PAGE> 41
paragraph will not result in any of the Company, the Trustee or the
trust created by the Company's deposit of funds pursuant to this
provision becoming or being deemed to be an "investment company" under
the Investment Company Act of 1940, as amended (the "Investment
Company Act"), and (iv) delivering to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating compliance with all
conditions precedent provided for herein. In addition, the Company
may, provided that no Default has occurred and is continuing or would
arise therefrom (or, with respect to a Default specified in Section
6.01(8) or (9), occurs at any time on or prior to the 91st calendar
day after the date of such deposit (it being understood that this
condition shall not be deemed satisfied until after such 91st day)),
terminate all of its substantive obligations in respect of the
Securities (including its obligations to pay the principal of and
interest on the Securities) by (i) depositing with the Trustee, under
the terms of an irrevocable trust agreement, money or U.S. Government
Obligations sufficient (without reinvestment) to pay all remaining
indebtedness on the Securities at maturity or upon earlier redemption,
(ii) delivering to the Trustee either a ruling directed to the Trustee
from the Internal Revenue Service to the effect that the Holders of
the Securities will not recognize income, gain or loss for federal
income tax purposes as a result of such deposit and termination of
obligations or an Opinion of Counsel addressed to the Trustee based
upon such a ruling or based on a change in the applicable Federal tax
law since the date of this Indenture to such effect, (iii) delivering
to the Trustee an Opinion of Counsel to the effect that the Company's
exercise of its option under this paragraph will not result in any of
the Company, the Trustee or the trust created by the Company's deposit
of funds pursuant to this provision becoming or being deemed to be an
"investment company" under the Investment Company Act and (iv)
delivering to the Trustee an Officers' Certificate and an Opinion of
Counsel each stating compliance with all conditions precedent provided
for herein.
Notwithstanding the foregoing paragraph, the Company's obligations
under Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.10, 2.12, 2.13
and 4.01 (but not with respect to termination of substantive
obligations pursuant to the third sentence of the foregoing
paragraph), 4.02, 7.07, 7.08, 8.03 and 8.04 shall survive until the
Securities are no longer outstanding. Thereafter the Company's
obligations in Sections 7.07, 8.03 and 8.04 shall survive.
After such delivery or irrevocable deposit and delivery of an
Officers' Certificate and Opinion of Counsel, the Trustee upon request
shall acknowledge in writing the discharge of the Company's
obligations under the Securities and this Indenture except for those
surviving obligations specified above.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U. S. Government
Obligations deposited pursuant to this Section 8.01 or the principal
and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of
outstanding Securities.
SECTION 8.02. Application of Trust Money.
The Trustee shall hold in trust money or U. S. Government Obligations
deposited with it pursuant to Section 8.01, and shall apply the
deposited money and the money from United States Government
Obligations in accordance with this Indenture solely to the payment of
principal of and interest on the Securities.
SECTION 8.03. Repayment to Company.
Subject to Sections 7.07 and 8.01, the Trustee shall promptly pay to
the Company upon written request any excess money held by it at any
time. The Trustee shall pay to the Company upon written request any
money held by it for the payment of principal or interest that remains
unclaimed for two years; provided, however, that the Trustee before
being required to make any payment may at the expense of the Company
cause to be published once in a newspaper of general circulation in
The City of New York and in a newspaper of general circulation in
Luxembourg (which is expected to be the Luxemburger Wort) or mail to
each Holder entitled to such money notice that such money remains
unclaimed and that, after a date specified therein which shall be at
least 30 days from the date of such publication or mailing, any
unclaimed balance of such money then remaining shall be repaid to the
Company. After payment to the Company, Securityholders entitled to
money must look to the Company for payment as general creditors unless
an applicable abandoned property law designates another person and all
liability of the Trustee or Paying Agent with respect to such money
shall thereupon cease.
SECTION 8.04. Reinstatement.
If the Trustee is unable to apply any money or U.S. Government
Obligations in accordance with Section 8.01 by reason of any legal
proceeding or by reason of any
<PAGE> 42
order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, the Company's
obligations under this Indenture and the Securities shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.01
until such time as the Trustee is permitted to apply all such money or
U.S. Government Obligations in accordance with Section 8.01; provided,
however, that if the Company has made any payment of interest on or
principal of any Securities because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders
of such Securities to receive such payment from the money or U.S.
Government Obligations held by the Trustee.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.02. Without Consent of Holders.
The Company, when authorized by a resolution of its Board of Directors,
and the Trustee may amend or supplement this Indenture or the Securities
without notice to or consent of any Securityholder:
(i) to cure any ambiguity, defect or inconsistency; provided, however,
that such amendment or supplement does not materially adversely affect the
rights of any Holder;
(ii) to effect the assumption by a successor Person of all obligations
of the Company under the Securities, this Indenture and the Registration
Rights Agreement in connection with any transaction complying with Article
Five of this Indenture;
(iii) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(iv) to comply with any requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(v) to make any change that would provide any additional benefit or
rights to the Holders;
(vi) to make any other change that does not materially adversely
affect the rights of any Holder under this Indenture;
(vii) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; or
(viii) to secure the Securities pursuant to the requirements of
Section 4.20 or otherwise;
provided, however, that the Company has delivered to the Trustee an Opinion of
Counsel stating that such amendment or supplement complies with the provisions
of this Section 9.01.
SECTION 9.02. With Consent of Holders.
Subject to Section 6.07, the Company, when authorized by a resolution of
its Board of Directors, and the Trustee may amend or supplement this
Indenture or the Securities with the written consent of the Holders of a
majority in principal amount of the outstanding Securities. Subject to
Section 6.07, the Holders of a majority in principal amount of the
outstanding Securities may waive compliance by the Company with any
provision of this Indenture or the Securities. However, without the
consent of the Holder of each Security affected, an amendment, supplement
or waiver, including a waiver pursuant to Section 6.04, may not:
(1) change the maturity of the principal of any such Security;
(2) alter the optional redemption or repurchase provisions of any such
Security or this Indenture in a manner adverse to the Holders of such
Security;
(3) reduce the principal amount of any such Security;
(4) reduce the rate of or extend the time for payment of interest on
any such Security;
(5) change the place or currency of payment of the principal of or
interest on any such Security;
(6) modify any provisions of Section 6.04 (other than to add sections
of this Indenture or the Securities subject thereto) or 6.07 or this
Section 9.02 (other than to add sections of this Indenture or the
Securities which may not be amended, supplemented or waived without the
consent of each Securityholder affected);
(7) reduce the percentage of the principal amount of outstanding
Securities necessary for amendment to or waiver of compliance with any
provision of this Indenture or the Securities or for waiver of any Default
in respect thereof;
(8) waive a default in the payment of the principal of or interest on
or redemption payment with respect to any such Security (except a
rescission of acceleration of the Securities by the Holders as provided in
Section 6.02 and a waiver of the payment default that resulted from such
acceleration);
(9) modify the ranking or priority of such Security; or
(10) modify the provisions of any covenant (or the related definitions
in this
<PAGE> 43
Indenture) requiring the Company to make any Offer to Purchase in a manner
materially adverse to the Holders.
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,
supplement or waiver, but it shall be sufficient if such consent
approves the substance thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected
thereby a notice briefly describing the amendment, supplement or
waiver. Any failure of the Company to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity
of any such supplemental indenture.
SECTION 9.03. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents.
Until an amendment or waiver becomes effective, a consent to it by a
Holder is a continuing consent by the Holder and every subsequent
Holder of that Security or portion of that Security that evidences the
same debt as the consenting Holder's Security, even if notation of the
consent is not made on any Security. Subject to the following
paragraph, any such Holder or subsequent Holder may revoke the consent
as to such Holder's Security or portion of such Security by notice to
the Trustee or the Company received before the date on which the
Trustee receives an Officers' Certificate certifying that the Holders
of the requisite principal amount of Securities have consented (and
not theretofore revoked such consent) to the amendment, supplement or
waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders of Securities entitled to
consent to any amendment, supplement or waiver. If a record date is
fixed, then, notwithstanding the last sentence of the immediately
preceding paragraph, those persons who were Holders of Securities at
such record date (or their duly designated proxies), and only those
persons, shall be entitled to consent to such amendment, supplement or
waiver or to revoke any consent previously given, whether or not such
persons continue to be Holders of such Securities after such record
date. No such consent shall be valid or effective for more than 90
days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any
of clauses (1) through (10) of Section 9.02. In that case the
amendment, supplement or waiver shall bind each Holder of a Security
who has consented to it and every subsequent Holder of a Security or
portion of a Security that evidences the same debt as the consenting
Holder's Security.
SECTION 9.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to
the Trustee. The Trustee may place an appropriate notation on the
Security about the changed terms and return it to the Holder.
Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Security shall issue and the Trustee shall
authenticate a new Security that reflects the changed terms. Failure
to make the appropriate notation or issue a new Security shall not
affect the validity and effect of such amendment, supplement or
waiver.
SECTION 9.06. Trustee To Sign Amendments, etc.
The Trustee shall be entitled to receive, and shall be fully protected
in relying upon, an Opinion of Counsel stating that the execution of
any amendment, supplement or waiver authorized pursuant to this
Article Nine is authorized or permitted by this Indenture and that
such amendment, supplement or waiver constitutes the legal, valid and
binding obligation of the Company, enforceable in accordance with its
terms (subject to customary exceptions). The Trustee may, but shall
not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise. In signing any amendment, supplement or
waiver, the Trustee shall be entitled to receive an indemnity
reasonably satisfactory to it.
ARTICLE TEN
MISCELLANEOUS
SECTION 10.01. Trust Indenture Act Controls.
This Indenture is subject to the provisions of the TIA that are
required to be a part of this Indenture, and shall, to the extent
applicable, be governed by such provisions. If any provision of this
Indenture modifies any TIA provision that may be so modified,
<PAGE> 44
such TIA provision shall be deemed to apply to this Indenture as so
modified. If any provision of this Indenture excludes any TIA
provision that may be so excluded, such TIA provision shall be
excluded from this Indenture.
The provisions of TIA Sections 310 through 317 that impose duties on
any Person (including the provisions automatically deemed included
unless expressly excluded by this Indenture) are a part of and govern
this Indenture, whether or not physically contained herein.
SECTION 10.02. Notices.
Any notice or communication shall be sufficiently given if in writing
and delivered in person, by facsimile and confirmed by overnight
courier, or mailed by first-class mail addressed as follows:
if to the Company:
Hermes Europe Railtel B.V.
Terhulpsesteenweg 6A
1560 Hoeilaart
Belgium
Attention: Chief Executive Officer
Facsimile: 32-2-658-5100
Telephone: 32-2-658-5200
with a copy to:
Global TeleSystems Group, Inc.
1751 Pinnacle Drive
North Tower 12th Floor
McLean, Virginia 22102
Attention: Chief Executive Officer
Facsimile: (703) 847-0663
Telephone: (703) 918-4500
and
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022-6069
Attention: John D. Morrison, Jr.
Facsimile: (212) 848-4000
Telephone: (212) 848-7179
if to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Facsimile: (212) 815-5915
Telephone: (212) 815-5919
if to the Luxembourg Paying and Transfer Agent:
Banque Internationale a Luxembourg
69, route d'Esch
L-1470 Luxembourg
Facsimile: (352) 4590-4227
Telephone: (352) 4590-3550
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed, first-class, postage prepaid, to a
Holder including any notice delivered in connection with TIA Section
310(b), TIA Section 313(c), TIA Section 314(a) and TIA Section 315(b),
shall be mailed to him at his address as set forth on the Security
Register and shall be sufficiently given to him if so mailed within
the time prescribed. To the extent required by the TIA, any notice or
communication shall also be mailed to any Person described in TIA
Section 313(c).
Failure to mail a notice or communication to a Securityholder or any
defect in it shall
<PAGE> 45
not affect its sufficiency with respect to other Securityholders.
Except for a notice to the Trustee, which is deemed given only when
received, if a notice or communication is mailed in the manner
provided above, it is duly given, whether or not the addressee
receives it.
SECTION 10.03. Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with
other Securityholders with respect to their rights under this
Indenture or the Securities. The Company, the Trustee, the Registrar
and any other person shall have the protection of TIA Section 312(c).
SECTION 10.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
or refrain from taking any action under this Indenture, the Company
shall furnish to the Trustee at the request of the Trustee:
(1) an Officers' Certificate in form and substance 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 and substance satisfactory to the
Trustee stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
SECTION 10.05. Statements Required in Certificate or Opinion.
Each certificate (other than the certificates provided pursuant to
Section 4.07) or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(1) a statement that the person 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 person, he has made
such examination or investigation as is necessary to enable him to
express an informed opinion as to whether such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of such person, such
condition or covenant has been complied with; provided, however,
that with respect to matters of fact an Opinion of Counsel may rely
on an Officers' Certificate or certificates of public officials.
SECTION 10.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Paying Agent or Registrar may make reasonable
rules for its functions.
SECTION 10.07. Governing Law.
The laws of the State of New York shall govern this Indenture and the
Securities without regard to principles of conflicts of law.
SECTION 10.08. No Recourse Against Others.
A director, officer, employee, incorporator or stockholder of the
Company or any of its Affiliates, as such, shall not have any
liability for any obligations of the Company or any of its Affiliates
under the Securities or this Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each
Holder by accepting a Security waives and releases all such liability.
SECTION 10.09. Successors.
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of the Trustee in this
Indenture shall bind its successor.
SECTION 10.10. Counterpart 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.
SECTION 10.11. Severability.
In case any provision in this Indenture or in the Securities 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, and a Holder shall have no claim
therefor against any party hereto.
SECTION 10.12. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or a Subsidiary. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 10.13. Legal Holidays.
If a payment date is a not a Business Day at a place of payment,
payment may be made at that place on the next succeeding Business Day,
and no interest shall accrue for the intervening period.
SECTION 10.14. Agent for Service; Submission to Jurisdiction; Waiver of
Immunities.
By the execution and delivery of this Indenture, the Company (i)
acknowledges that it
<PAGE> 46
has, by separate written instruments, designated and appointed CT
Corporation System, 1633 Broadway, New York, NY 10019 ("CT Corporation
System") (and any successor entity), as its authorized agent upon
which process may be served in any suit or proceeding arising out of
or relating to this Indenture that may be instituted in any federal or
state court in the Borough of Manhattan, City of New York, State of
New York or brought under federal or state securities laws, and
represent and warrant that CT Corporation System has accepted such
designation, (ii) submit to the jurisdiction of any such court in any
such suit or proceeding and (iii) agree that service of process upon
CT Corporation System and written notice of said service to the
Company, in accordance with Section 10.02 shall be deemed in every
respect effective service of process upon the Company in any such suit
or proceeding. The Company further agrees to take any and all action,
including the execution and filing of any and all such documents and
instruments, as may be necessary to continue such designation and
appointment of CT Corporation System in full force and effect for as
long as any of the Securities remain outstanding (subject to the
limitation set forth in clause (i)); provided, however, that the
Company may, and to the extent CT Corporation System ceases to be able
to be served on the basis contemplated herein shall, by written notice
to the Trustee, designate such additional or alternative agent for
service of process under this Section 10.14 that (i) maintains an
office located in the Borough of Manhattan, City of New York, State of
New York, and (ii) is either (x) United States counsel for the Company
or (y) a corporate service company which acts as agent for service of
process for other persons in the ordinary course of its business. Such
written notice shall identify the name of such agent for service of
process and the address of the office of such agent for service of
process in the Borough of Manhattan, City of New York, State of New
York.
To the extent that the Company has or hereafter may acquire any
immunity from jurisdiction of any court of (i) any jurisdiction in
which the Company owns or leases property or assets, (ii) the United
States or the State of New York or (iii) the Netherlands 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 and assets or this Agreement or any
of the Notes or actions to enforce judgments in respect of any
thereof, the Company hereby irrevocably waives such immunity in
respect of its obligations under the above-referenced documents, to
the extent permitted by law.
SECTION 10.15. Judgment Currency.
The Company hereby agrees to indemnify the Trustee, its directors, its
officers and each person, if any, who controls the Trustee within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act
against any loss incurred by such person as a result of any judgment
or order being given or made against the Company for any U.S. dollar
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 such party 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 party. 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.
[Signature Page Follows]
<PAGE> 47
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first written above.
HERMES EUROPE RAILTEL B.V.
By: /s/ FRANCOIS NOTE
Name: Francois Note
Title: Corporate Financial Director
THE BANK OF NEW YORK,
as Trustee
By: /s/ HECTOR HERRERA
Name: Hector Herrera
Title: Vice President
<PAGE> 48
EXHIBIT A
[FORM OF SERIES A SECURITY]
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"),
(B) IT IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2),
(3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT (AN "IAI") (2)
AGREES THAT IT WILL NOT, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT
(A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF
RULE 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN IAI THAT,
PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE
TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL
AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES
ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO
EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS
GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE
INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING.
<PAGE> 49
HERMES EUROPE RAILTEL B.V.
10 3/8% Senior Note due 2009
CUSIP No.:
No. $
HERMES EUROPE RAILTEL B.V., a Netherlands limited company (the
"Company", which term includes any successor corporation), for value
received promises to pay to or registered assigns, the principal sum
of Dollars, on January 15, 2009.
Interest Payment Dates: January 15 and July 15, commencing July 15,
1999.
Interest Record Dates: January 1 and July 1.
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officer.
HERMES EUROPE RAILTEL B.V.
By:
------------------------------------
Name:
Title:
<PAGE> 50
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 10 3/8% Senior Notes due 2009, described in the
within-mentioned Indenture.
Dated: January 4, 1999
THE BANK OF NEW YORK,
as Trustee
By:
------------------------------------
Authorized Signatory
(REVERSE OF SECURITY)
HERMES EUROPE RAILTEL B.V.
10 3/8% Senior Note due 2009
1. Interest.
HERMES EUROPE RAILTEL B.V., a Netherlands limited company (the
"Company"), promises to pay interest on the principal amount
of this Security at the rate per annum shown above. Cash
interest on the Securities will accrue from the most recent
date to which interest has been paid or, if no interest has
been paid, from January 4, 1999. The Company will pay interest
semi-annually in arrears on each Interest Payment Date,
commencing July 15, 1999. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal from time
to time on demand at the rate borne by the Securities and on
overdue installments of interest (without regard to any
applicable grace periods) at the rate borne by the Securities
to the extent lawful.
2. Method of Payment.
The Company shall pay interest on the Securities (except
defaulted interest) to the persons who are the registered
Holders at the close of business on the Interest Record Date
immediately preceding the Interest Payment Date even if the
Securities are cancelled on registration of transfer or
registration of exchange after such Interest Record Date.
Payments of principal and premium, if any, will be made (on
presentation of such Securities if in certificated form) at
the corporate trust office of the Paying Agent in New York
City or, subject to any applicable laws and regulations, at
the office of the Paying Agent in Luxembourg by United States
dollar check drawn on, or wire transfer to a United States
dollar account maintained by the Holder with, a bank located
in New York City. Payments of any installment of interest on
Securities will be made by a United States dollar check drawn
on a bank in New York City mailed to the Holder at such
Holder's registered address or (if arrangements satisfactory
to the Company and the Paying Agents are made) by wire
transfer to a dollar account maintained by the holder with a
bank in New York City.
3. Paying Agent and Registrar.
Initially, The Bank of New York (the "Trustee") will act as
Paying Agent and Registrar in the Borough of Manhattan, The
City of New York, and Banque Internationale a Luxembourg S.A.
will act as Paying Agent and Registrar in Luxembourg. The
Company may change any Paying Agent or Registrar without
notice to the Holders. The Company or any of its Subsidiaries
may, subject to certain exceptions, act as Registrar.
4. Indenture.
The Company issued the Securities under an Indenture, dated as
of January 4, 1999 (the "Indenture"), between the Company and
the Trustee. Capitalized terms herein are used
<PAGE> 51
as defined in the Indenture unless otherwise defined herein.
The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) (the "TIA"), as in effect on the date of the
Indenture until such time as the Indenture is qualified under
the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything
to the contrary herein, the Securities are subject to all such
terms, and holders of Securities are referred to the Indenture
and the TIA for a statement of them. This is one of the Series
A Securities referred to in the Indenture. The Series A
Securities and the Series B Securities referred to in the
Indenture are general obligations of the Company limited in
aggregate principal amount to $200,000,000.
5. Optional Redemption.
(a) The Securities will be redeemable at the option of the Company, in
whole or in part, at any time or from time to time, on or after
January 15, 2004 at the redemption prices (expressed as a percentage
of principal amount) set forth below, plus accrued and unpaid interest
thereon, if any, to the redemption date if redeemed during the
twelve-month period commencing on January 15 of the years set forth
below:
Redemption
<TABLE>
<CAPTION>
Year Price
---- -------
<S> <C>
2004 105.188%
2005 103.459%
2006 101.729%
2007 and thereafter 100.000%
</TABLE>
(b) Redemption Upon Public Equity Offering or Strategic Equity
Investment.
At any time, or from time to time, prior to January 15, 2002,
the Company may redeem Securities at a redemption price equal
to 110.375% of the principal amount of the Securities so
redeemed, plus accrued and unpaid interest thereon, if any, to
the redemption date, with the net cash proceeds of one or more
Public Equity Offerings or Strategic Equity Investments
resulting in aggregate gross cash proceeds to the Company of
at least $75.0 million; provided, however, that at least
two-thirds of the principal amount of Securities originally
issued would remain outstanding immediately after giving
effect to any such redemption (excluding any Securities owned
by the Company or any of its Affiliates). Notice of any such
redemption must be given within 60 days after the date of the
last Public Equity Offering or Strategic Equity Investment
resulting in gross cash proceeds to the Company, when
aggregated with all prior Public Equity Offerings and
Strategic Equity Investments, of at least $75.0 million.
(c) Redemption for Changes in Withholding Taxes.
The Company may, at its option, redeem all (but not less than
all) of the Securities then outstanding at 100% of the
principal amount thereof, plus accrued and unpaid interest, if
any, to the date of redemption, if the Company has become or
would become obligated to pay, on the next date on which any
amount would be payable with respect to the Securities, any
Additional Amounts as a result of change in law (including any
regulations promulgated thereunder) or in the interpretation
or administration thereof, if such change is announced and
becomes effective on or after the Issue Date. Notice of any
such redemption must be given within 60 days of the earlier of
the announcement and the effectiveness of any such change.
6. Notice of Redemption.
Notice of redemption will be mailed by first-class mail at
least 30 days but not more than 60 days before the Redemption
Date to each Holder of Securities to be redeemed at its
registered address; provided, however, that notice of
redemption pursuant to paragraph 5(b) of this Security will be
mailed to each Holder of Securities to be redeemed no later
than 60 days following the consummation of the last Public
Equity Offering resulting in gross cash proceeds to the
Company, when aggregated with all prior Public Equity
Offerings, of at least $75.0 million. The Company will cause a
copy of such notice to be published in a daily newspaper with
general circulation in Luxembourg (which is expected to the
Luxemburger Wort). The Trustee may select for redemption
portions of the principal amount of Securities that have
denominations equal to or larger than $1,000 principal amount.
Securities and portions of them the Trustee so selects shall
be in amounts of $1,000 principal amount or integral multiples
thereof.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the
portion of the principal amount thereof to be redeemed. A new
Security in a principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon
cancellation of the original Security. On and after the
Redemption Date, interest will cease to accrue on Securities
or portions thereof called for redemption so long as the
Company has deposited with the Paying
<PAGE> 52
Agent for the Securities funds in satisfaction of the
redemption price pursuant to the Indenture.
7. Change of Control Offer.
Upon the occurrence of a Change of Control, the Company will
be required to offer to purchase all outstanding Securities at
a purchase price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest
thereon, if any, to the Purchase Date. The Company will cause
a copy of such notice to be published in a daily newspaper
with general circulation in Luxembourg (which is expected to
the Luxemburger Wort).
8. Limitation on Disposition of Assets.
Upon the occurrence of certain Asset Sales, the Company is,
subject to certain conditions, obligated to make an offer to
purchase Securities at a purchase price in cash equal to 100%
of the aggregate principal amount thereof, plus accrued and
unpaid interest thereon, if any, to the Purchase Date.
9. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A
Holder shall register the transfer of or exchange Securities
in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain
transfer taxes or similar governmental charges payable in
connection therewith as permitted by the Indenture. The
Registrar need not register the transfer of or exchange any
Securities or portions thereof selected for redemption, except
the unredeemed portion of any security being redeemed in part.
10. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the
owner of it for all purposes.
11. Unclaimed Funds.
If funds for the payment of principal or interest remain
unclaimed for two years, the Trustee and the Paying Agent will
repay the funds to the Company at its written request. After
that, all liability of the Trustee and such Paying Agent with
respect to such funds shall cease.
12. Legal Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the
Indenture and the Securities except for certain provisions
thereof, and may be discharged from obligations to comply with
certain covenants contained in the Indenture and the
Securities, in each case upon satisfaction of certain
conditions specified in the Indenture.
13. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture and the
Securities may be amended or supplemented with the written
consent of the Holders of at least a majority in aggregate
principal amount of the Securities then outstanding, and any
existing Default or compliance with any provision may be
waived with the consent of the Holders of a majority in
aggregate principal amount of the Securities then outstanding.
Without notice to or consent of any Holder, the parties
thereto may amend or supplement the Indenture and the
Securities to, among other things, cure any ambiguity, defect
or inconsistency, provide for uncertificated Securities in
addition to or in place of certificated Securities, effect the
assumption by a successor person of all obligations of the
Company under the Securities, the Indenture and the
Registration Rights Agreement in connection with any
transaction complying with Article Five of the Indenture or
comply with any requirements of the SEC in connection with the
qualification of the Indenture under the TIA, or make any
other change that does not materially adversely affect the
rights of any Holder of a Security.
14. Restrictive Covenants.
The Indenture contains certain covenants that, among other
things, limit the ability of the Company and the Restricted
Subsidiaries to make restricted payments, to incur
indebtedness, to create liens, to sell assets, to permit
restrictions on dividends and other payments to become
applicable to Restricted Subsidiaries, to consolidate, merge
or sell all or substantially all of its assets, to engage in
transactions with affiliates or certain other related persons.
The limitations are subject to a number of important
qualifications and exceptions. The Company must annually
report to the Trustee on compliance with such limitations.
15. Defaults and Remedies.
If an Event of Default (other than certain events of
bankruptcy, insolvency or reorganization affecting the
Company) occurs and is continuing, the Trustee or the Holders
of at least 25% in aggregate principal amount of Securities
then outstanding by notice in writing to the Company may
declare all the Securities to be due and payable immediately
in the manner and with the effect provided in the Indenture.
If certain
<PAGE> 53
events of bankruptcy, insolvency or reorganization affecting
the Company occur under the Indenture, the Securities will
ipso facto become immediately due and payable without any
declaration or other act on the part of the Trustee or any
Holder of Securities. Holders of Securities may not enforce
the Indenture or the Securities except as provided in the
Indenture. The Trustee is not obligated to enforce the
Indenture or the Securities unless it has received indemnity
reasonably satisfactory to it. The Indenture permits, subject
to certain limitations therein provided, Holders of a majority
in aggregate principal amount of the Securities then
outstanding to direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of Securities
notice of certain continuing Defaults if it determines that
withholding notice is in their interest.
16. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Securities
and may otherwise deal with the Company, its Subsidiaries or
their respective Affiliates as if it were not the Trustee.
17. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator,
as such, of the Company or any of its Affiliates shall have
any liability for any obligation of the Company or any of its
Affiliates under the Securities or the Indenture or for any
claim based on, in respect of or by reason of, such
obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability.
The waiver and release are part of the consideration for the
issuance of the Securities.
18. Authentication.
This Security shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication
on this Security.
19. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of
a Security or an assignee, such as: TEN COM (= tenants in
common), TEN ENT (= tenants by the entireties), JT TEN (=
joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to
Minors Act).
20. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Securities as a
convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on
the other identification numbers printed hereon.
21. Governing Law.
The laws of the State of New York shall govern the Indenture
and this Security without regard to principles of conflicts of
laws.
<PAGE> 54
ASSIGNMENT FORM
I or we assign and transfer this Security to
(Print or type name, address and zip code of assignee or transferee)
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint agent to transfer this Security on the books of the
Company. The agent may substitute another to act for him.
Dated: Signed:
------------------- --------------------------------------
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee:
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor program
reasonably acceptable to the Trustee)
<PAGE> 55
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.10 or Section 4.16 of the
Indenture, check the appropriate box:
Section 4.10 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.10 or Section
4.16 of the Indenture, state the amount: $_____________
Dated: Signed:
------------------- --------------------------------------
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee:
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor program
reasonably acceptable to the Trustee)
<PAGE> 56
EXHIBIT B
(FORM OF SERIES B SECURITY)
HERMES EUROPE RAILTEL B.V.
10 3/8% Senior Note due 2009, Series B
CUSIP No.:
No. $
HERMES EUROPE RAILTEL B.V., a Netherlands limited company (the
"Company"), which term includes any successor corporation), for value
received promises to pay to or registered assigns, the principal sum
of Dollars, on January 15, 2009.
Interest Payment Dates: January 15 and July 15, commencing July 15,
1999.
Interest Record Dates: January 1 and July 1.
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officer.
HERMES EUROPE RAILTEL B.V.
By:
----------------------------------
Name:
Title:
<PAGE> 57
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 10 3/8% Senior Notes due 2009, Series B, described
in the within-mentioned Indenture.
Dated: January 4, 1999
THE BANK OF NEW YORK,
as Trustee
By:
-----------------------------------
Authorized Signatory
<PAGE> 58
(REVERSE OF SECURITY)
HERMES EUROPE RAILTEL B.V.
10 3/8% Senior Note due 2009, Series B
1. Interest.
HERMES EUROPE RAILTEL B.V., a Netherlands limited company (the
"Company"), promises to pay interest on the principal amount
of this Security at the rate per annum shown above. Cash
interest on the Securities will accrue from the most recent
date to which interest has been paid or, if no interest has
been paid, from January 4, 1999. The Company will pay interest
semi-annually in arrears on each Interest Payment Date,
commencing July 15, 1999. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal from time
to time on demand at the rate borne by the Securities and on
overdue installments of interest (without regard to any
applicable grace periods) at the rate borne by the Securities
to the extent lawful.
2. Method of Payment.
The Company shall pay interest on the Securities (except
defaulted interest) to the persons who are the registered
Holders at the close of business on the Interest Record Date
immediately preceding the Interest Payment Date even if the
Securities are cancelled on registration of transfer or
registration of exchange after such Interest Record Date.
Payments of principal and premium, if any, will be made (on
presentation of such Securities if in certificated form) at
the corporate trust office of the Paying Agent in New York
City or, subject to any applicable laws and regulations, at
the office of the Paying Agent in Luxembourg by United States
dollar check drawn on, or wire transfer to a United States
dollar account maintained by the Holder with, a bank located
in New York City. Payments of any installment of interest on
Securities will be made by a United States dollar check drawn
on a bank in New York City mailed to the
<PAGE> 59
Holder at such Holder's registered address or (if arrangements
satisfactory to the Company and the Paying Agents are made) by
wire transfer to a dollar account maintained by the holder
with a bank in New York City.
3. Paying Agent and Registrar.
Initially, The Bank of New York (the "Trustee") will act as
Paying Agent and Registrar in the Borough of Manhattan, The
City of New York, and Banque Internationale a Luxembourg S.A.
will act as Paying Agent and Registrar in Luxembourg. The
Company may change any Paying Agent or Registrar without
notice to the Holders. The Company or any of its Subsidiaries
may, subject to certain exceptions, act as Registrar.
4. Indenture.
The Company issued the Securities under an Indenture, dated as
of January 4, 1999 (the "Indenture"), among the Company and
the Trustee. Capitalized terms herein are used as defined in
the Indenture unless otherwise defined herein. The terms of
the Securities include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture
Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) (the "TIA"), as
in effect on the date of the Indenture until such time as the
Indenture is qualified under the TIA, and thereafter as in
effect on the date on which the Indenture is qualified under
the TIA. Notwithstanding anything to the contrary herein, the
Securities are subject to all such terms, and holders of
Securities are referred to the Indenture and the TIA for a
statement of them. This is one of the Series A Securities
referred to in the Indenture. The Series A Securities and the
Series B Securities referred to in the Indenture are general
obligations of the Company limited in aggregate principal
amount to $200,000,000.
5. Optional Redemption.
(a) The Securities will be redeemable at the option of the
Company, in whole or in part, at any time or from time to
time, on or after January 15, 2004 at the redemption prices
(expressed as a percentage of principal amount) set forth
below, plus accrued and unpaid interest thereon, if any, to
the redemption date if redeemed during the twelve-month
period commencing on January 15 of the years set forth below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- -------
<S> <C>
2004 105.188%
2005 103.459%
2006 101.729%
2007 and thereafter 100.000%
</TABLE>
(b) Redemption Upon Public Equity Offering or Strategic Equity
Investment.
At any time, or from time to time, prior to January 15, 2002,
the Company may redeem Securities at a redemption price equal
to 110.375% of the principal amount of the Securities so
redeemed, plus accrued and unpaid interest thereon, if any, to
the redemption date, with the net cash proceeds of one or more
Public Equity Offerings or Strategic Equity Investments
resulting in aggregate gross cash proceeds to the Company of
at least $75.0 million; provided, however, that at least
two-thirds of the principal amount of Securities originally
issued would remain outstanding immediately after giving
effect to any such redemption (excluding any Securities owned
by the Company or any of its Affiliates). Notice of any such
redemption must be given within 60 days after the date of the
last Public Equity Offering or Strategic Equity Investment
resulting in gross cash proceeds to the Company, when
aggregated with all prior Public Equity Offerings and
Strategic Equity Investments, of at least $75.0 million.
(c) Redemption for Changes in Withholding Taxes.
The Company may, at its option, redeem all (but not less than
all) of the Securities then outstanding at 100% of the
principal amount thereof, plus accrued and unpaid interest, if
any, to the date of redemption, if the Company has become or
would become obligated to pay, on the next date on which any
amount would be payable with respect to the Securities, any
Additional Amounts as a result of change in law (including any
regulations promulgated thereunder) or in the interpretation
or administration thereof, if such change is announced and
becomes effective on or after the Issue Date. Notice of any
such redemption must be given within 60 days of the earlier of
the announcement and the effectiveness of any such change.
6. Notice of Redemption.
Notice of redemption will be mailed by first-class mail at
least 30 days but not more than 60 days before the Redemption
Date to each Holder of Securities to be redeemed at its
registered address; provided, however, that notice of
redemption pursuant to paragraph 5(b) of this Security will be
mailed to each Holder of Securities to be redeemed no later
than 60 days following the consummation of the last Public
Equity
<PAGE> 60
Offering resulting in gross cash proceeds to the Company, when
aggregated with all prior Public Equity Offerings, of at least
$75.0 million. The Company will cause a copy of such notice to
be published in a daily newspaper with general circulation in
Luxembourg (which is expected to the Luxemburger Wort). The
Trustee may select for redemption portions of the principal
amount of Securities that have denominations equal to or
larger than $1,000 principal amount. Securities and portions
of them the Trustee so selects shall be in amounts of $1,000
principal amount or integral multiples thereof.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the
portion of the principal amount thereof to be redeemed. A new
Security in a principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon
cancellation of the original Security. On and after the
Redemption Date, interest will cease to accrue on Securities
or portions thereof called for redemption so long as the
Company has deposited with the Paying Agent for the Securities
funds in satisfaction of the redemption price pursuant to the
Indenture.
7. Change of Control Offer.
Upon the occurrence of a Change of Control, the Company will
be required to offer to purchase all outstanding Securities at
a purchase price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest
thereon, if any, to the Purchase Date. The Company will cause
a copy of such notice to be published in a daily newspaper
with general circulation in Luxembourg (which is expected to
the Luxemburger Wort).
8. Limitation on Disposition of Assets.
Upon the occurrence of certain Asset Sales, the Company is,
subject to certain conditions, obligated to make an offer to
purchase Securities at a purchase price in cash equal to 100%
of the aggregate principal amount thereof, plus accrued and
unpaid interest thereon, if any, to the Purchase Date.
9. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A
Holder shall register the transfer of or exchange Securities
in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain
transfer taxes or similar governmental charges payable in
connection therewith as permitted by the Indenture. The
Registrar need not register the transfer of or exchange any
Securities or portions thereof selected for redemption, except
the unredeemed portion of any security being redeemed in part.
10. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the
owner of it for all purposes.
11. Unclaimed Funds.
If funds for the payment of principal or interest remain
unclaimed for two years, the Trustee and the Paying Agent will
repay the funds to the Company at its written request. After
that, all liability of the Trustee and such Paying Agent with
respect to such funds shall cease.
12. Legal Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the
Indenture and the Securities except for certain provisions
thereof, and may be discharged from obligations to comply with
certain covenants contained in the Indenture and the
Securities, in each case upon satisfaction of certain
conditions specified in the Indenture.
13. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture and the
Securities may be amended or supplemented with the written
consent of the Holders of at least a majority in aggregate
principal amount of the Securities then outstanding, and any
existing Default or compliance with any provision may be
waived with the consent of the Holders of a majority in
aggregate principal amount of the Securities then outstanding.
Without notice to or consent of any Holder, the parties
thereto may amend or supplement the Indenture and the
Securities to, among other things, cure any ambiguity, defect
or inconsistency, provide for uncertificated Securities in
addition to or in place of certificated Securities, effect the
assumption by a successor person of all obligations of the
Company under the Securities, the Indenture and the
Registration Rights Agreement in connection with any
transaction complying with Article Five of the Indenture or
comply with any requirements of the SEC in connection with the
qualification of the Indenture under the TIA, or make any
other change that does not materially adversely affect the
rights of any Holder of a Security.
14. Restrictive Covenants.
The Indenture contains certain covenants that, among other
things, limit the ability of
<PAGE> 61
the Company and the Restricted Subsidiaries to make restricted
payments, to incur indebtedness, to create liens, to sell
assets, to permit restrictions on dividends and other payments
to become applicable to Restricted Subsidiaries, to
consolidate, merge or sell all or substantially all of its
assets, to engage in transactions with affiliates or certain
other related persons. The limitations are subject to a number
of important qualifications and exceptions. The Company must
annually report to the Trustee on compliance with such
limitations.
15. Defaults and Remedies.
If an Event of Default (other than certain events of
bankruptcy, insolvency or reorganization affecting the
Company) occurs and is continuing, the Trustee or the Holders
of at least 25% in aggregate principal amount of Securities
then outstanding by notice in writing to the Company may
declare all the Securities to be due and payable immediately
in the manner and with the effect provided in the Indenture.
If certain events of bankruptcy, insolvency or reorganization
affecting the Company occur under the Indenture, the
Securities will ipso facto become immediately due and payable
without any declaration or other act on the part of the
Trustee or any Holder of Securities. Holders of Securities may
not enforce the Indenture or the Securities except as provided
in the Indenture. The Trustee is not obligated to enforce the
Indenture or the Securities unless it has received indemnity
reasonably satisfactory to it. The Indenture permits, subject
to certain limitations therein provided, Holders of a majority
in aggregate principal amount of the Securities then
outstanding to direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of Securities
notice of certain continuing Defaults if it determines that
withholding notice is in their interest.
16. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Securities
and may otherwise deal with the Company, its Subsidiaries or
their respective Affiliates as if it were not the Trustee.
17. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator,
as such, of the Company or any of its Affiliates shall have
any liability for any obligation of the Company or any of its
Affiliates under the Securities or the Indenture or for any
claim based on, in respect of or by reason of, such
obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability.
The waiver and release are part of the consideration for the
issuance of the Securities.
18. Authentication.
This Security shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication
on this Security.
19. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of
a Security or an assignee, such as: TEN COM (= tenants in
common), TEN ENT (= tenants by the entireties), JT TEN (=
joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to
Minors Act).
20. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Securities as a
convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on
the other identification numbers printed hereon.
21. Governing Law.
The laws of the State of New York shall govern the Indenture
and this Security without regard to principles of conflicts of
laws.
<PAGE> 62
ASSIGNMENT FORM
I or we assign and transfer this Security to
(Print or type name, address and zip code of assignee or transferee)
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint agent to transfer this Security on the books of the
Company. The agent may substitute another to act for him.
Dated: Signed:
------------------- -------------------------------------
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee:
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor program
reasonably acceptable to the Trustee)
<PAGE> 63
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.10 or Section 4.16 of the
Indenture, check the appropriate box:
Section 4.10 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.10 or Section
4.16 of the Indenture, state the amount: $_____________
Dated: Signed:
------------------- -------------------------------------
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee:
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor program
reasonably acceptable to the Trustee)
<PAGE> 64
EXHIBIT C
FORM OF LEGEND FOR GLOBAL SECURITIES
Any Global Security authenticated and delivered hereunder
shall bear a legend (which would be in addition to any other legends
required in the case of a Restricted Security) in substantially the
following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS
SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY
BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE.
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.
<PAGE> 65
EXHIBIT D
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Re: 10 3/8% Senior Notes due 2009
(the "Securities"), of Hermes Europe Railtel B.V.
This Certificate relates to $_______ principal amount of
Securities held in the form of* ___ a beneficial interest in a Global Security
or* _______ Physical Securities by (the "Transferor").
The Transferor:*
<PAGE> 66
[ ] has requested by written order that the Registrar deliver in
exchange for its beneficial interest in the Global Security held by
the Depositary a Physical Security or Physical Securities in
definitive, registered form of authorized denominations and an
aggregate number equal to its beneficial interest in such Global
Security (or the portion thereof indicated above); or
[ ] has requested that the Registrar by written order to exchange or
register the transfer of a Physical Security or Physical Securities.
In connection with such request and in respect of each such
Security, the Transferor does hereby certify that the Transferor
is familiar with the Indenture relating to the above captioned
Securities and the restrictions on transfers thereof as provided
in Section 2.06 of such Indenture, and that the transfer of the
Securities does not require registration under the Securities Act
of 1933, as amended (the "Act"), because*:
[ ] Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.06 of the Indenture).
[ ] Such Security is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Act), in reliance on Rule
144A.
[ ] Such Security is being transferred to an institutional "accredited
investor" (within the meaning of subparagraph (a)(1), (2), (3) or (7)
of Rule 501 under the Act) which delivers a certificate to the Trustee
in the form of Exhibit E to the Indenture. An opinion of counsel to
the effect that such transfer does not require registration under the
Securities Act accompanies this certification.
[ ] Such Security is being transferred in reliance on Regulation S
under the Act. An opinion of counsel to the effect that such transfer
does not require registration under the Securities Act accompanies
this certification.
[ ] Such Security is being transferred in reliance on Rule 144 under
the Act. An opinion of counsel to the effect that such transfer does
not require registration under the Securities Act accompanies this
certification.
[ ] Such Security is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the
Act other than Rule 144A or Rule 144 or Regulation S under the Act to
a person other than an institutional "accredited investor." An opinion
of counsel to the effect that such transfer does not require
registration under the Securities Act accompanies this certification.
------------------------------
[INSERT NAME OF TRANSFEROR]
By:
---------------------------
[Authorized Signatory]
Date:
-------------------
*Check applicable box.
<PAGE> 67
EXHIBIT E
Form of Certificate To Be
Delivered in Connection with
Transfers to Institutional Accredited Investors
---------------, ----
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Administration
Re: Hermes Europe Railtel B.V. (the "Company")
Indenture (the "Indenture") relating to 10 3/8%
Senior Notes due 2009
Ladies and Gentlemen:
In connection with our proposed purchase of $ aggregate
principal amount of 10 3/8% Senior Notes due 2009 (the
"Notes") of Hermes Europe Railtel B.V., a Netherlands limited
company (the "Company"), we confirm that:
1. We understand that the Notes have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"),
and may not be sold except as permitted in the following
sentence. We understand and agree, on our own behalf and on
behalf of any accounts for which we are acting as hereinafter
stated, (x) that such Notes are being offered only in a
transaction not involving any public offering within the
meaning of the Securities Act and (y) that if we decide to
resell, pledge or otherwise transfer such Notes within two
years after the date of the original issuance of the Notes or
if within three months after we cease to be an affiliate
(within the meaning of Rule 144 under the Securities Act) of
the Company, such Notes may be resold, pledged or transferred
only (i) to the Company, (ii) so long as the Notes are
eligible for resale pursuant to Rule 144A under the Securities
Act ("Rule 144A"), to a person whom we reasonably believe
<PAGE> 68
is a "qualified institution buyer" (as defined in Rule 144A)
("QIB") that purchases for its own account or for the account
of a QIB to whom notice is given that the resale, pledge or
transfer is being made in reliance on Rule 144A (as indicated
by the box checked by the transferor on the Certificate of
Transfer on the reverse of the certificate for the Notes),
(iii) in an offshore transaction in accordance with Regulation
S under the Securities Act (as indicated by the box checked by
the transferor on the Certificate of Transfer on the reverse
of the Note if the Note is not in book-entry form), and, if
such transfer is being effected by certain transferors prior
to the expiration of the "40-day distribution compliance
period" (within the meaning of Rule 903(b)(2) of Regulation S
under the Securities Act), a certificate that may be obtained
from the Trustee is delivered by the transferee, (iv) to an
institution that is an "accredited investor" as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act (as
indicated by the box checked by the transferor on the
Certificate of Transfer on the reverse of the certificate for
the Notes) which has certified to the Company and the Trustee
for the Notes that it is such an accredited investor and is
acquiring the Notes for investment purposes and not for
distribution (provided that no Notes purchased from a foreign
purchaser or from any person other than a QIB or an
institutional accredited investor pursuant to this clause
(iii) shall be permitted to transfer any Notes so purchased to
an institutional accredited investor pursuant to this clause
(iv) prior to the expiration of the "applicable restricted
period" (within the meaning of Regulation S under the
Securities Act)), (v) pursuant to an exemption from
registration under the Securities Act provided by Rule 144 (if
applicable) under the Securities Act, or (vi) pursuant to an
effective registration statement under the Securities Act, in
each case in accordance with any applicable securities laws of
any state of the United States, and we will notify any
purchaser of the Notes from us of the above resale
restriction, if then applicable. We further understand that in
connection with any transfer of the Notes by us that the
Company and the Trustee for the Notes may request, and if so
requested we will furnish, such certificates, legal opinions
and other information as they may reasonably require to
confirm that any such transfer complies with the foregoing
restrictions.
2. We are able to fend for ourselves in the transactions
contemplated by this Offering Memorandum, we have such
knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of our
investment in the Notes, and we and any accounts for which we
are acting are each able to bear the economic risk of our or
its investment and can afford the complete loss of such
investment.
3. We understand that the minimum principal amount of Notes
that may be purchased by an investor is $250,000.
4. We understand that the Company, Donaldson, Lufkin &
Jenrette Securities Corporation, Merrill Lynch, Pierce, Fenner
& Smith Incorporated, Bear, Stearns & Co. Inc., BT Alex. Brown
Incorporated and Lehman Brothers Inc., as the initial
purchasers of the Securities ("Initial Purchasers"), and
others will rely upon the truth and accuracy of the foregoing
acknowledgments, representations and agreements and we agree
that if any of the acknowledgments, representations and
warranties deemed to have been made by us by our purchase of
Notes, for our own account or of one or more accounts as to
each of which we exercise sole investment discretion, are no
longer accurate, we shall promptly notify the Company and the
Initial Purchasers.
5. We are acquiring the Notes purchased by us for investment
purposes and not for distribution of our own account or for
one or more accounts as to each of which we exercise sole
investment discretion and we are or such account is an
institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act).
6. You are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof
to any interested party in any administrative or legal
proceeding or official inquiry with respect to the matters
covered hereby.
Very truly yours,
---------------------------------------
(Name of Purchaser)
By:
------------------------------------
Date:
----------------------------------
<PAGE> 69
EXHIBIT F
Form of Certificate To Be
Delivered in Connection
with Regulation S Transfers
--------------- ----
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Administration
Re: Hermes Europe Railtel B.V. (the "Company") 10 3/8%
Senior Notes due 2009 (the "Securities")
Ladies and Gentlemen:
In connection with our proposed sale of $____________
aggregate principal amount of the Securities, we confirm that
such sale has been effected pursuant to and in accordance with
Regulation S under the Securities Act of 1933, as amended (the
"Securities Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a person in
the United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person
acting on our behalf reasonably believed that the transferee
was outside the United States, or (b) the transaction was
executed in, on or through the facilities of a designated
off-shore securities market and neither we nor any person
acting on our behalf knows that the transaction has been
prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(a) or
Rule 904(a) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer
restrictions applicable to the Securities.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal
proceedings or official inquiry with respect to the matters
covered hereby. Defined terms used herein without definition
have the respective meanings provided in Regulation S.
Very truly yours,
[Name of Transferor]
By:
-----------------------------
<PAGE> 1
EXHIBIT 4.6
INDENTURE
DATED AS OF JANUARY 4, 1999
BETWEEN
HERMES EUROPE RAILTEL B.V., AS ISSUER
AND
THE BANK OF NEW YORK, AS TRUSTEE
--------------------
EURO 85,000,000
10 3/8% SENIOR NOTES DUE 2006
10 3/8% SENIOR NOTES DUE 2006, SERIES B
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TRUST INDENTURE INDENTURE
ACT SECTION SECTION
- ---------------- ---------
<S> <C>
Section 310(a)(1) .............................................................. 7.10
(a)(2) ................................................................... 7.10
(a)(3) ................................................................... N.A.
(a)(4) ................................................................... N.A.
(a)(5) ................................................................... 7.08, 7.10.
(b) ...................................................................... 7.08; 7.10; 10.02
(c) ...................................................................... N.A.
Section 311(a) ................................................................. 7.11
(b) ...................................................................... 7.11
(c) ...................................................................... N.A.
Section 312(a) ................................................................. 2.05
(b) ...................................................................... 10.03
(c) ...................................................................... 10.03
Section 313(a) ................................................................. 7.06
(b)(1) ................................................................... 7.06
(b)(2) ................................................................... 7.06
(c) ...................................................................... 7.06; 10.02
(d) ...................................................................... 7.06
Section 314(a) ................................................................. 4.07; 4.09; 10.02
(b) ...................................................................... N.A.
(c)(1) ................................................................... 10.04
(c)(2) ................................................................... 10.04
(c)(3) ................................................................... N.A.
(d) ...................................................................... N.A.
(e) ...................................................................... 10.05
(f) ...................................................................... N.A.
Section 315(a) ................................................................. 7.01(b)
(b) ...................................................................... 7.05; 10.02
(c) ...................................................................... 7.01(a)
(d) ...................................................................... 7.01(c)
(e) ...................................................................... 6.11
Section 316(a)(last sentence) .................................................. 2.09
(a)(1)(A) ................................................................ 6.05
(a)(1)(B) ................................................................ 6.04
(a)(2) ................................................................... N.A.
(b) ...................................................................... 6.07
(c) ...................................................................... 9.04
Section 317(a)(1) .............................................................. 6.08
(a)(2) ................................................................... 6.09
(b) ...................................................................... 2.04
Section 318(a) ................................................................. 10.01
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions................................................................................
SECTION 1.02. Incorporation by Reference of Trust Indenture Act..........................................
SECTION 1.03. Rules of Construction......................................................................
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating............................................................................
SECTION 2.02. Execution and Authentication...............................................................
SECTION 2.03. Registrar and Paying Agent.................................................................
SECTION 2.04. Paying Agent To Hold Assets in Trust.......................................................
SECTION 2.05. Securityholder Lists.......................................................................
SECTION 2.06. Transfer and Exchange......................................................................
SECTION 2.07. Replacement Securities.....................................................................
SECTION 2.08. Outstanding Securities.....................................................................
SECTION 2.09. Treasury Securities........................................................................
SECTION 2.10. Temporary Securities.......................................................................
SECTION 2.11. Cancellation...............................................................................
SECTION 2.12. Defaulted Interest.........................................................................
SECTION 2.13. CUSIP Number...............................................................................
SECTION 2.14. Deposit of Moneys..........................................................................
SECTION 2.15. Book-Entry Provisions for Global Securities................................................
SECTION 2.16. Registration of Transfers and Exchanges....................................................
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.........................................................................
SECTION 3.02. Selection of Securities To Be Redeemed.....................................................
SECTION 3.03. Notice of Redemption.......................................................................
SECTION 3.04. Effect of Notice of Redemption.............................................................
SECTION 3.05. Deposit of Redemption Price................................................................
SECTION 3.06. Securities Redeemed in Part................................................................
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities......................................................................
SECTION 4.02. Maintenance of Office or Agency............................................................
SECTION 4.03. Corporate Existence........................................................................
SECTION 4.04. Payment of Taxes and Other Claims..........................................................
SECTION 4.05. Notice of Defaults.........................................................................
SECTION 4.06. Maintenance of Properties and Insurance....................................................
SECTION 4.07. Compliance Certificate.....................................................................
SECTION 4.08. Waiver of Stay, Extension or Usury Laws....................................................
SECTION 4.09. Provision of Financial Information.........................................................
SECTION 4.10. Change of Control..........................................................................
SECTION 4.11. Limitation on Restricted Payments..........................................................
SECTION 4.12. Limitation on Incurrence of Indebtedness..............................................
SECTION 4.13. Limitations on Restrictions Affecting Restricted Subsidiaries..............................
SECTION 4.14. Designation of Unrestricted Subsidiaries...................................................
SECTION 4.15. Limitation on Liens........................................................................
SECTION 4.16. Limitation on Asset Sales..................................................................
SECTION 4.17. Limitation on Transactions with Affiliates.................................................
SECTION 4.18. Limitation on Issuances of Guarantees by Restricted Subsidiaries...........................
SECTION 4.19. Limitation on the Issuance and Sale of Capital Stock of Restricted
Subsidiaries.............................................................................
SECTION 4.20. Additional Amounts.........................................................................
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Sale of Assets, etc...............................................................
SECTION 5.02. Successor Corporation Substituted..........................................................
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default..........................................................................
SECTION 6.02. Acceleration...............................................................................
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
SECTION 6.03. Other Remedies.............................................................................
SECTION 6.04. Waiver of Past Default.....................................................................
SECTION 6.05. Control by Majority........................................................................
SECTION 6.06. Limitation on Suits........................................................................
SECTION 6.07. Rights of Holders To Receive Payment.......................................................
SECTION 6.08. Collection Suit by Trustee.................................................................
SECTION 6.09. Trustee May File Proofs of Claim...........................................................
SECTION 6.10. Priorities.................................................................................
SECTION 6.11. Undertaking for Costs......................................................................
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee..........................................................................
SECTION 7.02. Rights of Trustee..........................................................................
SECTION 7.03. Individual Rights of Trustee...............................................................
SECTION 7.04. Trustee's Disclaimer.......................................................................
SECTION 7.05. Notice of Defaults.........................................................................
SECTION 7.06. Reports by Trustee to Holders..............................................................
SECTION 7.07. Compensation and Indemnity.................................................................
SECTION 7.08. Replacement of Trustee.....................................................................
SECTION 7.09. Successor Trustee by Merger, etc...........................................................
SECTION 7.10. Eligibility; Disqualification..............................................................
SECTION 7.11. Preferential Collection of Claims Against Company..........................................
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations.......................................................
SECTION 8.02. Application of Trust Money.................................................................
SECTION 8.03. Repayment to Company.......................................................................
SECTION 8.04. Reinstatement..............................................................................
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.................................................................
SECTION 9.02. With Consent of Holders....................................................................
SECTION 9.03. Compliance with Trust Indenture Act........................................................
SECTION 9.04. Revocation and Effect of Consents..........................................................
SECTION 9.05. Notation on or Exchange of Securities......................................................
SECTION 9.06. Trustee To Sign Amendments, etc............................................................
ARTICLE TEN
MISCELLANEOUS
SECTION 10.01. Trust Indenture Act Controls...............................................................
SECTION 10.02. Notices....................................................................................
SECTION 10.03. Communications by Holders with Other Holders...............................................
SECTION 10.04. Certificate and Opinion as to Conditions Precedent.........................................
SECTION 10.05. Statements Required in Certificate or Opinion..............................................
SECTION 10.06. Rules by Trustee, Paying Agent, Registrar..................................................
SECTION 10.07. Governing Law..............................................................................
SECTION 10.08. No Recourse Against Others.................................................................
SECTION 10.09. Successors.................................................................................
SECTION 10.10. Counterpart Originals......................................................................
SECTION 10.11. Severability...............................................................................
SECTION 10.12. No Adverse Interpretation of Other Agreements..............................................
SECTION 10.13. Legal Holidays.............................................................................
SECTION 10.14. Agent for Service; Submission to Jurisdiction; Waiver of Immunities........................
SECTION 10.15. Judgment Currency..........................................................................
SIGNATURES..................................................................................................... S-1
EXHIBIT A Form of Series A Security.................................................................... A-1
EXHIBIT B Form of Series B Security.................................................................... B-1
EXHIBIT C Form of Legend for Global Securities......................................................... C-1
EXHIBIT D Form of Transfer Certificate................................................................. D-1
EXHIBIT E Form of Transfer Certificate for Institutional Accredited Investors.......................... E-1
EXHIBIT F Form of Transfer Certificate for Regulation S Transfers...................................... F-1
</TABLE>
<PAGE> 5
INDENTURE dated as of January 4, 1999, between HERMES EUROPE RAILTEL B.V.,
a Netherlands limited company (the "Company") and THE BANK OF NEW YORK, a New
York banking corporation, as Trustee.
Each party hereto agrees as follows for the benefit of each other party and
for the equal and ratable benefit of the Holders of the Securities:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed in
connection with an Acquisition from such Person or (b) existing at the time
such Person becomes a Restricted Subsidiary or is merged or consolidated
with or into the Company or any Restricted Subsidiary; provided, however,
that such Indebtedness was not Incurred in connection with, or in
contemplation of, such Acquisition, such Person becoming a Restricted
Subsidiary or such merger or consolidation.
"Acquired Person" means, with respect to any specified Person, any other
Person which merges with or into or becomes a Subsidiary of such specified
Person.
"Acquisition" means (i) any 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) by the Company or any
Restricted Subsidiary to any other Person, or any acquisition or purchase
of Equity Interests of any other Person by the Company or any Restricted
Subsidiary, in either case pursuant to which such Person shall become a
Restricted Subsidiary or shall be consolidated, merged with or into the
Company or any Restricted Subsidiary or (ii) any acquisition by the Company
or any Restricted Subsidiary of the assets of any Person which constitute
substantially all of an operating unit or line of business of such Person
or which is otherwise outside of the ordinary course of busineSection
"Additional Interest" has the meaning provided in Section 4(a) of the
Registration Rights Agreement.
"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. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to
any person, shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of such
person, whether through the ownership of voting securities, by agreement or
otherwise.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease
(that has the effect of a disposition) or other disposition (including,
without limitation, any merger, consolidation or sale-leaseback
transaction) to any Person other than the Company or a Restricted
Subsidiary, in one transaction or a series of related transactions, of (i)
any Equity Interest of any Restricted Subsidiary; (ii) any material
license, franchise or other authorization of the Company or any Restricted
Subsidiary; (iii) any assets of the Company or any Restricted Subsidiary
which constitute substantially all of an operating unit or line of business
of the Company or any Restricted Subsidiary; or (iv) any other property or
asset of the Company or any Restricted Subsidiary outside of the ordinary
course of business (including the receipt of proceeds paid on account of
the loss of or damage to any property or asset and awards of compensation
for any asset taken by condemnation, eminent domain or similar
proceedings). For the purposes of this definition, the term "Asset Sale"
shall not include (a) any transaction consummated in compliance with
Section 5.01 and the creation of any Lien not prohibited by Section 4.15;
provided, however, that any transaction consummated in compliance with
Section 5.01 involving a sale, conveyance, assignment, transfer, lease or
other disposal of less than all of the properties or assets of the Company
and the Restricted Subsidiaries shall be deemed to be an Asset Sale with
respect to the properties or assets of the Company and Restricted
Subsidiaries that are not so sold, conveyed, assigned, transferred, leased
or otherwise disposed of in such transaction; (b) sales of property or
equipment that has become worn out, obsolete or damaged or otherwise
unsuitable for use in connection with the business of the Company or any
Restricted Subsidiary, as the case may be; and (c) any transaction
consummated in compliance with Section 4.11. In addition, solely for
purposes of Section 4.16, any sale, conveyance, transfer, lease or other
disposition of any property or asset, whether in one transaction or a
series of related transactions, involving assets with a Fair Market Value
not in excess of $1.0 million in any fiscal year shall be deemed not to be
an Asset Sale.
<PAGE> 6
"Bankruptcy Law" see Section 6.01.
"Basket" see Section 4.11.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person (or comparable governing body), or any authorized
committee of that Board (it being understood that the Board of Directors of
the Company shall be its Board of Supervisory Directors).
"Board Resolution" means, with respect to any Person, a duly adopted
resolution of the Board of Directors of such Person.
"Business Day" means a day (other than a Saturday or Sunday) on which the
Depository and banks in New York and the place of payment are open for
busineSection
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be so required to be capitalized on the balance sheet in
accordance with GAAP.
"Cash Equivalents" means: (a) U.S. dollars; (b) securities issued or
directly and fully guaranteed or insured by the U.S. government or any
agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition; (c) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the
date of acquisition, bankers' acceptances with maturities not exceeding six
months and overnight bank deposits, in each case with any commercial bank
having capital and surplus in excess of $500 million; (d) repurchase
obligations with a term of not more than seven days for underlying
securities of the types described in clauses (b) and (c) entered into with
any financial institution meeting the qualifications specified in clause
(c) above; and (e) commercial paper rated P-1, A-1 or the equivalent
thereof by Moody's Investors Service, Inc. or Standard & Poor's Ratings
Group, respectively, and in each case maturing within six months after the
date of acquisition.
"Cedel" means Cedel Bank, societe anonyme.
"Change of Control" shall mean the occurrence of any of the following
events (whether or not approved by the Board of Directors of the Company):
(a) any Person or group, excluding Permitted Holders, is or becomes the
beneficial owner, directly or indirectly, of Voting Equity Interests
representing 35% or more of the total voting power of the Voting Equity
Interests of the Company at a time when the Permitted Holders together (x)
own Voting Equity Interests representing a lesser percentage of the total
voting power of the Voting Equity Interests of the Company, than such
Person or group (for purposes of determining the percentage of the Voting
Equity Interests of such Person or group, the holdings of the Permitted
Holders who are part of such Person or group shall not be counted in the
Voting Equity Interests of such Person or group) or (y) do not hold the
power to elect a majority of the members of the Board of Directors of the
Company; (b) any Person or group is or becomes the beneficial owner
directly or indirectly, of Voting Equity Interests representing 50% or more
of the total voting power of the Voting Equity Interests of GTS or has the
power, directly or indirectly, to elect a majority of the members of the
Board of Directors of GTS; (c) the Company consolidates with, or merges
with or into, another Person or the Company or one or more Restricted
Subsidiaries sell, assign, convey, transfer, lease or otherwise dispose of
all or substantially all of the assets of the Company and the Restricted
Subsidiaries, taken as a whole, to any Person (other than a Wholly Owned
Restricted Subsidiary), or any Person consolidates with, or merges with or
into, the Company, in any such event other than pursuant to a transaction
in which the Person or Persons that "beneficially owned," directly or
indirectly, Voting Equity Interests representing a majority of the total
voting power of the Voting Equity Interests of the Company immediately
prior to such transaction, "beneficially own," directly or indirectly,
Voting Equity Interests representing a majority of the total voting power
of the Voting Equity Interests of the surviving or transferee Person; (d)
GTS consolidates with, or merges with or into, another Person or GTS or one
or more of its Subsidiaries sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of the assets of GTS and its
Subsidiaries, taken as a whole, to any Person (other than a wholly owned
Subsidiary of GTS), or any Person consolidates with, or merges with or
into, GTS, in any such event other than pursuant to a transaction in which
the Person or Persons that "beneficially owned," directly or indirectly,
Voting Equity Interests representing a majority of the total voting power
of the Voting Equity Interests of GTS immediately prior to such
transaction, "beneficially own," directly or indirectly Voting Equity
Interests representing a majority of the total voting power of the Voting
Equity Interests of the surviving or transferee Person; (e) during any
consecutive two-year period, individuals who at the beginning of such
period constituted the Board of Directors of the Company (together with any
new directors whose election by the Board of Directors of the
<PAGE> 7
Company or whose nomination for election by the stockholders of the Company
was approved by a vote of a majority 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) cease for any reason
(other than by action of the Permitted Holders) to constitute a majority of
the Board of Directors of the Company, then in office; (f) during any
consecutive two year period, individuals who at the beginning of such
period constituted the Board of Directors of GTS (together with any new
directors whose election by the Board of Directors of GTS or whose
nomination for election by the stockholders of GTS was approved by a vote
of a majority 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) cease for any reason to constitute
a majority of the Board of Directors of GTS then in office; or (g) there
shall occur the liquidation or dissolution of the Company or GTS. For
purposes of this definition, (I) "group" has the meaning under Section
13(d) and 14(d) of the Exchange Act or any successor provision to either of
the foregoing, including any group acting for the purpose of acquiring,
holding or disposing of securities within the meaning of Rule 13d-5(b)(1)
under the Exchange Act, and (II) "beneficial ownership" has the meaning set
forth in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person
shall be deemed to have "beneficial ownership" of all securities that such
Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time, upon the happening of an
event or otherwise.
"Change of Control Date" see Section 4.10.
"Company" means the Person named as the "Company" in the first paragraph of
this Indenture until a successor shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Company" shall
mean such successor.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by two Officers or by an Officer and an
Assistant Treasurer or an Assistant Secretary, and delivered to the
Trustee.
"Consolidated Income Tax Expense" means, with respect to any period, the
provision for federal, state, local and foreign income taxes payable by the
Company and the Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any period, without
duplication, the sum of (i) the interest expense of the Company and the
Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP, including, without limitation, (a) any
amortization of debt discount, (b) the net cost under Interest Rate
Protection Obligations (including any amortization of discounts), (c) the
interest portion of any deferred payment obligation, (d) all commissions,
discounts and other fees and charges owed with respect to letters of credit
and bankers' acceptance financing and (e) all capitalized interest and all
accrued interest, (ii) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by the
Company and the Restricted Subsidiaries during such period as determined on
a consolidated basis in accordance with GAAP and (iii) dividends and
distributions in respect of Disqualified Equity Interests actually paid in
cash by the Company or any Restricted Subsidiary (other than to the Company
or another Restricted Subsidiary) during such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any period, the net income
of the Company and the Restricted Subsidiaries for such period determined
on a consolidated basis in accordance with GAAP, adjusted, to the extent
included in calculating such net income, by excluding, without duplication,
(a) other than for purposes of calculating the Basket, all extraordinary
gains or losses for such period, (b) other than for purposes of calculating
the Basket, all gains or losses from the sales or other dispositions of
assets out of the ordinary course of business (net of taxes, fees and
expenses relating to the transaction giving rise thereto) for such period;
(c) that portion of such net income derived from or in respect of
investments in Persons other than Restricted Subsidiaries, except to the
extent actually received in cash by the Company or any Restricted
Subsidiary (subject, in the case of any Restricted Subsidiary, to the
provisions of clause (f) of this definition); (d) the portion of such net
income (or loss) allocable to minority interests in any Person (other than
a Restricted Subsidiary) for such period, except to the extent the
Company's allocable portion of such Person's net income for such period is
actually received in cash by the Company or any Restricted Subsidiary
(subject, in the case of any Restricted Subsidiary, to the provisions of
clause (f) of this definition); (e) the net income (or loss) of any other
Person combined with the Company or any Restricted Subsidiary on a "pooling
of interests" basis attributable to any period prior to
<PAGE> 8
the date of combination; and (f) the net income of any Restricted
Subsidiary to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income is not at the
time (regardless of any waiver) permitted, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulations
applicable to that Restricted Subsidiary or its Equity Interest holders.
"Consolidated Operating Cash Flow" means, with respect to any period,
Consolidated Net Income for such period increased (without duplication), to
the extent deducted in calculating such Consolidated Net Income, by (a)
Consolidated Income Tax Expense for such period; (b) Consolidated Interest
Expense for such period; and (c) depreciation, amortization and any other
non-cash items for such period (other than any non-cash item which requires
the accrual of, or a reserve for, cash charges for any future period) of
the Company and the Restricted Subsidiaries, including, without limitation,
amortization of capitalized debt issuance costs for such period, all of the
foregoing determined on a consolidated basis in accordance with GAAP minus
non-cash items to the extent they increase Consolidated Net Income
(including the partial or entire reversal of reserves taken in prior
periods) for such period.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 10.02 or such other address as the Trustee may
give notice to the Company.
"CT Corporation System" see Section 10.14.
"Cumulative Operating Cash Flow" means, as at any date of determination,
the positive cumulative Consolidated Operating Cash Flow realized during
the period commencing on the Issue Date and ending on the last day of the
most recent fiscal quarter immediately preceding the date of determination
for which consolidated financial information of the Company is available
or, if such cumulative Consolidated Operating Cash Flow for such period is
negative, the negative amount by which cumulative Consolidated Operating
Cash Flow is less than zero.
"Currency Agreement" shall mean any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement, which may include
the use of derivatives, designed to protect the Company or any Restricted
Subsidiary against fluctuations in currency values.
"Custodian" see Section 6.01.
"Debt to Annualized Operating Cash Flow Ratio" means the ratio of (a) the
Total Consolidated Indebtedness as of the date of calculation (the
"Determination Date") to (b) two times the Consolidated Operating Cash Flow
for the latest two fiscal quarters for which financial information is
available immediately preceding such Determination Date (the "Measurement
Period"). For purposes of calculating Consolidated Operating Cash Flow for
the Measurement Period immediately prior to the relevant Determination
Date, (I) any Person that is a Restricted Subsidiary on the Determination
Date (or would become a Restricted Subsidiary on such Determination Date in
connection with the transaction that requires the determination of such
Consolidated Operating Cash Flow) will be deemed to have been a Restricted
Subsidiary at all times during such Measurement Period, (II) any Person
that is not a Restricted Subsidiary on such Determination Date (or would
cease to be a Restricted Subsidiary on such Determination Date in
connection with the transaction that requires the determination of such
Consolidated Operating Cash Flow) will be deemed not to have been a
Restricted Subsidiary at any time during such Measurement Period, and (III)
if the Company or any Restricted Subsidiary shall have in any manner (x)
acquired (through an Acquisition or the commencement of activities
constituting such operating business) or (y) disposed of (by way of an
Asset Sale or the termination or discontinuance of activities constituting
such operating business) any operating business during such Measurement
Period or after the end of such period and on or prior to such
Determination Date, such calculation will be made on a pro forma basis in
accordance with GAAP as if, in the case of an Acquisition or the
commencement of activities constituting such operating business, all such
transactions had been consummated on the first day of such Measurement
Period and, in the case of an Asset Sale or termination or discontinuance
of activities constituting such operating business, all such transactions
had been consummated prior to the first day of such Measurement Period (it
being understood that in calculating Consolidated Operating Cash Flow the
exclusions set forth in clauses (a) through (f) of the definition of
Consolidated Net Income shall apply to an Acquired Person as if it were a
Restricted Subsidiary).
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Depository" means, with respect to the Securities issued in the form of
one or more Global Securities, Euroclear or Cedel or a Person designated as
the common depository by Euroclear or Cedel.
<PAGE> 9
"Designation" see Section 4.14.
"Designation Amount" see Section 4.14.
"Determination Date" has the meaning set forth in the definition of "Debt
to Annualized Operating Cash Flow Ratio" above.
"Disinterested Director" means a member of the Board of Directors of the
Company who does not have any material direct or indirect financial
interest in or with respect to the transaction being considered.
"Disposition" means, with respect to any Person, any merger, consolidation
or other business combination involving such Person (whether or not such
Person is the Surviving Person) or the sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of such
Person's assets.
"Disqualified Equity Interest" means any Equity Interest which, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable, at the option of the
holder thereof, in whole or in part, on or prior to the Maturity Date;
provided, however, that any Equity Interests that would not constitute
Disqualified Equity Interests but for provisions thereof giving holders
thereof the right to require the Company to repurchase or redeem such
Equity Interests upon the occurrence of a change in control occurring prior
to the Maturity Date shall not constitute Disqualified Equity Interests if
the change in control provisions applicable to such Equity Interests are no
more favorable to the holders of such Equity Interests than the provisions
under Section 4.10 and such Equity Interests specifically provide that the
Company will not repurchase or redeem any such Equity Interests pursuant to
such provisions prior to the Company's repurchase of Securities as are
required to be repurchased pursuant to the provisions under Section 4.10.
"Dollar Equivalent" shall mean, with respect to a 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 other
currency involved in such computation into U.S. dollars at the rate for the
purchase of U.S. dollars with the applicable currency as set forth in the
Key Currency Cross Rates table of The Wall Street Journal (or a successor
table) on the date that is two Business Days prior to such determination.
"Dollar Notes" means (1) $200,000,000 aggregate principal amount of 10 3/8%
Senior Notes due 2009 of the Company and (2) the 10 3/8% Senior Notes due
2009, Series B, of the Company issued in exchange for the securities
referred to in clause (1).
"Equity Interest" in any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or
limited, in such Person, including any Preferred Equity Interests.
"Euroclear" means Morgan Guaranty Trust Company of New York (Brussels
office) as operator of the Euroclear System.
"Event of Default" see Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC thereunder.
"Expiration Date" has the meaning set forth in the definition of "Offer to
Purchase" below.
"Fair Market Value" means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) which could be
negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing and able buyer, neither of which is under any
compulsion to complete the transaction; provided, however, that the Fair
Market Value of any such asset or assets shall be determined conclusively
by the Board of Directors of the Company acting in good faith, which
determination shall be evidenced by a resolution of such Board delivered to
the Trustee.
"GAAP" means, at any date of determination, generally accepted accounting
principles in effect in the United States which are applicable at the date
of determination and which are consistently applied for all applicable
periods.
"Global Security" means a security evidencing all or a portion of the
Securities issued to the Depository or its nominee in accordance with
Section 2.01 and bearing the legend set forth in Exhibit C hereto.
"GTS" means Global TeleSystems Group, Inc., a Delaware corporation, and its
successors.
"guarantee" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the
ordinary course of
<PAGE> 10
business), direct or indirect, in any manner, of any part or all of such
obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the
payment or performance (or payment of damages in the event of
non-performance) of all or any part of such obligation, including, without
limiting the foregoing, the payment of amounts drawn down by letters of
credit. A guarantee shall include, without limitation, any agreement to
maintain or preserve any other person's financial condition or to cause any
other Person to achieve certain levels of operating results.
"Holder," "holder of Securities," "Securityholders" or other similar terms
mean the registered holder of any Security.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to
GAAP or otherwise, of any such Indebtedness or other obligation on the
balance sheet of such Person (and "Incurrence," "Incurred" and "Incurring"
shall have meanings correlative to the foregoing). Indebtedness of a Person
existing at the time such Person becomes a Restricted Subsidiary or is
merged or consolidated with or into the Company or any Restricted
Subsidiary shall be deemed to be Incurred at such time.
"Indebtedness" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and
whether or not contingent, (a) every obligation of such Person for money
borrowed; (b) every obligation of such Person evidenced by bonds,
debentures, notes or other similar instruments, including obligations
incurred in connection with the acquisition of property, assets or
businesses; (c) every reimbursement obligation of such Person with respect
to letters of credit, bankers' acceptances or similar facilities issued for
the account of such Person; (d) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but
excluding trade accounts payable incurred in the ordinary course of
business and payable in accordance with industry practices, or other
accrued liabilities arising in the ordinary course of business which are
not overdue or which are being contested in good faith); (e) every Capital
Lease Obligation of such Person; (f) every net obligation under interest
rate swap or similar agreements or foreign currency hedge, exchange or
similar agreements of such Person; (g) every obligation of the type
referred to in clauses (a) through (f) of another Person and all dividends
of another Person the payment of which, in either case, such Person has
guaranteed or is responsible or liable for, directly or indirectly, as
obligor, guarantor or otherwise; and (h) any and all Refinancings of, or
amendments, modifications or supplements to, any liability of the kind
described in any of the preceding clauses (a) through (g) above.
Indebtedness (i) shall never be calculated taking into account any cash and
cash equivalents held by such Person; (ii) shall not include obligations of
any Person (x) arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently drawn
against insufficient funds in the ordinary course of business, provided
that such obligations are extinguished within two Business Days of their
incurrence unless covered by an overdraft line, (y) resulting from the
endorsement of negotiable instruments for collection in the ordinary course
of business and consistent with past business practices and (z) under
stand-by letters of credit to the extent collateralized by cash or Cash
Equivalents; (iii) which provides that an amount less than the principal
amount thereof shall be due upon any declaration of acceleration thereof
shall be deemed to be Incurred or outstanding in an amount equal to the
accreted value thereof at the date of determination determined in
accordance with GAAP; and (iv) shall include the liquidation preference and
any mandatory redemption payment obligations in respect of any Disqualified
Equity Interests of the Company or any Preferred Equity Interests of any
Restricted Subsidiary.
"Indenture" means this Indenture as amended or supplemented from time to
time.
"Independent Financial Advisor" means a recognized, accounting, appraisal,
investment banking firm or consultant with experience in a
Telecommunications Business (i) which does not, and whose directors,
officers and employees or Affiliates do not, have a material direct or
indirect financial interest in the Company and (ii) which, in the judgment
of the Board of Directors of the Company, is otherwise independent and
qualified to perform the task for which it is to be engaged.
"Initial Purchasers" means Donaldson, Lufkin & Jenrette International,
Merrill Lynch International, Bear, Stearns International Limited, BT Alex.
Brown International, a division of Bankers Trust International, PLC and
Lehman Brothers International (Europe).
<PAGE> 11
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act.
"interest" means, with respect to the Securities, the sum of any cash
interest and any Additional Interest on the Securities.
"Interest Payment Date" means each semiannual interest payment date on
January 15 and July 15 of each year, commencing July 15, 1999.
"Interest Rate Protection Obligations" means, with respect to any Person,
the Obligations of such Person under (i) interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements, and (ii)
other agreements or arrangements designed to protect such Person against
fluctuations in interest rates.
"Interest Record Date" for the interest payable on any Interest Payment
Date (except a date for payment of defaulted interest) means the January 1
or July 1 (whether or not a Business Day), as the case may be, immediately
preceding such Interest Payment Date.
"Investment" means, with respect to any Person, any direct or indirect
loan, advance, guarantee or other extension of credit or capital
contribution to (by means of transfers of cash or other property or assets
to others or payments for property or services for the account or use of
others, or otherwise), or purchase or acquisition of capital stock, bonds,
notes, debentures or other securities or evidences of Indebtedness issued
by, any other Person. The amount of any Investment shall be the original
cost of such Investment, plus the cost of all additions thereto, and minus
the amount of any portion of such Investment repaid to such Person in cash
as a repayment of principal or a return of capital, as the case may be, but
without any other adjustments for increases or decreases in value, or
write-ups, write-downs or write-offs with respect to such Investment. In
determining the amount of any investment involving a transfer of any
property or asset other than cash, such property shall be valued at its
Fair Market Value at the time of such transfer. "Investments" shall exclude
extensions of trade credit in the ordinary course of business in accordance
with normal trade practices.
"Issue Date" means the original issue date of the Securities.
"Judgment Currency" see Section 10.15.
"Latest Balance Sheet" means, of any Person, the latest consolidated
balance sheet of such Person reported on by a recognized firm of
independent accountants without qualification as to scope; provided,
however, that such balance sheet is as of a date within the past 135 days.
"Lien" means any lien, mortgage, charge, security interest, hypothecation,
assignment for security or encumbrance of any kind (including any
conditional sale or capital lease or other title retention agreement, any
lease in the nature thereof, and any agreement to give any security
interest).
"Maturity Date" means the date, which is set forth on the face of the
Securities, on which the Securities will mature.
"Measurement Period" has the meaning set forth in the definition of "Debt
to Annualized Operating Cash Flow Ratio" above.
"Monetization Sale" see Section 4.16.
"Net Cash Proceeds" means the aggregate proceeds in the form of cash or
Cash Equivalents received by the Company or any Restricted Subsidiary in
respect of any Asset Sale, including all cash or Cash Equivalents received
upon any sale, liquidation or other exchange of proceeds of Asset Sales
received in a form other than cash or Cash Equivalents, net of (a) the
direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and
any relocation expenses incurred as a result thereof; (b) taxes paid or
payable as a result thereof (after taking into account any available tax
credits or deductions and any tax sharing arrangements); (c) amounts
required to be applied to the repayment of Indebtedness secured by a Lien
on the asset or assets that were the subject of such Asset Sale; (d)
amounts deemed, in good faith, appropriate by the Board of Directors of the
Company to be provided as a reserve, in accordance with GAAP, against any
liabilities associated with such assets which are the subject of such Asset
Sale (provided that the amount of any such reserves shall be deemed to
constitute Net Cash Proceeds at the time such reserves shall have been
released or are not otherwise required to be retained as a reserve); and
(e) with respect to Asset Sales by Subsidiaries, the portion of such cash
payments attributable to Persons holding a minority interest in such
Subsidiary.
"Note Amount" see Section 4.16.
"Note Portion of Excess Proceeds" see Section 4.16.
"Obligations" means any principal, interest (including, without limitation,
post-petition interest), penalties, fees, indemnifications, reimbursement
obligations, damages and other liabilities payable under the documentation
governing any Indebtedness.
<PAGE> 12
"Offer" has the meaning set forth in the definition of "Offer to Purchase"
below.
"Offer to Purchase" means a written offer (the "Offer") sent by or on
behalf of the Company by first-class mail, postage prepaid, to each holder
at his address appearing in the register for the Securities on the date of
the Offer offering to purchase up to the principal amount of Securities
specified in such Offer at the purchase price specified in such Offer (as
determined pursuant to this Indenture). Unless otherwise required by
applicable law, the Offer shall specify an expiration date (the "Expiration
Date") of the Offer to Purchase, which shall be not less than 20 Business
Days nor more than 90 days after the date of such Offer, and a settlement
date (the "Purchase Date") for purchase of Securities to occur no later
than five Business Days after the Expiration Date. The Company shall notify
the Trustee at least 15 Business Days (or such shorter period as is
acceptable to the Trustee) prior to the mailing of the Offer of the
Company's obligation to make an Offer to Purchase, and the Offer shall be
mailed by the Company or, at the Company's request, by the Trustee in the
name and at the expense of the Company. The Offer shall contain all the
information required by applicable law to be included therein. The Offer
shall contain all instructions and materials necessary to enable such
Holders to tender Securities pursuant to the Offer to Purchase. The Offer
shall also state:
(1) the Section of this Indenture pursuant to which the Offer to Purchase
is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the outstanding Securities offered
to be purchased by the Company pursuant to the Offer to Purchase
(including, if less than 100%, the manner by which such amount has been
determined pursuant to the Section of this Indenture requiring the Offer to
Purchase) (the "Purchase Amount");
(4) the purchase price to be paid by the Company for each Euro 1,000
aggregate principal amount of Securities accepted for payment (as specified
pursuant to this Indenture) (the "Purchase Price");
(5) that the holder may tender all or any portion of the Securities
registered in the name of such holder and that any portion of a Security
tendered must be tendered in an integral multiple of Euro 1,000 aggregate
principal amount;
(6) the place or places where Securities are to be surrendered for tender
pursuant to the Offer to Purchase;
(7) that interest on any Security not tendered or tendered but not
purchased by the Company pursuant to the Offer to Purchase will continue to
accrue;
(8) that on the Purchase Date the Purchase Price will become due and
payable upon each Security being accepted for payment pursuant to the Offer
to Purchase and that interest thereon shall cease to accrue on and after
the Purchase Date;
(9) that each holder electing to tender all or any portion of a Security
pursuant to the Offer to Purchase will be required to surrender such
Security at the place or places specified in the Offer prior to the close
of business on the Expiration Date (such Security being, if the Company or
the Trustee so requires, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Trustee
duly executed by, the holder thereof or his attorney duly authorized in
writing);
(10) that holders will be entitled to withdraw all or any portion of
Securities tendered if the Company (or its Paying Agent) receives, not
later than the close of business on the fifth Business Day next preceding
the Expiration Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the holder, the principal amount of the Security
the holder tendered, the certificate number of the Security the holder
tendered and a statement that such holder is withdrawing all or a portion
of his tender;
(11) that (a) if Securities in an aggregate principal amount less than or
equal to the Purchase Amount are duly tendered and not withdrawn pursuant
to the Offer to Purchase, the Company shall purchase all such Securities
and (b) if Securities in an aggregate principal amount in excess of the
Purchase Amount are tendered and not withdrawn pursuant to the Offer to
Purchase, the Company shall purchase Securities having an aggregate
principal amount equal to the Purchase Amount on a pro rata basis (with
such adjustments as may be deemed appropriate so that only Securities in
denominations of Euro 1,000 aggregate principal amount or integral
multiples thereof shall be purchased); and
(12) that in the case of any holder whose Security is purchased only in
part, the Company shall execute and the Trustee shall authenticate and
deliver to the holder of such Security without service charge, a new
Security or Securities, of any authorized denomination as requested by such
holder, in an aggregate principal amount equal to and in exchange for the
unpurchased portion of the Security so tendered.
An Offer to Purchase shall be governed by and effected in accordance with
the provisions above pertaining to any Offer.
<PAGE> 13
"Officer" means the Chairman, any Vice Chairman, the President, any Vice
President, the Chief Financial Officer, the Treasurer, or the Secretary of
the Company.
"Officer's Certificate" means a certificate signed by an Officer of the
Company complying with Sections 10.04 and 10.05.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company.
"Other Debt" see Section 4.16.
"Participant" see Section 2.15.
"Paying Agent" see Section 2.03.
"Permitted Holders" means GTS or any of its Affiliates.
"Permitted Investments" means (a) Cash Equivalents; (b) Investments in
prepaid expenses, negotiable instruments held for collection and lease,
utility and workers' compensation, performance and other similar deposits;
(c) loans and advances to employees made in the ordinary course of business
not to exceed $3,000,000 in the aggregate at any one time outstanding; (d)
Interest Rate Protection Obligations and Currency Agreements permitted
under Section 4.12; (e) bonds, notes, debentures or other securities
received as a result of Asset Sales permitted under Section 4.16; (f)
transactions with officers, directors and employees of the Company or any
Restricted Subsidiary entered into in the ordinary course of business
(including compensation or employee benefit arrangements with any such
director or employee) and consistent with past business practices; (g)
Investments made in the ordinary course of business and on ordinary
business terms as partial payment for constructing a network relating
principally to a Telecommunications Business; (h) Investments in any
Restricted Subsidiary; (i) intercompany Indebtedness to the extent
permitted under Section 4.12(b)(v); (i) Investments by the Company or any
Restricted Subsidiary in another Person, if as a result of such Investment
(x) such other Person becomes a Restricted Subsidiary or (y) such other
Person is merged or consolidated with or into, or transfers or conveys all
or substantially all of its assets to, the Company or a Restricted
Subsidiary; and (j) Investments in evidences of Indebtedness, securities or
other property received from another Person by the Company or any
Restricted Subsidiary in connection with any bankruptcy proceeding or by
reason of a composition or readjustment of debt or a reorganization of such
Person or as a result of foreclosure, perfection or enforcement of any Lien
in exchange for evidences of Indebtedness, securities or other property of
such Person held by the Company or any Restricted Subsidiary, or for other
liabilities or obligations of such other Person to the Company or any
Restricted Subsidiary that were created in accordance with the terms of
this Indenture.
"Permitted Liens" means (a) Liens on property of a Person existing at the
time such Person is merged into or consolidated with the Company or any
Restricted Subsidiary; provided, however, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not
secure any property or assets of the Company or any Restricted Subsidiary
other than the property or assets subject to the Liens prior to such merger
or consolidation; (b) Liens existing on the Issue Date; (c) Liens securing
Indebtedness consisting of Capitalized Lease Obligations, mortgage
financings, industrial revenue bonds or other monetary obligations, in each
case incurred solely for the purpose of financing all or any part of the
purchase price or cost of construction or installation of assets used in
the business of the Company or any Restricted Subsidiary, or repairs,
additions or improvements to such assets; provided, however, that (I) such
Liens secure Indebtedness in an amount not in excess of the original
purchase price or the original cost of any such assets or repair, addition
or improvement thereto (plus an amount equal to the reasonable fees and
expenses in connection with the Incurrence of such Indebtedness), (II) such
Liens do not extend to any other assets of the Company or any Restricted
Subsidiary (and, in the case of repair, addition or improvements to any
such assets, such Lien extends only to the assets (and improvements thereto
or thereon) repaired, added to or improved), (III) the Incurrence of such
Indebtedness is permitted by Section 4.12 and (IV) such Liens attach within
90 days of such purchase, construction, installation, repair, addition or
improvement; (d) Liens to secure any Refinancings, in whole or in part, of
any Indebtedness secured by Liens referred to in the clauses above so long
as such Lien does not extend to any other property (other than improvements
thereto); (e) Liens securing letters of credit entered into in the ordinary
course of business and consistent with past business practice; (f) Liens on
and pledges of the capital stock of any Unrestricted Subsidiary securing
any Indebtedness of such Unrestricted Subsidiary; (g) Liens on any property
or assets of a Restricted Subsidiary granted in favor of and held by the
Company or any Restricted Subsidiary; (h) Liens on
<PAGE> 14
any property or assets of the Company or any Restricted Subsidiary securing
on a pari passu basis all of the Securities and the Dollar Notes; (i)
statutory Liens of landlords and carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen or other like Liens arising in the
ordinary course of business of the Company or any Restricted Subsidiary and
with respect to amounts not yet delinquent or being contested in good faith
by appropriate proceedings; (j) Liens for taxes, assessments, government
charges or claims that are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted; provided that any
reserve or other appropriate provision as shall be required in conformity
with GAAP shall have been made therefor; (k) Liens incurred or deposits
made to secure the performance of tenders, bids, leases, statutory
obligations, surety and appeal bonds, government contracts, performance
bonds and other obligations of a like nature incurred in the ordinary
course of business (other than contracts for the payment of money); (l)
easements, rights-of-way, restrictions and other similar charges or
encumbrances not interfering in any material respect with the business of
the Company or any Restricted Subsidiary incurred in the ordinary course of
business; (m) Liens arising by reason of judgment, decree or order of any
court so long as such Lien is adequately bonded and any appropriate legal
proceedings that may have been duly initiated for the review of such
judgment, decree or order shall not have been finally terminated or the
period within which such proceedings may be initiated shall not have
expired; (n) Liens securing Qualified Subsidiary Indebtedness to the extent
permitted to be Incurred under Section 4.12; (o) Liens securing
Indebtedness under Interest Rate Protection Obligations or Indebtedness
under Currency Agreements to the extent permitted to be Incurred under
Section 4.12; and (p) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security.
"Permitted Refinancing" means, with respect to any Indebtedness,
Indebtedness to the extent representing a Refinancing of such Indebtedness;
provided, however, that (1) the Refinancing Indebtedness shall not exceed
the sum of the amount of the Indebtedness being Refinanced, plus the amount
of accrued interest or dividends thereon, the amount of any reasonably
determined prepayment premium necessary to accomplish such Refinancing and
reasonable fees and expenses incurred in connection therewith; (2) the
Refinancing Indebtedness shall have a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced and shall not permit redemption or other
retirement (including pursuant to any required offer to purchase to be made
by the Company or any Restricted Subsidiary) of such Indebtedness at the
option of the holder thereof prior to the final stated maturity of the
Indebtedness being Refinanced, other than a redemption or other retirement
at the option of the holder of such Indebtedness (including pursuant to a
required offer to purchase made by the Company or a Restricted Subsidiary)
upon a change of control of the Company pursuant to provisions
substantially similar to those under Section 4.10; (3) Indebtedness that
ranks pari passu with the Securities may be Refinanced only with
Indebtedness that is made pari passu with or subordinate in right of
payment to the Securities, and Indebtedness that is subordinated in right
of payment to the Securities may be Refinanced only with Indebtedness that
is subordinate in right of payment to the Securities on terms no less
favorable to the Holders than those contained in the Indebtedness being
Refinanced; and (4) the Refinancing Indebtedness shall be Incurred by the
obligor on the Indebtedness being Refinanced or by the Company.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, limited
liability partnership, limited partnership, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Physical Securities" has the meaning set forth in Section 2.01.
"Preferred Equity Interest" in any Person, means an Equity Interest of any
class or classes (however designated) which is preferred as to the payment
of dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over
Equity Interests of any other class in such Person.
"principal" of a debt security means the principal of the security, plus,
when appropriate, the premium, if any, on the security.
"Private Placement Legend" means the legend initially set forth on the
Series A Securities in the form set forth on Exhibit A hereto.
"Public Equity Offering" means an underwritten public offering of common
Equity Interests of the Company pursuant to an effective registration
statement filed under the
<PAGE> 15
Securities Act (excluding registration statements filed on Form S-8).
"Purchase Amount" has the meaning set forth in the definition of "Offer to
Purchase" above.
"Purchase Date" has the meaning set forth in the definition of "Offer to
Purchase" above.
"Purchase Price" has the meaning set forth in the definition of "Offer to
Purchase" above.
"QIB Global Security" see Section 2.01.
"Qualified Equity Interest" means any Equity Interest of the Company other
than any Disqualified Equity Interest.
"Qualified Institutional Buyer" or "QIB" means a "qualified institutional
buyer" as that term is defined in Rule 144A under the Securities Act.
"Qualified Subsidiary Indebtedness" means (i) Indebtedness of Restricted
Subsidiaries under one or more senior credit agreements, senior loan
agreements or similar senior facilities, secured or unsecured, entered into
from time to time, including any related notes, guarantees collateral
documents, instruments and agreements executed in connection therewith or
(ii) Indebtedness of Restricted Subsidiaries in an aggregate principal
amount not to exceed $25.0 million in the aggregate at any time
outstanding.
"Redemption Date," when used with respect to any Security to be redeemed,
means the date fixed for such redemption pursuant to this Indenture.
"Redemption Price," when used with respect to any Security to be redeemed,
means the price fixed for such redemption pursuant to this Indenture as set
forth in the form of Security annexed hereto as Exhibit A or Exhibit B
hereto.
"Refinance" means refinance, renew, extend, replace, defease or refund; and
"Refinancing" and "Refinanced" have correlative meanings.
"Registered Exchange Offer" means the offer to exchange the Series B
Securities for all of the outstanding Series A Securities in accordance
with the Registration Rights Agreement.
"Registrar" see Section 2.03.
"Registration" means the Registered Exchange Offer by the Company or other
registration of the Series A Securities under the Securities Act pursuant
to and in accordance with the terms of the Registration Rights Agreement.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of January 4, 1999 relating to the Securities between the Company
and the Initial Purchasers.
"Registration Statement" means the registration statement(s) as defined and
described in the Registration Rights Agreement.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Security" see Section 2.01.
"Replacement Assets" means (x) properties and assets (other than cash or
any Equity Interests or other security) that will be used in a
Telecommunications Business of the Company and the Restricted Subsidiaries
or (y) Equity Interests of any Person engaged primarily in a
Telecommunications Business, which Person will become on the date of
acquisition thereof a Restricted Subsidiary as a result of the Company's
acquiring such Equity Interests.
"Required Filing Date" see Section 4.09.
"Restricted Payments" see Section 4.11.
"Restricted Security" has the meaning set forth in Rule 144(a)(3) under the
Securities Act or any successor to such rule; provided, however, that the
Trustee shall be entitled to request and conclusively rely upon an Opinion
of Counsel with respect to whether any Security is a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company that has not
been designated by the Board of Directors of the Company, by a resolution
of the Board of Directors of the Company delivered to the Trustee, as an
Unrestricted Subsidiary pursuant to Section 4.14. Any such designation may
be revoked by a resolution of the Board of Directors of the Company
delivered to the Trustee, subject to the provisions of such covenant.
"Revocation" see Section 4.14.
"Rule 144A" means Rule 144A under the Securities Act or any successor
thereto.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Series A Securities and the Series B Securities
treated as a single class of securities, as amended or supplemented from
time to time in accordance with the terms of this Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.
<PAGE> 16
"Series A Securities" means the 10 3/8% Senior Notes due 2006 of the
Company issued pursuant to this Indenture and sold pursuant to the Purchase
Agreement.
"Series B Securities" means the 10 3/8% Senior Notes due 2006, Series B, of
the Company to be issued pursuant to this Indenture in exchange for the
Series A Securities pursuant to the Registered Exchange Offer and the
Registration Rights Agreement.
"Share Capital" shall mean, at any time of determination, the stated
capital of the Equity Interests (other than Disqualified Stock) and
additional paid-in capital of the Company at such time, all as determined
in accordance with GAAP.
"Significant Restricted Subsidiary" means, at any date of determination,
(a) any Restricted Subsidiary that, together with its Subsidiaries that
constitute Restricted Subsidiaries (i) for the most recent fiscal year of
the Company accounted for more than 10.0% of the consolidated revenues of
the Company and the Restricted Subsidiaries or (ii) as of the end of such
fiscal year, owned more than 10.0% of the consolidated assets of the
Company and the Restricted Subsidiaries, all as set forth on the
consolidated financial statements of the Company and the Restricted
Subsidiaries for such year prepared in conformity with GAAP, and (b) any
Restricted Subsidiary which, when aggregated with all other Restricted
Subsidiaries that are not otherwise Significant Restricted Subsidiaries and
as to which any event described in Section 6.01(8) or (9) has occurred and
is continuing, would constitute a Significant Restricted Subsidiary under
clause (a) of this definition.
"Stated Maturity", when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security
as the fixed date on which the principal of such Security or such
installment of interest is due and payable.
"Strategic Equity Investments" means the issuance and sale of Qualified
Equity Interests to a Person that has an equity market capitalization, a
net asset value or annual revenues of at least $1.5 billion and owns and
operates business primarily in a Telecommunication Business
"Subordinated Indebtedness" means any Indebtedness of the Company which is
expressly subordinated in right of payment to the Securities.
"Subsidiary" means, with respect to any Person, (a) any corporation of
which the outstanding Voting Equity Interests having at least a majority of
the votes entitled to be cast in the election of directors shall at the
time be owned, directly or indirectly, by such Person, or (b) any other
Person of which at least a majority of Voting Equity Interests are at the
time, directly or indirectly, owned by such first named Person.
"Surviving Person" means, with respect to any Person involved in or that
makes any Disposition, the Person formed by or surviving such Disposition
or the Person to which such Disposition is made.
"Tax" shall mean any tax, duty, levy, impost, assessment or other
governmental charge (including penalties, interest and any other
liabilities related thereto).
"Taxing Authority" shall mean any government or political subdivision or
territory or possession of any government or any authority or agency
therein or thereof having power to tax.
"Telecommunications Acquisition" means an Acquisition of properties or
assets to be used in a Telecommunications Business or of the Equity
Interests of any Person that becomes a Restricted Subsidiary; provided,
however, that such Person's properties and assets shall consist principally
of properties or assets that will be used in a Telecommunications
Business
"Telecommunications Business" means any business owning, constructing,
financing and operating a telephone and/or communications system located
entirely in countries located in Western and Central Europe, or any
business reasonably related thereto, including, without limitation, any
business conducted by the Company or any Restricted Subsidiary on the Issue
Date.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb), as amended, as in effect on the date of this Indenture until
such time as this Indenture is qualified under the TIA, and thereafter as
in effect on the date on which this Indenture is qualified under the TIA,
except in each case as provided in Section 9.03.
"Total Consolidated Indebtedness" means, as at any date of determination,
an amount equal to the aggregate amount of all Indebtedness of the Company
and the Restricted Subsidiaries, on a consolidated basis, outstanding as of
such date of determination, after giving effect to any Incurrence of
Indebtedness and the application of the proceeds therefrom giving rise to
such determination.
"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 such successor.
"Trust Officer" means any officer within the corporate trust department (or
any successor group of the Trustee) including any vice president, assistant
vice president,
<PAGE> 17
assistant secretary or any other officer or assistant officer of the
Trustee customarily performing functions similar to those performed by the
persons who at that time shall be such officers, and also means, with
respect to a particular corporate trust matter, any other officer to whom
such trust matter is referred because of his knowledge of and familiarity
with the particular subject, and who shall have direct responsibility for
the administration of this Indenture.
"Unrestricted Subsidiary" means any Subsidiary of the Company designated as
such pursuant to Section 4.14. Any such designation may be revoked by a
resolution of the Board of Directors of the Company delivered to the
Trustee, subject to the provisions of Section 4.14.
"Unutilized Net Cash Proceeds" see Section 4.16(a).
"U.S. Government Obligations" means direct non-callable obligations of, or
obligations guaranteed by, the United States of America for the payment of
which guarantee or obligations the full faith and credit of the United
States is pledged.
"U.S. Person" means a "U.S. person" as defined in Rule 902 under the
Securities Act or any successor to such Rule.
"Voting Equity Interests" means Equity Interests in a corporation or other
Person with voting power under ordinary circumstances entitling the holders
thereof to elect the Board of Directors or other governing body of such
corporation or Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the sum of the
products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled
payment of principal, including payment of final maturity, in respect
thereof, by (ii) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment, by (b) the then outstanding aggregate principal amount of such
Indebtedness.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary all of
the outstanding Voting Equity Interests (other than directors' qualifying
shares) of which are owned, directly or indirectly, by the Company.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or any other
obligor on the Securities.
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 and not
otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. 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 generally accepted accounting principles in effect
from time to time, and any other reference in this Indenture to "generally
accepted accounting principles" refers to GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
The Series A Securities and the Trustee's certificate of authentication
thereof shall be substantially in the form of Exhibit A hereto, which is
hereby incorporated in and expressly made a part of this Indenture. The
Series B Securities and the Trustee's certificate of authentication thereof
shall be substantially in the form of Exhibit B hereto, which is hereby
incorporated in and expressly made a part of this Indenture.
<PAGE> 18
The Securities may have notations, legends or endorsements required by law,
stock exchange rule or usage. The Company and the Trustee shall approve the
form of the Securities and any notation, legend or endorsement on them.
Each Security shall be dated the date of its issuance and shall show the
date of its authentication.
Securities initially offered and sold by the Initial Purchasers shall,
unless the applicable Holder requests Securities in the form of
certificated Securities in registered form ("Physical Securities"), which
shall be in substantially the form set forth in Exhibit A hereto, be issued
initially in the form of one or more permanent Global Securities in
registered form, substantially in the form set forth in Exhibit A hereto,
deposited with the Trustee, as custodian for the Depository, and shall bear
the legend set forth in Exhibit C hereto. One or more separate Global
Securities shall be issued to represent Securities held by (i) Qualified
Institutional Buyers (a "QIB Global Security") and (ii) Persons acquiring
Securities in offshore transactions in reliance on Regulation S (a
"Regulation S Global Security"). The Company shall cause the QIB Global
Securities and Regulation S Global Securities to have separate CUSIP
numbers.
The provisions of the "Operating Procedures of the Euroclear System" and
"Terms and Conditions Governing Use of Euroclear" and the "General Terms
and Conditions of Cedel Bank" and "Customer Handbook" of Cedel shall be
applicable to interests in the Regulation S Global Security that are held
by the Participants through Euroclear or Cedel.
Upon consummation of the Registration, Series B Securities may be issued in
the form of one or more permanent Global Securities in registered form,
substantially in the form set forth in Exhibit B hereto, deposited with the
Trustee, as custodian for the Depository, and shall bear the legend set
forth on Exhibit C hereto.
The aggregate principal amount of any Global Security may from time to time
be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depository, as hereinafter provided.
SECTION 2.02. Execution and Authentication.
An Officer or an Assistant Secretary (who shall, in either case, have been
duly authorized by all requisite corporate actions) shall sign the
Securities for the Company by manual or facsimile signature.
If an Officer whose signature is on a Security was an Officer at the time
of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheleSection
A Security shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate (i) Series A Securities for original issue
in the aggregate principal amount not to exceed Euro 85,000,000 and (ii)
Series B Securities from time to time only in exchange for a like principal
amount of Series A Securities in accordance with the Registration Rights
Agreement, in each case upon a written order of the Company in the form of
an Officer's Certificate. The Officer's Certificate shall specify the
amount of Securities to be authenticated, the series of Securities and the
date on which the Securities are to be authenticated. The aggregate
principal amount of Securities outstanding at any time may not exceed Euro
85,000,000, except as provided in Section 2.07. Upon receipt of a written
order of the Company in the form of an Officer's Certificate, the Trustee
shall authenticate Securities in substitution for Securities originally
issued to reflect any name change of the Company.
The Trustee may appoint an authenticating agent reasonably acceptable to
the Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities 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 an Agent to deal with the Company and
Affiliates of the Company.
The Securities shall be issuable only in registered form without coupons in
denominations of Euro 1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency in the Borough of Manhattan,
The City of New York, and, so long as the Securities are listed on the
Luxembourg Stock Exchange and the rules of such stock exchange require, in
Luxembourg where (a) Securities may be presented or surrendered for
registration of transfer or for exchange ("Registrar"), (b) Securities may
be presented or surrendered for payment ("Paying Agent") and (c) notices
and demands in respect of the Securities and this Indenture may be served.
The Registrar shall keep a register or registers of the Securities and of
their transfer and exchange. The Company, upon notice to the
<PAGE> 19
Trustee, may appoint one or more co-Registrars and one or more additional
Paying Agents. The term "Paying Agent" includes any additional Paying
Agent. Except as provided herein, the Company, or any Subsidiary may act as
Paying Agent, Registrar or co-Registrar.
The Company shall enter into an appropriate agency agreement with any Agent
not a party to this Indenture, which shall incorporate the provisions of
the TIA. The agreement shall implement the provisions of this Indenture
that relate to such Agent. The Company shall promptly notify the Trustee of
the name and address of any such Agent. If the Company fails to maintain a
Registrar or Paying Agent, or fails to give the foregoing notice, the
Trustee shall act as such and shall be entitled to appropriate compensation
in accordance with Section 7.07.
The Company initially appoints the Trustee as Paying Agent and as Registrar
(acting through its London Branch) until such time as the Trustee has
resigned or a successor has been appointed.
SECTION 2.04. Paying Agent to Hold Assets in Trust.
The Company shall require each Paying Agent other than the Trustee to agree
in writing that each Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all assets held by the Paying Agent for the payment
of principal of, or interest on, the Securities, and shall promptly notify
the Trustee of any Default by the Company in making any such payment. The
Company at any time may require a Paying Agent to distribute all assets
held by it to the Trustee and account for any assets disbursed and the
Trustee may at any time during the continuance of any payment Default, upon
written request to a Paying Agent, require such Paying Agent to distribute
all assets held by it to the Trustee and to account for any assets
distributed. Upon distribution to the Trustee of all assets that shall have
been delivered by the Company to the Paying Agent (if other than the
Company), the Paying Agent shall have no further liability for such assets.
If the Company, any Subsidiary or any of their respective Affiliates acts
as Paying Agent, it shall, on or before each due date of the principal of
or interest on the Securities, segregate and hold in trust for the benefit
of the Persons entitled thereto a sum sufficient to pay the principal or
interest 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.
SECTION 2.05. Securityholder Lists.
The Trustee 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 Company shall furnish
to the Trustee before each Interest Record Date and at such other times as
the Trustee may request in writing a list as of such date and in such form
as the Trustee may reasonably require of the names and addresses of
Holders, which list may be conclusively relied upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
Subject to the provisions of Sections 2.15 and 2.16, when Securities are
presented to the Registrar or a co-Registrar with a request to register the
transfer of such Securities or to exchange such Securities for an equal
principal amount of Securities of other authorized denominations of the
same series, the Registrar or co-Registrar shall register the transfer or
make the exchange as requested if its requirements for such transaction are
met; provided, however, that the Securities surrendered for transfer or
exchange shall be duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Registrar or
co-Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing. To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall authenticate Securities at
the Registrar's or co-Registrar's written request. No service charge shall
be made for any registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer taxes or other governmental charge payable upon exchanges or
transfers pursuant to Section 2.02, 2.10, 3.06, 4.10, 4.16 or 9.05). The
Registrar or co-Registrar shall not be required to register the transfer or
exchange of any Security (i) during a period beginning at the opening of
business 15 days before the mailing of a notice of redemption of Securities
and ending at the close of business on the day of such mailing and (ii)
selected for redemption in whole or in part pursuant to Article Three
hereof, except the unredeemed portion of any Security being redeemed in
part.
Prior to the registration of any transfer by a Holder as provided herein,
the Company, the Trustee, and any Agent of the Company shall treat the
person in whose name the Security is registered as the owner thereof for
all purposes whether or not the Security shall be overdue, and neither the
Company, the Trustee, nor any such Agent shall be
<PAGE> 20
affected by notice to the contrary. Any Holder of a Global Security shall,
by acceptance of such Global Security, agree that transfers of beneficial
interests in such Global Security may be effected only through a book-entry
system maintained by the Depository (or its agent), and that ownership of a
beneficial interest in a Global Security shall be required to be reflected
in a book entry.
SECTION 2.07. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if the Holder of a
Security claims that the Security has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee shall authenticate a
replacement Security if the Trustee's requirements for replacement of
Securities are met. Such Holder must provide an indemnity bond or other
indemnity, sufficient in the judgment of both the Company and the Trustee,
to protect the Company, the Trustee and any Agent from any loss which any
of them may suffer if a Security is replaced and evidence to their
satisfaction of the apparent loss, destruction or theft of such Security.
The Company may charge such Holder for its reasonable out-of-pocket
expenses in replacing a Security, including reasonable fees and expenses of
counsel.
Every replacement Security is an additional obligation of the Company.
SECTION 2.08. Outstanding Securities.
Securities outstanding at any time are all the Securities that have been
authenticated by the Trustee except those cancelled by it, those delivered
to it for cancellation and those described in this Section 2.08 as not
outstanding. Subject to Section 2.09, a Security does not cease to be
outstanding because the Company or any of its Affiliates holds the
Security.
If a Security is replaced pursuant to Section 2.07 (other than a mutilated
Security surrendered for replacement), it ceases to be outstanding unless
the Trustee receives proof satisfactory to it that the replaced Security is
held by a bona fide purchaser. A mutilated Security ceases to be
outstanding upon surrender of such Security and replacement thereof
pursuant to Section 2.07.
If on a Redemption Date, Purchase Date or the Maturity Date the Paying
Agent holds money sufficient to pay all of the principal and interest due
on the Securities payable on that date, then on and after that date such
Securities cease to be outstanding and interest on them ceases to accrue.
SECTION 2.09. Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities
owned by the Company or any of its Affiliates shall be disregarded, except
that, for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, waiver or consent, only
Securities that a Trust Officer of the Trustee actually knows are so owned
shall be disregarded.
SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but
may have variations that the Company considers appropriate for temporary
Securities. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate upon receipt of a written order of the Company
pursuant to Section 2.02 definitive Securities in exchange for temporary
Securities.
SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the
Trustee any Securities surrendered to them for transfer, exchange or
payment. The Trustee, or at the direction of the Trustee, the Registrar or
the Paying Agent, and no one else, shall cancel all Securities surrendered
for transfer, exchange, payment or cancellation and deliver to the Company
such cancelled Securities for disposal. Subject to Section 2.07, the
Company may not issue new Securities to replace Securities that it has paid
or delivered to the Trustee for cancellation. If the Company shall acquire
any of the Securities, such acquisition shall not operate as a redemption
or satisfaction of the Indebtedness represented by such Securities unless
and until the same are surrendered to the Trustee for cancellation pursuant
to this Section 2.11. The Trustee shall cancel all Securities surrendered
for transfer, exchange, payment or cancellation and shall dispose of them
in accordance with its normal procedure.
SECTION 2.12. Defaulted Interest.
If the Company defaults in a payment of principal or interest on the
Securities, it shall pay interest on overdue principal and on overdue
installments of interest (without regard to any applicable grace periods)
from time to time on demand at the rate per annum borne by the Securities,
to the extent lawful.
<PAGE> 21
SECTION 2.13. CUSIP Number.
The Company in issuing the Securities will use one or more "CUSIP" numbers
and the Trustee shall use the appropriate CUSIP number in notices of
redemption or exchange as a convenience to Holders; provided, however, that
any such notice may state that no representation is made as to the
correctness or accuracy of the CUSIP number printed in the notice or on the
Securities, and that reliance may be placed only on the other
identification numbers printed on the Securities. The Company shall
promptly notify the Trustee of any changes in CUSIP numbers.
SECTION 2.14. Deposit of Moneys.
Prior to 12:00 noon London time on the Business Day prior to each Interest
Payment Date, Redemption Date, Purchase Date and the Maturity Date, the
Company shall deposit with the Paying Agent in immediately available funds
money sufficient to make cash payments, if any, due on such Interest
Payment Date, Redemption Date, Purchase Date or Maturity Date, as the case
may be, in a timely manner which permits the Paying Agent to remit payment
to the Holders on such Interest Payment Date, Redemption Date, Purchase
Date or Maturity Date, as the case may be.
SECTION 2.15. Book-Entry Provisions for Global Securities.
(a) The Global Securities initially shall (i) be registered in the name of
the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set
forth in Exhibit C hereto.
Members of, or participants in, the Depository ("Participants") shall have
no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository, or the Trustee as its custodian, or under
such Global Security, and the Depository may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner
of such Global Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any
agent of the Company or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depository or
impair, as between the Depository and Participants, the operation of
customary practices governing the exercise of the rights of a beneficial
owner of any Security.
(b) Transfers of Global Securities shall be limited to transfers in whole,
but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Securities may be
transferred or exchanged for Physical Securities in accordance with the
rules and procedures of the Depository and the provisions of Section 2.16.
In addition, Physical Securities shall be transferred to all beneficial
owners in exchange for their beneficial interests in Global Securities if
(i) the Depository notifies the Company that it is unwilling or unable to
continue as Depository for any Global Security and a successor Depository
is not appointed by the Company within 90 days of such notice or (ii) an
Event of Default has occurred and is continuing and the Registrar has
received a request from the Depository to issue Physical Securities.
(c) In connection with the transfer of Global Securities as an entirety to
beneficial owners pursuant to paragraph (b) of this Section 2.15, the
Global Securities shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall upon
written instructions from the Company authenticate and make available for
delivery, to each beneficial owner identified by the Depository in exchange
for its beneficial interest in the Global Securities, an equal aggregate
principal amount of Physical Securities of authorized denominations.
(d) Any Physical Security constituting a Restricted Security delivered in
exchange for an interest in a Global Security pursuant to paragraph (b) of
this Section 2.15 shall, except as otherwise provided by Section 2.16, bear
the Private Placement Legend.
(e) The Holder of any Global Security may grant proxies and otherwise
authorize any Person, including Participants and Persons that may hold
interests through Participants, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
SECTION 2.16. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Physical Securities. When Physical Securities
are presented to the Registrar or co-Registrar with a request:
(i) to register the transfer of the Physical Securities; or
(ii) to exchange such Physical Securities for an equal principal
amount of Physical Securities of other authorized denominations,
the Registrar or co-Registrar shall register the transfer or make the
exchange as requested if the requirements under this Indenture as set forth
in this Section 2.16 for such transactions are met; provided, however, that
the Physical Securities presented or surrendered for registration of
transfer or exchange:
<PAGE> 22
(I) shall be duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Registrar or co-Registrar, duly
executed by the Holder thereof or his attorney duly authorized in
writing; and
(II) in the case of Physical Securities of Series A Securities, such
Physical Securities shall be accompanied, in the sole discretion of
the Company, by the following additional information and documents, as
applicable:
(A) if such Physical Security is being delivered to the Registrar or
co-Registrar by a Holder for registration in the name of such
Holder, without transfer, a certification from such Holder to
that effect (substantially in the form of Exhibit D hereto); or
(B) if such Physical Security is being transferred to a Qualified
Institutional Buyer in accordance with Rule 144A, a certification
to that effect (substantially in the form of Exhibit D hereto);
or
(C) if such Physical Security is being transferred to an
Institutional Accredited Investor, delivery of a certification to
that effect (substantially in the form of Exhibit D hereto) and a
transferee certificate for Institutional Accredited Investors
substantially in the form of Exhibit E hereto and an Opinion of
Counsel reasonably satisfactory to the Company to the effect that
such transfer is in compliance with the Securities Act; or
(D) if such Physical Security is being transferred in reliance on
Regulation S, delivery of a certification to that effect
(substantially in the form of Exhibit D hereto) and a transferor
certificate for Regulation S transfers substantially in the form
of Exhibit F hereto and an Opinion of Counsel reasonably
satisfactory to the Company to the effect that such transfer is
in compliance with the Securities Act; or
(E) if such Physical Security is being transferred in reliance on
Rule 144 under the Securities Act, delivery of a certification to
that effect (substantially in the form of Exhibit D hereto) and
an Opinion of Counsel reasonably satisfactory to the Company to
the effect that such transfer is in compliance with the
Securities Act; or
(F) if such Physical Security is being transferred in reliance on
another exemption from the registration requirements of the
Securities Act, a certification to that effect (substantially in
the form of Exhibit D hereto) and an Opinion of Counsel
reasonably acceptable to the Company to the effect that such
transfer is in compliance with the Securities Act.
(b) Restrictions on Transfer of a Physical Security for a Beneficial
Interest in a Global Security. A Physical Security may not be exchanged for
a beneficial interest in a Global Security except upon satisfaction of the
requirements set forth below. Upon receipt by the Registrar or co-Registrar
of a Physical Security, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Registrar or
co-Registrar, together with:
(A) in the case of Series A Securities, certification, substantially
in the form of Exhibit D hereto, that such Physical Security is
being transferred (I) to a Qualified Institutional Buyer, (II) to
an Institutional Accredited Investor or (III) in an offshore
transaction in reliance on Regulation S and, with respect to (II)
or (III), an Opinion of Counsel reasonably acceptable to the
Company to the effect that such transfer is in compliance with
the Securities Act; and
(B) written instructions directing the Registrar or co-Registrar to
make, or to direct the Depository to make, an endorsement on the
applicable Global Security to reflect an increase in the
aggregate amount of the Securities represented by the Global
Security,
then the Registrar or co-Registrar shall cancel such Physical Security and
cause, or direct the Depository to cause, in accordance with the standing
instructions and procedures existing between the Depository and the
Registrar or co-Registrar, the principal amount of Securities represented
by the applicable Global Security to be increased accordingly. If no Global
Security representing Securities held by Qualified Institutional Buyers,
Institutional Accredited Investors or Persons acquiring Securities in
offshore transactions in reliance on Regulation S, as the case may be, is
then outstanding, the Company shall issue and the Trustee shall, upon
written instructions from the Company in accordance with Section 2.02,
authenticate such a Global Security in the appropriate principal amount.
(c) Transfer and Exchange of Global Securities. The transfer and exchange
of Global Securities or beneficial interests therein shall be effected
through the Depository in accordance with this Indenture (including the
restrictions on transfer set forth herein) and the procedures of the
Depository therefor. Upon receipt by the Registrar or Co-Registrar of
written instructions, or such other instruction as is customary for the
<PAGE> 23
Depository, from the Depository or its nominee, requesting the registration
of transfer of an interest in a QIB Global Security, an Accredited Investor
Global Security or Regulation S Global Security, as the case may be, to
another type of Global Security, together with the applicable Global
Securities (or, if the applicable type of Global Security required to
represent the interest as requested to be transferred is not then
outstanding, only the Global Security representing the interest being
transferred), the Registrar or Co-Registrar shall cancel such Global
Securities (or Global Security) and the Company shall issue and the Trustee
shall, upon written instructions from the Company in accordance with
Section 2.02, authenticate new Global Securities of the types so cancelled
(or the type so cancelled and applicable type required to represent the
interest as requested to be transferred) reflecting the applicable increase
and decrease of the principal amount of Securities represented by such
types of Global Securities, giving effect to such transfer. If the
applicable type of Global Security required to represent the interest as
requested to be transferred is not outstanding at the time of such request,
the Company shall issue and the Trustee shall, upon written instructions
from the Company in accordance with Section 2.02, authenticate a new Global
Security of such type in principal amount equal to the principal amount of
the interest requested to be transferred.
(d) Transfer of a Beneficial Interest in a Global Security for a Physical
Security.
(i) Any Person having a beneficial interest in a Global Security may
upon request exchange such beneficial interest for a Physical
Security. Upon receipt by the Registrar or co-Registrar of written
instructions, or such other form of instructions as is customary for
the Depository, from the Depository or its nominee on behalf of any
Person having a beneficial interest in a Global Security and upon
receipt by the Trustee of a written order or such other form of
instructions as is customary for the Depository or the Person
designated by the Depository as having such a beneficial interest
containing registration instructions and, in the case of any such
transfer or exchange of a beneficial interest in Series A Securities,
the following additional information and documents:
(A) if such beneficial interest is being transferred to the Person
designated by the Depository as being the beneficial owner, a
certification from such Person to that effect (substantially in
the form of Exhibit D hereto); or
(B) if such beneficial interest is being transferred to a Qualified
Institutional Buyer in accordance with Rule l44A, a certification
to that effect (substantially in the form of Exhibit D hereto);
or
(C) if such beneficial interest is being transferred to an
Institutional Accredited Investor, delivery of a certification to
that effect (substantially in the form of Exhibit D hereto) and a
transferee certificate for Institutional Accredited Investors
substantially in the form of Exhibit E hereto and an Opinion of
Counsel reasonably satisfactory to the Company to the effect that
such transfer is in compliance with the Securities Act; or
(D) if such beneficial interest is being transferred in reliance on
Regulation S, delivery of a certification to that effect
(substantially in the form of Exhibit D hereto) and a transferor
certificate for Regulation S transfers substantially in the form
of Exhibit F hereto and an Opinion of Counsel reasonably
satisfactory to the Company to the effect that such transfer is
in compliance with the Securities Act; or
(E) if such beneficial interest is being transferred in reliance on
Rule 144 under the Securities Act, delivery of a certification to
that effect (substantially in the form of Exhibit D hereto) and
an Opinion of Counsel reasonably satisfactory to the Company to
the effect that such transfer is in compliance with the
Securities Act; or
(F) if such beneficial interest is being transferred in reliance on
another exemption from the registration requirements of the
Securities Act, a certification to that effect (substantially in
the form of Exhibit D hereto) and an Opinion of Counsel
reasonably satisfactory to the Company to the effect that such
transfer is in compliance with the Securities Act,
then the Registrar or co-Registrar will cause, in accordance with the
standing instructions and procedures existing between the Depository and
the Registrar or co-Registrar, the aggregate principal amount of the
applicable Global Security to be reduced and, following such reduction, the
Company will execute and, upon receipt of an authentication order in the
form of an Officers' Certificate in accordance with Section 2.02, the
Trustee will authenticate and make available for delivery to the transferee
a Physical Security in the appropriate principal amount.
(ii) Securities issued in exchange for a beneficial interest in a
Global Security pursuant to this Section 2.16(d) shall be registered
in such names and in such authorized denominations as the Depository,
pursuant to instructions from its direct or indirect participants
<PAGE> 24
or otherwise, shall instruct the Registrar or co-Registrar in writing.
The Registrar or co-Registrar shall deliver such Physical Securities
to the Persons in whose names such Physical Securities are so
registered.
(e) Restrictions on Transfer and Exchange of Global Securities.
Notwithstanding any other provisions of this Indenture, a Global Security
may not be transferred as a whole except by the Depository to a nominee of
the Depository or by a nominee of the Depository to the Depository or
another nominee of the Depository or by the Depository or any such nominee
to a successor Depository or a nominee of such successor Depository.
(d) Private Placement Legend. Upon the transfer, exchange or replacement
of Securities not bearing the Private Placement Legend, the Registrar or
co-Registrar shall deliver Securities that do not bear the Private
Placement Legend. Upon the transfer, exchange or replacement of Securities
bearing the Private Placement Legend, the Registrar or co-Registrar shall
deliver only Securities that bear the Private Placement Legend unless, and
the Trustee is hereby authorized to deliver Securities without the Private
Placement Legend if, (i) there is delivered to the Trustee an Opinion of
Counsel reasonably satisfactory to the Company and the Trustee to the
effect that neither such legend nor the related restrictions on transfer
are required in order to maintain compliance with the provisions of the
Securities Act or (ii) such Security has been sold pursuant to an effective
registration statement under the Securities Act (including pursuant to a
Registration).
(g) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in this Indenture and
in the Private Placement Legend and agrees that it will transfer such
Security only as provided in this Indenture.
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 of any
interest in any Security (including any transfers between or among
Participants or beneficial owners of interest in any Global Security) 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, and to examine the same to
determine substantial compliance as to form with the express requirements
hereof.
The Registrar shall retain copies of all letters, notices and other written
communications received pursuant to Section 2.15 or this Section 2.16. The
Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Registrar.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company elects to redeem Securities pursuant to paragraph 5 of the
Securities at the applicable redemption price set forth thereon, it shall
notify the Trustee in writing of the Redemption Date and the principal
amount of Securities to be redeemed. The Company shall give such notice to
the Trustee at least 45 days before the Redemption Date (unless a shorter
notice shall be agreed to by the Trustee), together with an Officers'
Certificate stating that such redemption will comply with the conditions
contained herein.
SECTION 3.02. Selection of Securities To Be Redeemed.
If less than all of the Securities are to be redeemed pursuant to paragraph
5(a) or (b) of the Securities, the Trustee shall select the Securities to
be redeemed in compliance with the requirements of the national securities
exchange, if any, on which the Securities are listed or, if the Securities
are not then listed on a national securities exchange, on a pro rata basis,
by lot or in such other manner as the Trustee shall deem fair and
appropriate. The Trustee shall make the selection from the Securities then
outstanding, subject to redemption and not previously called for
redemption.
The Trustee may select for redemption pursuant to paragraph 5(a) or (b) of
the Securities portions of the principal amount of Securities that have
denominations equal to or larger than Euro 1,000 principal amount.
Securities and portions of them the Trustee so selects shall be in amounts
of Euro 1,000 principal amount or integral multiples thereof. Provisions of
this Indenture that apply to Securities called for redemption also apply to
portions of Securities called for redemption.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date, the
Company
<PAGE> 25
shall mail a notice of redemption by first-class mail to each Holder whose
Securities are to be redeemed at such Holder's registered address;
provided, however, that notice of a redemption pursuant to paragraph 5(b)
of the Securities shall be mailed to each Holder whose Securities are to be
redeemed no later than 60 days following the consummation of the last
Public Equity Offering or Strategic Equity Investment resulting in gross
cash proceeds to the Company, when aggregated with all prior Public Equity
Offerings and Strategic Equity Investments, of at least $75.0 million. The
Company will cause a notice of such redemption to be published in a daily
newspaper with general circulation in Luxembourg (which is expected to be
the Luxemburger Wort).
Each notice of redemption shall identify the Securities to be redeemed
(including the CUSIP number thereon) and shall state:
(1) the Redemption Date;
(2) the redemption price;
(3) the name and address of the Paying Agent to which the Securities are
to be surrendered for redemption;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) that, unless the Company defaults in making the redemption payment,
interest on Securities called for redemption ceases to accrue on and after
the Redemption Date and the only remaining right of the Holders is to
receive payment of the redemption price upon surrender to the Paying Agent;
and
(6) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
Redemption Date, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion thereof will
be issued.
At the Company's request, the Trustee shall give the notice of redemption
on behalf of the Company, in the Company's name and at the Company's
expense.
SECTION 3.04. Effect of Notice of Redemption.
Once a notice of redemption is mailed, Securities called for redemption
become due and payable on the Redemption Date and at the redemption price.
Upon surrender to the Paying Agent, such Securities shall be paid at the
redemption price, plus accrued interest thereon, if any, to the Redemption
Date, but interest installments whose maturity is on such Redemption Date
shall be payable to the Holders of record at the close of business on the
relevant Interest Record Date.
SECTION 3.05. Deposit of Redemption Price.
Prior to 12:00 noon London time on the Business Day prior to the Redemption
Date, the Company shall deposit with the Paying Agent (or if the Company is
its own Paying Agent, shall, on or before the Redemption Date, segregate
and hold in trust) money sufficient to pay the redemption price of and
accrued interest, if any, on all Securities to be redeemed on that date
other than Securities or portions thereof called for redemption on that
date which have been delivered by the Company to the Trustee for
cancellation.
If any Security surrendered for redemption in the manner provided in the
Securities shall not be so paid on the Redemption Date due to the failure
of the Company to deposit with the Paying Agent money sufficient to pay the
redemption price thereof, the principal and accrued and unpaid interest, if
any, thereon shall, until paid or duly provided for, bear interest as
provided in Sections 2.12 and 4.01 with respect to any payment default.
SECTION 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the Trustee shall
authenticate for the Holder a new Security equal in principal amount to the
unredeemed portion of the Security surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
The Company shall pay the principal of and interest on the Securities in
the manner provided in the Securities and the Registration Rights
Agreement. An installment of principal or interest shall be considered paid
on the date due if the Trustee or Paying Agent (other than the Company, a
Subsidiary or an Affiliate of the Company) holds on that date money
designated for and sufficient to pay the installment in full and is not
prohibited from paying such money to the Holders of the Securities pursuant
to the terms of this Indenture.
The Company shall pay cash interest on overdue principal at the same rate
per annum borne by the Securities. The Company shall pay cash interest on
overdue installments of
<PAGE> 26
interest at the same rate per annum borne by the Securities, to the extent
lawful, as provided in Section 2.12.
SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, The City of New
York, and, so long as the Securities are listed on the London or Luxembourg
Stock Exchange and the rules of such stock exchange require, in London or
Luxembourg the office or agency required under Section 2.03. The Company
shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the
Company 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 address of the
Trustee set forth in Section 10.02 hereof. The Company hereby initially
designates (i) the Trustee at its address set forth in Section 10.02 hereof
as its office or agency in The Borough of Manhattan, The City of New York,
for such purposes, (ii) Banque Internationale a Luxembourg S.A., at 69,
route d'Esch, L-1470 Luxembourg, as its office or agency in Luxembourg for
such purposes and (iii) the Paying Agent at its address set forth in
Section 10.02 hereof as its office or agency in London, for such purposes.
SECTION 4.03. Corporate Existence.
Subject to Article Five, the Company shall do or shall cause to be done all
things necessary to preserve and keep in full force and effect its
corporate existence and the corporate, partnership or other existence of
each Restricted Subsidiary in accordance with the respective organizational
documents of each such Restricted Subsidiary and the rights (charter and
statutory) and material franchises of the Company and the Restricted
Subsidiaries; provided, however, that the Company shall not be required to
preserve any such right or franchise, or the corporate existence of any
Restricted Subsidiary, if the Board of Directors of the Company shall
determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company and the Restricted Subsidiaries,
taken as a whole, and that the loss thereof is not, and will not be,
adverse in any material respect to the Holders; provided, further, however,
that a determination of the Board of Directors of the Company shall not be
required in the event of a merger of one or more Wholly Owned Restricted
Subsidiaries of the Company with or into another Wholly Owned Restricted
Subsidiary of the Company or another Person, if the surviving Person is a
Wholly Owned Restricted Subsidiary of the Company organized under the laws
of the United States or a State thereof or of the District of Columbia.
SECTION 4.04. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all material taxes,
assessments and governmental charges levied or imposed upon the Company or
any Restricted Subsidiary or upon the income, profits or property of the
Company or any Restricted Subsidiary and (2) all lawful claims for labor,
materials and supplies which, in each case, if unpaid, might by law become
a material liability, or Lien upon the property, of the Company or any
Restricted Subsidiary; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such
tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings and for which
appropriate provision has been made.
SECTION 4.05. Notice of Defaults.
(a) In the event that any Indebtedness of the Company or any of its
Subsidiaries is declared due and payable before its maturity because of the
occurrence of any default (or any event which, with notice or lapse of
time, or both, would constitute such a default) under such Indebtedness,
the Company shall promptly give written notice to the Trustee of such
declaration, the status of such default or event and what action the
Company is taking or proposes to take with respect thereto.
(b) Upon becoming aware of any Default, the Company shall promptly
deliver an Officers' Certificate to the Trustee specifying the Default.
SECTION 4.06. Maintenance of Properties and Insurance.
(a) The Company shall cause all material properties owned by or leased to
it or any Restricted Subsidiary and used or useful in the conduct of its
business or the business of any Restricted Subsidiary to be maintained and
kept in normal 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
<PAGE> 27
the judgment of the Company may be necessary, so that the business carried
on in connection therewith may be properly and advantageously conducted at
all times; provided, however, that nothing in this Section 4.06 shall
prevent the Company or any Restricted Subsidiary from discontinuing the
use, operation or maintenance of any of such properties, or disposing of
any of them, if such discontinuance or disposal is, in the judgment of the
Board of Directors or of the board of directors of the Restricted
Subsidiary concerned, or of an officer (or other agent employed by the
Company or of any Restricted Subsidiary) of the Company or such Restricted
Subsidiary having managerial responsibility for any such property,
desirable in the conduct of the business of the Company or any Restricted
Subsidiary, and if such discontinuance or disposal is not adverse in any
material respect to the Holders.
(b) The Company shall maintain, and shall cause the Restricted
Subsidiaries to maintain, insurance with responsible carriers against such
risks and in such amounts, and with such deductibles, retentions,
self-insured amounts and co-insurance provisions, as are customarily
carried by similar businesses of similar size, including property and
casualty loss, and workers' compensation insurance.
SECTION 4.07. Compliance Certificate.
The Company shall deliver to the Trustee within 120 days after the close of
each fiscal year a certificate signed by the principal executive officer,
principal financial officer or principal accounting officer stating that a
review of the activities of the Company has been made under the supervision
of the signing officers with a view to determining whether a Default has
occurred and whether or not the signers know of any Default by the Company
that occurred during such fiscal year. If they do know of such a Default,
the certificate shall describe all such Defaults, their status and the
action the Company is taking or proposes to take with respect thereto. The
first certificate to be delivered by the Company pursuant to this Section
4.07 shall be for the fiscal year ending December 31, 1998.
SECTION 4.08. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law or any usury
law or other law, which would prohibit or forgive the Company from paying
all or any portion of the principal of and/or interest, if any, on the
Securities as contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the covenants or the performance of
this Indenture; and (to the extent that it may lawfully do so) the Company
hereby expressly waives all benefit or advantage of any such law, and
covenants that it shall not hinder, delay or impede the execution of any
power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law had been enacted.
SECTION 4.09. Provision of Financial Information.
Whether or not the Company is subject to Section 13(a) or 15(d) of the
Exchange Act, or any successor provision thereto, the Company shall file
with the SEC (if permitted by SEC practice and applicable law and
regulations) the annual reports, quarterly reports and other documents
which the Company would have been required to file with the SEC pursuant to
such Section 13(a) or 15(d) or any successor provision thereto if the
Company were so required, such documents to be filed with the SEC on or
prior to the respective dates (the "Required Filing Dates") by which the
Company would have been required so to file such documents if the Company
were so required; provided, however, that until the Company is subject to
Section 13(a) or Section 15(d) of the Exchange Act or any successor
provisions thereto, the Required Filing Dates for such quarterly reports
shall be 75 days following the end of the applicable fiscal quarter. The
Company shall also in any event (a) within 15 days of each Required Filing
Date (whether or not permitted or required to be filed with the SEC but
subject to the proviso in the previous sentence) (i) transmit (or cause to
be transmitted) by mail to all Holders, as their names and addresses appear
in the Note register, without cost to such Holders, and (ii) file with the
Trustee, copies of the annual reports, quarterly reports and other
documents which the Company is required to file with the SEC pursuant to
the preceding sentence, or, if such filing is not so permitted, information
and data of a similar nature, and (b) if, notwithstanding the preceding
sentence, filing such documents by the Company with the SEC is not
permitted by SEC practice or applicable law or regulations, promptly upon
written request supply copies of such documents to any Holder. In addition,
for so long as any Securities remain outstanding, the Company will furnish
to the Holders and to securities analysts and prospective investors, upon
their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act, and, to any beneficial holder of
Securities, if not obtainable from the SEC, information of the type that
would be filed with the SEC pursuant to the foregoing provisions, upon the
request of any such holder. Delivery of such reports, information and
documents to the Trustee is for informational purposes only and the
Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants
hereunder (as to which the Trustee is entitled to rely exclusively on
Officers' Certificates).
<PAGE> 28
SECTION 4.10. Change of Control.
(a) Following the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Company shall notify
the Trustee and Holders of the Securities of such occurrence in the manner
prescribed by this Indenture and shall, within 30 days after the Change of
Control Date, make an Offer to Purchase all Securities then outstanding at
a purchase price in cash equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the Purchase
Date. The Company will cause a copy of such notice to be published in a
daily newspaper with general circulation in Luxembourg (which is expected
to be the Luxemburger Wort). The Company's obligations may be satisfied if
a third party makes the Offer to Purchase in the manner, at the times and
otherwise in compliance with the requirements of this Indenture applicable
to an Offer to Purchase made by the Company and purchases all Securities
validly tendered and not withdrawn under such Offer to Purchase. Each
Holder shall be entitled to tender all or any portion of the Securities
owned by such Holder pursuant to the Offer to Purchase, subject to the
requirement that any portion of a Security tendered must be tendered in an
integral multiple of Euro 1,000 principal amount.
(b) On or prior to the Purchase Date specified in the Offer to Purchase,
the Company shall (i) accept for payment all Securities or portions thereof
validly tendered pursuant to the Offer, (ii) deposit with the Paying Agent
or, if the Company is acting as its own Paying Agent, segregate and hold in
trust as provided in Section 2.04) money sufficient to pay the Purchase
Price of all Securities or portions thereof so accepted and (iii) deliver
or cause to be delivered to the Trustee for cancellation all Securities so
accepted together with an Officers' Certificate stating the Securities or
portions thereof accepted for payment by the Company. The Paying Agent (or
the Company, if so acting) shall promptly mail or deliver to Holders of
Securities so accepted, payment in an amount equal to the Purchase Price
for such Securities, and the Trustee shall promptly authenticate and mail
or deliver to each Holder of Securities a new Security or Securities equal
in principal amount to any unpurchased portion of the Security surrendered
as requested by the Holder. Any Security not accepted for payment shall be
promptly mailed or delivered by the Company to the Holder thereof. The
Company shall publicly announce the results of the Offer on or as soon as
practicable after the Purchase Date.
(c) If the Company makes an Offer to Purchase, the Company will comply
with all applicable tender offer laws and regulations, including, to the
extent applicable, Section 14(e) and Rule 14e-1 under the Exchange Act, and
any other applicable Federal or state securities laws and regulations and
any applicable requirements of any securities exchange on which the
Securities are listed, and any violation of the provisions of this
Indenture relating to such Offer to Purchase occurring as a result of such
compliance shall not be deemed a Default.
SECTION 4.11. Limitation on Restricted Payments.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly,
(i) declare or pay any dividend or any other distribution on any
Equity Interests of the Company or any Restricted Subsidiary or make
any payment or distribution to the direct or indirect holders of
Equity Interests of the Company or any Restricted Subsidiary (other
than any dividends, distributions and payments made to the Company or
any Restricted Subsidiary and dividends or distributions payable to
any Person solely in Qualified Equity Interests or in options,
warrants or other rights to purchase Qualified Equity Interests);
(ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any Restricted Subsidiary (other
than any such Equity Interests owned by the Company or any Restricted
Subsidiary);
(iii) purchase, redeem, defease or retire for value, or make any
principal payment on, prior to any scheduled maturity, scheduled
repayment or scheduled sinking fund payment, any Subordinated
Indebtedness (other than any Subordinated Indebtedness held by any
Restricted Subsidiary); or
(iv) make any Investment (other than Permitted Investments)
(any of the foregoing, a "Restricted Payment"), unless
(a) no Default shall have occurred and be continuing at the time of
or after giving effect to such Restricted Payment;
(b) immediately after giving effect to such Restricted Payment, the
Company would be able to Incur $1.00 of additional Indebtedness
under Section 4.12(a); and
(c) immediately after giving effect to such Restricted Payment, the
aggregate amount
<PAGE> 29
of all Restricted Payments (including the Fair Market Value of any
non-cash Restricted Payment) declared or made on or after the Issue
Date (excluding any Restricted Payment described in clauses (ii),
(iii) or (iv) of the next paragraph) does not exceed an amount equal
to the sum of the following (the "Basket"):
(1) (x) the Cumulative Operating Cash Flow determined at the
time of such Restricted Payment less (y) 150% of cumulative
Consolidated Interest Expense determined for the period (treated
as one accounting period) commencing on the Issue Date and ending
on the last day of the most recent fiscal quarter immediately
preceding the date of such Restricted Payment for which
consolidated financial information of the Company is required to
be available, plus
(2) the aggregate net cash proceeds received by the Company
either (x) as capital contributions to the Company after the
Issue Date or (y) from the issue and sale (other than to a
Subsidiary) of Qualified Equity Interests after the Issue Date
(other than any issuance and sale of Qualified Equity Interests
financed (A) directly or indirectly, using funds (I) borrowed
from the Company or any Subsidiary until and to the extent such
borrowing is repaid or (II) contributed, extended, guaranteed or
advanced by the Company or any Subsidiary (including, without
limitation, in respect of any employee stock ownership or benefit
plan) or (B) the proceeds of which are used to effect any
transaction permitted by clauses (ii), (iii) or (iv) of the next
paragraph), plus
(3) the aggregate amount by which Indebtedness (other than any
Subordinated Indebtedness) of the Company or any Restricted
Subsidiary is reduced on the Company's balance sheet upon the
conversion or exchange (other than by a Subsidiary of the
Company) subsequent to the Issue Date into Qualified Equity
Interests (less the amount of any cash, or the fair value of
property, distributed by the Company or any Restricted Subsidiary
upon such conversion or exchange), plus
(4) in the case of the disposition or repayment of any
Investment that was treated as a Restricted Payment made after
the Issue Date, an amount (to the extent not included in the
computation of Cumulative Operating Cash Flow) equal to the
lesser of: (x) the return of capital with respect to such
Investment and (y) the amount of such Investment that was treated
as a Restricted Payment, in either case, less the cost of the
disposition of such Investment and net of taxes, plus
(5) so long as the Designation thereof was treated as a
Restricted Payment made after the Issue Date, with respect to any
Unrestricted Subsidiary that has been redesignated as a
Restricted Subsidiary after the Issue Date in accordance with
Section 4.14, the Company's proportionate interest in an amount
equal to the excess of (x) the total assets of such Subsidiary,
valued on an aggregate basis at the lesser of book value and Fair
Market Value, over (y) the total liabilities of such Subsidiary,
determined in accordance with GAAP (and provided that such amount
shall not in any case exceed the Designation Amount with respect
to such Restricted Subsidiary upon its Designation), minus
(6) with respect to each Subsidiary of the Company which has
been designated as an Unrestricted Subsidiary after the Issue
Date in accordance with Section 4.14, the greater of (x) $0 and
(y) the Designation Amount thereof (measured as of the Date of
Designation).
The foregoing provisions will not prevent (i) the payment of any dividend
or distribution on, or redemption of, Equity Interests within 60 days after
the date of declaration of such dividend or distribution or the giving of
formal notice of such redemption, if at the date of such declaration or
giving of formal notice such payment or redemption would comply with the
provisions of this Indenture; (ii) the purchase, redemption, retirement or
other acquisition of any Equity Interests of the Company in exchange for,
or out of the net cash proceeds of the substantially concurrent (A) common
equity capital contribution to the Company from any Person (other than a
Subsidiary) or (B) issue and sale (other than to a Subsidiary) of,
Qualified Equity Interests; (iii) any Investment to the extent that the
consideration therefor consists of the net proceeds of the substantially
concurrent issue and sale (other than to a Subsidiary) of Qualified Equity
Interests; (iv) the purchase, redemption, retirement, defeasance or other
acquisition of Subordinated Indebtedness made in exchange for, or out of
the net cash proceeds of, a substantially concurrent issue and sale (other
than to a Subsidiary) of, (x) Qualified Equity Interests or (y) other
Subordinated Indebtedness having no stated maturity for the payment of
principal thereof prior to the Maturity Date; or (v) any Investment in any
Person principally engaged in a Telecommunications Business; provided,
however, that Investments pursuant to this clause (v) shall not exceed
$25.0 million in the aggregate at any time outstanding; provided, further,
however, that in the case of each of clauses (ii), (iii), (iv) and (v), no
Default shall have occurred and be continuing or would arise therefrom.
<PAGE> 30
SECTION 4.12. Limitation on Incurrence of Indebtedness.
(a) The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, Incur any Indebtedness; provided,
however, that the Company may Incur Indebtedness if, at the time of such
Incurrence, the Debt to Annualized Operating Cash Flow Ratio would be less
than or equal to 6.0 to 1.0.
(b) The foregoing limitations of paragraph (a) of this covenant will not
apply to any of the following, each of which shall be given independent
effect:
(i) the Securities and the Dollar Notes, and Permitted Refinancings
thereof;
(ii) Indebtedness of the Company or any Restricted Subsidiary to the
extent outstanding on the date of this Indenture, and Permitted
Refinancings thereof;
(iii) Indebtedness of the Company or Qualified Subsidiary
Indebtedness, in each case, to the extent that the proceeds of or
credit support provided by such Indebtedness is used to finance the
cost (including the cost of design, development, construction,
installation or integration) of network assets, equipment or inventory
acquired by the Company or a Restricted Subsidiary after the Issue
Date, and Permitted Refinancings thereof;
(iv) (1) Indebtedness of the Company or Qualified Subsidiary
Indebtedness, in each case, to the extent that the proceeds of or
credit support provided by such Indebtedness is used to finance a
Telecommunications Acquisition, or working capital for, or to finance
the construction of, the business or network acquired and (2) Acquired
Indebtedness, and, in each case, Permitted Refinancings thereof, but
in each case only to the extent that (x) the aggregate amount of
Indebtedness outstanding of the Company and the Restricted
Subsidiaries after giving effect to the Incurrence of such
Indebtedness and the application of the proceeds therefrom does not
exceed the product of 2.0 and the Share Capital of the Company at the
date of Incurrence of such Indebtedness or (y) the aggregate amount of
such Indebtedness or Acquired Indebtedness, together with all
Indebtedness of the Person, if any, that is to become a Restricted
Subsidiary or be merged or consolidated with or into the Company or
any Restricted Subsidiary in the contemplated transaction outstanding
at the time of such transaction (whether or not Incurred in connection
with, or in contemplation of, such transaction), does not exceed the
net sum of the plant, property and equipment set forth on the Latest
Balance Sheet of such Person;
(v) (1) Indebtedness of any Restricted Subsidiary owed to and held
by the Company or any Restricted Subsidiary and (2) Indebtedness of
the Company owed to and held by any Restricted Subsidiary which is
unsecured and subordinated in right of payment to the payment and
performance of the Company's obligations under the Securities;
provided, however, that an Incurrence of Indebtedness that is not
permitted by this clause (v) shall be deemed to have occurred upon (x)
any sale or other disposition of any Indebtedness of the Company or
any Restricted Subsidiary referred to in this clause (v) to any Person
other than the Company or any Restricted Subsidiary or (y) any
Restricted Subsidiary that holds Indebtedness of the Company or
another Restricted Subsidiary ceasing to be a Restricted Subsidiary;
(vi) Interest Rate Protection Obligations of the Company or any
Restricted Subsidiary relating to Indebtedness of the Company or such
Restricted Subsidiary, as the case may be (which Indebtedness (x)
bears interest at fluctuating interest rates and (y) is otherwise
permitted to be Incurred under this covenant); provided, however, that
the notional principal amount of such Interest Rate Protection
Obligations does not exceed the principal amount of the Indebtedness
to which such Interest Rate Protection Obligations relate;
(vii) Indebtedness of the Company or any Restricted Subsidiary under
Currency Agreements to the extent relating to (x) Indebtedness of the
Company or such Restricted Subsidiary, as the case may be, and/or (y)
obligations to purchase assets, properties or services incurred in the
ordinary course of business of the Company or such Restricted
Subsidiary, as the case may be; provided, however, that such Currency
Agreements do not increase the Indebtedness or other obligations of
the Company and the Restricted Subsidiaries outstanding other than as
a result of fluctuations in foreign currency exchange rates or by
reason of fees, indemnities or compensation payable thereunder;
(viii) Indebtedness of the Company and/or any Restricted Subsidiary in
respect of performance bonds of the Company or any Restricted
Subsidiary or surety bonds provided by the Company or any Restricted
Subsidiary incurred in the ordinary course of business and on ordinary
business terms in connection with the construction or operation of a
Telecommunications Business; and
(ix) in addition to the items referred to in clauses (i) through
(viii) above, Indebtedness of the Company or Qualified Subsidiary
Indebtedness in an aggregate amount not to exceed $15.0 million at any
time outstanding.
(c) For purposes of determining any particular amount of Indebtedness
under this covenant, guarantees, Liens or obligations with respect to
letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included; provided,
however, that the foregoing shall not in any way be deemed to limit the
provisions of Section 4.18.
<PAGE> 31
(d) For purposes of determining compliance with this covenant, in the
event that an item of Indebtedness may be Incurred through the first
paragraph of this covenant or by meeting the criteria of one or more of the
types of Indebtedness described in the second paragraph of this covenant
(or the definitions of the terms used therein), the Company, in its sole
discretion may, at the time of such Incurrence, (i) classify such item of
Indebtedness under and comply with either of such paragraphs (or any of
such definitions), as applicable, (ii) classify and divide such item of
Indebtedness into more than one of such paragraphs (or definitions), as
applicable, and (iii) elect to comply with such paragraphs (or
definitions), as applicable, in any order.
SECTION 4.13. Limitations on Restrictions Affecting Restricted Subsidiaries.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer
to exist or become effective any encumbrance or restriction on the ability
of any Restricted Subsidiary to (x) pay dividends or make any other
distributions to the Company or any other Restricted Subsidiary on its
Equity Interests or with respect to any other interest or participation in,
or measured by, its profits, or pay any Indebtedness owed to the Company or
any other Restricted Subsidiary, (y) make loans or advances to, or
guarantee any Indebtedness or other obligations of, the Company or any
other Restricted Subsidiary or (z) transfer any of its properties or assets
to the Company or any other Restricted Subsidiary.
The foregoing shall not prohibit (a) any encumbrance or restriction
existing under or by reason of any agreement in effect on the Issue Date,
as any such agreement is in effect on such date or as thereafter amended or
supplemented but only if such encumbrance or restriction is no more
restrictive than in the agreement being amended; (b) customary provisions
contained in an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets of a
Restricted Subsidiary; provided, however, that (x) such encumbrance or
restriction is applicable only to such Restricted Subsidiary or assets and
(y) such sale or disposition is made in accordance with Section 4.16; (c)
any encumbrance or restriction existing under or by reason of applicable
law; (d) customary provisions restricting subletting or assignment of any
lease governing any leasehold interest of any Restricted Subsidiary; (e)
covenants in purchase money obligations for property acquired in the
ordinary course of business restricting transfer of such property; (f)
covenants in security agreements securing Indebtedness of a Restricted
Subsidiary (to the extent that such Liens were otherwise incurred in
accordance with Section 4.15) that restrict the transfer of property
subject to such agreements; (g) any agreement or other instrument of a
Person acquired by the Company or any Restricted Subsidiary in existence at
the time of such acquisition, which encumbrance or restriction (x) is not
applicable to any Person, or the properties or assets of any Person, other
than the Person, or the properties or assets of the Person so acquired, and
(y) is not incurred in connection with or in contemplation of such
acquisition; or (h) contained in any agreement entered into after the Issue
Date, so long as such encumbrance or restriction is not materially more
disadvantageous to the Holders than the encumbrances and restrictions in
existence at the Issue Date.
SECTION 4.14. Designation of Unrestricted Subsidiaries.
(a) The Company may designate any Subsidiary of the Company as an
"Unrestricted Subsidiary" under this Indenture (a "Designation") only if:
(i) no Default shall have occurred and be continuing at the time of
or after giving effect to such Designation; and
(ii) the Company would be permitted to make an Investment (other than
a Permitted Investment) at the time of Designation (assuming the
effectiveness of such Designation) pursuant to the first paragraph of
Section 4.11 in an amount (the "Designation Amount") equal to the Fair
Market Value of the Company's proportionate interest in the net worth
of such Subsidiary on such date calculated in accordance with GAAP.
All Subsidiaries of Unrestricted Subsidiaries shall be Unrestricted
Subsidiaries.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, at any time (x) provide credit
support for, subject any of its properties or assets (other than the Equity
Interests of any Unrestricted Subsidiary) to the satisfaction of, or
guarantee, any Indebtedness of any Unrestricted Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness), (y) be
liable for any Indebtedness of any Unrestricted Subsidiary or (z) be liable
for any Indebtedness which provides that the holder thereof may (upon
notice, lapse of time or both) declare a default thereon or cause the
payment thereof to be accelerated or payable prior to its final scheduled
maturity upon the occurrence of a default with respect to any Indebtedness
of any Unrestricted Subsidiary.
(b) The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation") only if:
<PAGE> 32
(i) no Default shall have occurred and be continuing at the time of
and after giving effect to such Revocation;
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if Incurred
at such time, have been permitted to be Incurred for all purposes of
this Indenture; and
(iii) any transaction (or series of related transactions) between such
Subsidiary and any of its Affiliates that occurred while such
Subsidiary was an Unrestricted Subsidiary would be permitted by
Section 4.17 as if such transaction (or series of related
transactions) had occurred at the time of such Revocation (after
giving effect to any modification to such transaction (or series of
related transactions) effective at such time).
All Designations and Revocations must be evidenced by resolutions of the
Board of Directors of the Company, delivered to the Trustee certifying
compliance with the foregoing provisions.
SECTION 4.15. Limitation on Liens.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, Incur any Lien (other than any
Permitted Lien) of any kind against or upon any of their respective
properties or assets now owned or hereafter acquired, or any proceeds,
income or profits therefrom, unless contemporaneously therewith or prior
thereto, (i) in the case of any Lien securing an obligation that ranks pari
passu with the Securities, effective provision is made to secure the
Securities equally and ratably with or prior to such obligation with a Lien
on the same collateral and (ii) in the case of any Lien securing an
obligation that is subordinated in right of payment to the Securities,
effective provision is made to secure the Securities with a Lien on the
same collateral that is prior to the Lien securing such subordinated
obligation, in each case, for so long as such obligation is secured by such
Lien.
SECTION 4.16. Limitation on Asset Sales.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, make any Asset Sale, unless (x) the
Company 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 assets sold or otherwise disposed of and (y) at least
75% of such consideration consists of (i) cash or Cash Equivalents, (ii)
Replacement Assets, (iii) publicly traded Equity Interests of a Person who
is engaged primarily in a Telecommunications Business; provided, however,
that the Company or such Restricted Subsidiary shall sell (a "Monetization
Sale"), for cash or Cash Equivalents, such Equity Interests to a third
Person (other than to the Company or a Subsidiary thereof) at a price not
less than the Fair Market Value thereof within 365 days of the consummation
of such Asset Sale, or (iv) any combination of the foregoing clauses (i)
through (iii). The amount of any (x) Indebtedness (other than any
Subordinated Indebtedness) of the Company or any Restricted Subsidiary that
is actually assumed by the transferee in such Asset Sale and from which the
Company and the Restricted Subsidiaries are fully released shall be deemed
to be cash for purposes of determining the percentage of cash consideration
received by the Company or such Restricted Subsidiary and (y) notes or
other similar obligations received by the Company or any Restricted
Subsidiary from such transferee that are immediately converted, sold or
exchanged (or are converted, sold or exchanged within 365 days of the
related Asset Sale) by the Company or any Restricted Subsidiary into cash
shall be deemed to be cash, in an amount equal to the net cash proceeds
realized upon such conversion, sale or exchange for purposes of determining
the percentage of cash consideration received by the Company or such
Restricted Subsidiary. Any Net Cash Proceeds from any Asset Sale or any
Monetization Sale that are not invested in Replacement Assets or used to
repay and permanently reduce the commitments under Indebtedness of any
Restricted Subsidiary within 365 days of the consummation of such Asset
Sale or Monetization Sale shall constitute "Excess Proceeds" subject to
disposition as provided below.
Within 40 days after the aggregate amount of Excess Proceeds equals or
exceeds $10.0 million, the Company shall make an Offer to Purchase, from
all Holders on a pro rata basis, that aggregate principal amount of
Securities as can be purchased with the Note Portion of Excess Proceeds at
a price in cash equal to 100% of the principal amount thereof, plus accrued
and unpaid interest, if any, to any purchase date. To the extent that the
aggregate amount of principal and accrued interest of Securities validly
tendered and not withdrawn pursuant to an Offer to Purchase is less than
the Excess Proceeds, the Company may use such surplus for general corporate
purposes. If the aggregate amount of principal and accrued interest of
Securities validly tendered and not withdrawn by Holders thereof exceeds
the amount of Securities that can be
<PAGE> 33
purchased with the Note Portion of Excess Proceeds, Securities to be
purchased will be selected pro rata based on the aggregate principal amount
of Securities tendered by each Holder. Upon completion of an Offer to
Purchase, the amount of Excess Proceeds with respect to the applicable
Asset Sale or Monetization Sale shall be reset to zero.
In the event that any other Indebtedness of the Company that ranks pari
passu with the Securities (the "Other Debt") requires an offer to purchase
to be made to repurchase such Other Debt upon the consummation of an Asset
Sale, the Company may apply the Excess Proceeds otherwise required to be
applied to an Offer to Purchase to offer to purchase such Other Debt and to
an Offer to Purchase so long as the amount of such Excess Proceeds applied
to purchase the Securities is not less than the Note Portion of Excess
Proceeds. With respect to any Excess Proceeds, the Company shall make the
Offer to Purchase in respect thereof at the same time as the analogous
offer to purchase is made pursuant to any Other Debt and the Purchase Date
in respect thereof shall be the same as the purchase date in respect
thereof pursuant to any Other Debt.
For purposes of this covenant, "Note Portion of Excess Proceeds" means (1)
if no Other Debt is being offered to be purchased, the amount of the Excess
Proceeds and (2) if Other Debt is being offered to be purchased, the amount
of the Excess Proceeds equal to the product of (x) the Excess Proceeds and
(y) a fraction the numerator of which is the aggregate amount of all
Securities tendered pursuant to the Offer to Purchase related to such
Excess Proceeds (the "Note Amount") and the denominator of which is the sum
of the Note Amount and the aggregate amount as of the relevant purchase
date of all Other Debt tendered and purchased pursuant to a concurrent
offer to purchase such Other Debt made at the time of such Offer to
Purchase.
In the event that the Company makes an Offer to Purchase the Securities,
the Company shall comply with any applicable securities laws and
regulations, including any applicable requirements of Section 14(e) of, and
Rule 14e-1 under, the Exchange Act, and any violation of the provisions of
this Indenture relating to such Offer to Purchase occurring as a result of
such compliance shall not be deemed a Default or an Event of Default.
SECTION 4.17. Limitation on Transactions with Affiliates.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, conduct any business or enter into
any transaction or series of related transactions with or for the benefit
of any Affiliate, any holder of 5% or more of any class of Equity Interests
or any officer, director or employee of the Company or any Restricted
Subsidiary (each, an "Affiliate Transaction"), unless such Affiliate
Transaction is on terms that are no less favorable to the Company or such
Restricted Subsidiary, as the case may be, than could reasonably be
obtained at such time in a comparable transaction with an unaffiliated
third party. For any such transaction that involves value in excess of $5.0
million, the Company shall deliver to the Trustee an Officers' Certificate
stating that a majority of the Disinterested Directors has determined that
the transaction satisfies the above criteria and shall evidence such a
determination by a Board Resolution delivered to the Trustee. For any such
transaction that involves value in excess of $12.5 million, the Company
shall also obtain a written opinion from an Independent Financial Advisor
to the effect that such transaction is fair, from a financial point of
view, to the Company or such Restricted Subsidiary, as the case may be.
Notwithstanding the foregoing, the restrictions set forth in this covenant
shall not apply to (i) transactions between or among the Company and one or
more Restricted Subsidiaries or between or among Restricted Subsidiaries;
(ii) customary directors' fees, indemnification and similar arrangements,
employee salaries, bonuses or employment agreements, compensation or
employee benefit arrangements and incentive arrangements with any officer,
director or employee of the Company or any Restricted Subsidiary entered
into in the ordinary course of business (including customary benefits
thereunder); (iii) transactions pursuant to agreements in effect on the
Issue Date, as such agreements are in effect on the Issue Date or as
thereafter amended or supplemented in a manner not adverse to the Holders;
(iv) loans and advances to officers, directors and employees of the Company
or any Restricted Subsidiary for travel, entertainment, moving and other
relocation expenses, in each case made in the ordinary course of business
and consistent with past business practices; (v) any transactions between
the Company or any Restricted Subsidiary, on the one hand, and any
Affiliate of the Company engaged primarily in a Telecommunications
Business, on the other hand, (x) in the ordinary course of business and
consistent with commercially reasonable practices or (y) approved by a
majority of the Disinterested Directors; (vi) any payment pursuant to any
tax sharing agreement between the Company and any other Person with which
the Company files a consolidated tax return or with which the
<PAGE> 34
Company is part of a consolidated group for tax purposes; provided that
such payment is not greater than that which the Company would be required
to pay as a stand-alone taxpayer; (vii) the pledge of Equity Interests of
Unrestricted Subsidiaries to support the Indebtedness thereof; and (viii)
payment of dividends in respect of Equity Interests of the Company or any
Restricted Subsidiary permitted under Section 4.11.
SECTION 4.18. Limitation on Issuances of Guarantees by Restricted Subsidiaries.
The Company shall not cause or permit any Restricted Subsidiary, directly
or indirectly, to guarantee any Indebtedness of the Company ("Guaranteed
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously
executes and delivers a supplemental indenture to this Indenture pursuant
to which such Restricted Subsidiary guarantees (a "Subsidiary Guarantee")
all of the Company's obligations under the Securities and this Indenture
and (ii) such Restricted Subsidiary waives and will not in any manner
whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the
Company or any other Restricted Subsidiary as a result of any payment by
such Restricted Subsidiary under its Subsidiary Guarantee. If the
Guaranteed Indebtedness is (A) pari passu with the Securities, then the
guarantee of such Guaranteed Indebtedness shall be pari passu with, or
subordinated to, the Subsidiary Guarantee or (B) subordinated to the
Securities, then the guarantee of such Guaranteed Indebtedness shall be
subordinated to the Subsidiary Guarantee at least to the extent that the
Guaranteed Indebtedness is subordinated to the Securities.
Any Subsidiary Guarantee by a Restricted Subsidiary shall provide by its
terms that it shall be automatically and unconditionally released and
discharged upon (i) any sale, exchange or transfer, to any Person not an
Affiliate of the Company, of all of the Equity Interests of the Company or
any Restricted Subsidiary in, or all or substantially all the assets of,
such Restricted Subsidiary (which sale, exchange or transfer is made in
accordance with this Indenture) or (ii) the release or discharge of the
guarantee which resulted in the creation of such Subsidiary Guarantee,
except a discharge or release by or as a result of payment under such
guarantee.
SECTION 4.19. Limitation on the Issuance and Sale of Capital Stock of Restricted
Subsidiaries.
The Company shall not sell, and shall not cause or permit any Restricted
Subsidiary, directly or indirectly, to issue or sell, any Equity Interests
of a Restricted Subsidiary, except (i) to the Company or a Wholly Owned
Restricted Subsidiary; (ii) if, immediately after giving effect to such
issuance or sale, such Restricted Subsidiary would no longer constitute a
Restricted Subsidiary; or (iii) in the case of issuance of Equity Interests
by a non-Wholly Owned Restricted Subsidiary if, after giving effect to such
issuance, the Company maintains its direct or indirect percentage of
beneficial and economic ownership of such non-Wholly Owned Restricted
Subsidiary.
SECTION 4.20. Additional Amounts.
(a) All payments made by the Company under or with respect to the
Securities will be made free and clear of and without withholding or
deduction for or on account of any present of future Taxes imposed or
levied by or on behalf of any Taxing Authority within the Netherlands, or
within any other jurisdiction in which the Company is organized or engaged
in business for tax purposes, unless the Company is required to withhold or
deduct Taxes by law or by the interpretation or administration thereof. If
the Company is required to withhold or deduct any amount for or on account
of Taxes imposed by a Taxing Authority within the Netherlands, or within
any other jurisdiction in which the Company is organized or engaged in
business for tax purposes, from any payment made under or with respect to
the Securities, the Company will pay such additional amounts ("Additional
Amounts") as may be necessary so that the net amount received by each
holder of Securities (including Additional Amounts) after such withholding
or deduction will equal the amount the holder would have received if such
Taxes had not been withheld or deducted; provided, however, that no
Additional Amounts will be payable with respect to any Tax that would not
have been imposed, payable or due (i) but for the existence of any present
or former connection between the holder (or the beneficial owner of, or
person ultimately entitled to obtain an interest in, such Securities) and
the Netherlands or other jurisdiction in which the Company is organized or
engaged in business for tax purposes other than the mere holding of the
Securities; (ii) but for the failure to satisfy any certification,
identification or other reporting requirements whether imposed by statute,
treaty, regulation or administrative practice, provided that the Company
has delivered a request to the holder to comply with such requirements at
least 30 days prior to the date by which such compliance is required; (iii)
if the presentation of Securities (where presentation is required) for
payment has occurred within 30 days after the date such payment was due and
payable or was duly provided for, whichever is later; or (iv) if the
beneficial owner of, or
<PAGE> 35
person ultimately entitled to obtain an interest in, such Securities had
been the holder of the Securities and would not be entitled to the payment
of Additional Amounts (excluding the impact of the book-entry procedures
described in Section 2.15). In addition, Additional Amounts will not be
payable with respect to any Tax which is payable otherwise than by
withholding from payments of, or in respect of principal of, or any
interest on, the Securities.
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Sale of Assets, etc.
The Company shall not consolidate with or merge with or into (whether or
not the Company is the Surviving Person) any other Person and the Company
shall not, and shall not cause or permit any Restricted Subsidiary to,
sell, convey, assign, transfer, lease or otherwise dispose of all or
substantially all of the property and assets of the Company and the
Restricted Subsidiaries, taken as a whole, to any Person or Persons (other
than any Restricted Subsidiary), in each case, in a single transaction or
series of related transactions, unless: (i) either (x) the Company shall be
the Surviving Person or (y) the Surviving Person (if other than the
Company) shall be a corporation organized and validly existing under the
laws of The Netherlands, the United States of America or any State thereof
or the District of Columbia, and shall, in any such case, expressly assume
by a supplemental indenture, the due and punctual payment of the principal
of and interest on the Securities and the performance and observance of
every covenant of this Indenture and the Registration Rights Agreement to
be performed or observed on the part of the Company; (ii) immediately after
giving effect to such transaction, no Default shall have occurred and be
continuing; and (iii) immediately after giving effect to such transaction,
the Surviving Person (as the Company) could Incur at least $1.00 of
additional Indebtedness under Section 4.12(a).
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all the properties and assets of one or more Restricted
Subsidiaries the Equity Interests of which constitutes all or substantially
all the properties and assets of the Company shall be deemed to be the
transfer of all or substantially all the properties and assets of the
Company.
SECTION 5.02. Successor Corporation Substituted.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the first paragraph of this
covenant in which the Company is not the Surviving Person and the Surviving
Person is to assume all the Obligations of the Company under the
Securities, this Indenture and the Registration Rights Agreement pursuant
to a supplemental indenture, such Surviving Person shall succeed to, and be
substituted for, and may exercise every right and power of, the Company and
the Company shall be discharged from its Obligations under the Securities,
this Indenture and the Registration Rights Agreement.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
Each of the following shall be an "Event of Default" for purposes of this
Indenture:
(1) failure to pay principal of any Security when due;
(2) failure to pay any interest on any Security when due, continued
for 30 days or more;
(3) failure to pay on the Purchase Date the Purchase Price for any
Security validly tendered pursuant to an Offer to Purchase;
(4) failure to perform or comply with any of the provisions of
Section 5.01;
(5) failure to perform any other covenant, warranty or agreement of
the Company under this Indenture or in the Securities, and the Default
continues for the period and after the notice specified in the last
paragraph of this Section 6.01;
(6) there shall be, with respect to any issue or issues of
Indebtedness of the Company or any Restricted Subsidiary having an
outstanding principal amount of $10.0 million or more in aggregate for
such issues of all such Persons, whether such Indebtedness now exists
or shall hereafter be created, (x) an event of default that has caused
the holders thereof (or their representative) (I) to declare such
Indebtedness to be due and payable prior to its scheduled maturity and
such Indebtedness has not been discharged in full or such acceleration
has not been rescinded or annulled within 45 days following such
acceleration and/or (II) to commence judicial proceeding to foreclose
upon, or to exercise remedies under applicable law or applicable
security documents to take ownership of, the property or assets
securing such Indebtedness and/or (y) the failure to make a principal
payment at the final (but not any interim) fixed
<PAGE> 36
maturity and such defaulted payment shall not have been made, waived
or extended within 45 days of such payment default;
(7) there shall have been any final judgment or judgments against the
Company or any Restricted Subsidiary in an amount of $10.0 million or
more which remain undischarged or unstayed for a period of 60
consecutive days;
(8) the Company or any Significant Restricted Subsidiary pursuant to
or within the meaning of any Bankruptcy Law:
(A) admits in writing its inability to pay its debts generally as
they become due,
(B) commences a voluntary case or proceeding,
(C) consents to the entry of an order for relief against it in an
involuntary case or proceeding,
(D) consents or acquiesces in the institution of a bankruptcy or
insolvency proceeding against it,
(E) consents to the appointment of a Custodian of it or for all
or substantially all of its property, or
(F) makes a general assignment for the benefit of its creditors,
or any of them takes any action to authorize or effect any of the
foregoing; or
(9) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Restricted Subsidiary in an involuntary case or proceeding,
(B) appoints a Custodian of the Company or any Significant
Restricted Subsidiary or for all or substantially all of its
property, or
(C) orders the liquidation of the Company or any Significant
Restricted Subsidiary, and in each case the order or decree
remains unstayed and in effect for 60 days; provided, however,
that if the entry of such order or decree is appealed and
dismissed on appeal, then the Event of Default hereunder by
reason of the entry of such order or decree shall be deemed to
have been cured.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal,
state or foreign law for the relief of debtors. The term "Custodian" means
any receiver, trustee, assignee, liquidator, sequestrator or similar
official under any Bankruptcy Law.
A Default under clause (5) is not an Event of Default until the Trustee
notifies the Company, or the Holders of at least 25% in aggregate principal
amount of the outstanding Securities notify the Company and the Trustee, of
the Default in writing and the Company does not cure the Default within 30
days after receipt of the notice. The notice must specify the Default,
demand that it be remedied and state that the notice is a "Notice of
Default." Such notice shall be given by the Trustee if so requested by the
Holders of at least 25% in principal amount of the Securities then
outstanding. When a Default is cured, it ceases.
SECTION 6.02. Acceleration.
If an Event of Default with respect to the Securities (other than an Event
of Default specified in clause (8) or (9) of Section 6.01 with respect to
the Company) occurs and is continuing, the Trustee or the Holders of at
least 25% in aggregate principal amount of the outstanding Securities by
notice in writing to the Company may declare the unpaid principal of and
accrued interest to the date of acceleration on all outstanding Securities
to be due and payable immediately and, upon any such declaration, such
principal amount and accrued interest, notwithstanding anything contained
in this Indenture or the Securities to the contrary, shall become
immediately due and payable.
If an Event of Default specified in clause (8) or (9) of Section 6.01 with
respect to the Company occurs, all unpaid principal of and accrued interest
on all outstanding Securities shall ipso facto become immediately due and
payable without any declaration or other act on the part of the Trustee or
any Holder.
After a declaration of acceleration, but before a judgment or decree of the
money due in respect of the Securities has been obtained, the Holders of
not less than a majority in aggregate principal amount of the Securities
then outstanding by written notice to the Trustee may rescind an
acceleration and its consequences if all existing Events of Default (other
than the nonpayment of principal of and interest on the Securities which
has become due solely by virtue of such acceleration) have been cured or
waived and if the rescission would not conflict with any judgment or
decree. No such rescission shall affect any subsequent Default or impair
any right consequent thereto.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment
of principal of or interest on the Securities or to enforce the performance
of any provision of the Securities or this Indenture.
<PAGE> 37
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Securityholder in exercising any right or
remedy maturing upon an Event of Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in the Event of Default.
No remedy is exclusive of any other remedy. All available remedies are
cumulative to the extent permitted by law.
Upon a declaration of acceleration of the Securities in accordance with
Section 6.02, the Trustee shall foreclose on all Collateral and take all
other actions permitted of a secured party under the UCC or otherwise.
SECTION 6.04. Waiver of Past Default.
Subject to Sections 2.09, 6.07 and 9.02, prior to the declaration of
acceleration of the Securities, the Holders of not less than a majority in
aggregate principal amount of the outstanding Securities by written notice
to the Trustee may waive an existing Default and its consequences, except a
Default in the payment of principal of or interest on any Security as
specified in Section 6.01(1) or (2) or a Default in respect of any term or
provision of this Indenture that may not be amended or modified without the
consent of each Holder affected as provided in Section 9.02. The Company
shall deliver to the Trustee an Officers' Certificate stating that the
requisite percentage of Holders have consented to such waiver and attaching
copies of such consents. In case of any such waiver, the Company, the
Trustee and the Holders shall be restored to their former positions and
rights hereunder and under the Securities, respectively. This paragraph of
this Section 6.04 shall be in lieu of Section 316(a)(1)(B) of the TIA and
such Section 316(a)(1)(B) of the TIA is hereby expressly excluded from this
Indenture and the Securities, as permitted by the TIA.
Upon any such waiver, such Default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred for
every purpose of this Indenture and the Securities, but no such waiver
shall extend to any subsequent or other Default or impair any right
consequent thereon.
SECTION 6.05. Control by Majority.
Subject to Section 2.09, the Holders of a majority in principal amount of
the outstanding Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture
that the Trustee determines may be unduly prejudicial to the rights of
another Securityholder, or that may involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action
deemed proper by the Trustee which is not inconsistent with such direction.
In the event the Trustee takes any action or follows any direction pursuant
to this Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against any loss or expense
caused by taking such action or following such direction. This Section 6.05
shall be in lieu of Section 316(a)(1)(A) of the TIA, and such Section
316(a)(1)(A) of the TIA is hereby expressly excluded from this Indenture
and the Securities, as permitted by the TIA.
SECTION 6.06. Limitation on Suits.
A Securityholder may not pursue any remedy with respect to this Indenture
or the Securities unless:
(i) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount of the
outstanding Securities make a written request to the Trustee to pursue
a remedy;
(iii) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity reasonably satisfactory to the Trustee against any
loss, liability or expense;
(iv) the Trustee does not comply with the request within 60 days
after receipt of the request; and
(v) during such 60-day period the Holders of a majority in principal
amount of the outstanding Securities (excluding Affiliates of the
Company) do not give the Trustee a direction which, in the opinion of
the Trustee, is inconsistent with the request.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over such
other Securityholder.
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 or interest on a Security, on or
after the respective due dates therefor, 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 the Holder.
<PAGE> 38
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal or interest specified in
Section 6.01(1) or (2) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the
Company or any other obligor on the Securities for the whole amount of
principal and accrued interest remaining unpaid, together with interest
overdue on principal and to the extent that payment of such interest is
lawful, interest on overdue installments of interest, in each case at the
rate per annum borne by the Securities and such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel.
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
(including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Securityholders allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Securities), its creditors or its property
and shall be entitled and empowered to collect and receive any monies or
other property payable or deliverable on any such claims and to distribute
the same, and any Custodian in any such judicial proceedings is hereby
authorized by each Securityholder to make such payments to the Trustee and,
in the event that the Trustee shall consent to the making of such payments
directly to the Securityholders, to pay to the Trustee any amount due to it
for the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agent and counsel, and any other amounts due the Trustee
under Section 7.07. Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof,
or to authorize the Trustee to vote in respect of the claim of any
Securityholder in any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money or property pursuant to this Article Six
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 Holders for amounts due and unpaid on the Securities for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Securities for
principal and interest, respectively; and
Third: to the Company.
The Trustee, upon prior written notice to the Company, may fix a record
date and payment date for any payment to Securityholders pursuant to this
Section 6.10.
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 and expenses, 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 6.11 shall not apply to a
suit by the Trustee, a suit by a Holder or group of Holders of more than
10% in aggregate principal amount of the outstanding Securities, or to any
suit instituted by any Holder for the enforcement or the payment of the
principal or interest on any Securities on or after the respective due
dates therefor.
ARTICLE SEVEN
TRUSTEE
SECTION 7.1. Duties of Trustee.
(a) If a Default has occurred and is continuing, 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 a Default:
(1) The Trustee shall not be liable except for the performance of
such duties as are specifically set forth herein 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 conforming to the requirements of this Indenture; however, in
the case of any such certificates or opinions which by any provision
hereof are specifically required to be
<PAGE> 39
furnished to the Trustee, the Trustee shall examine such certificates
and opinions to determine whether or not 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 shall not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful 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) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any
action under this Indenture or take any action at the request or direction
of Holders if it shall have reasonable grounds for believing that repayment
of such funds is not assured to it or it does not receive from such Holders
an indemnity or security satisfactory to it in its sole discretion against
such risk, liability, loss, fee or expense which might be incurred by it in
compliance with such request or direction.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section
7.01.
(f) The Trustee shall not be liable for interest on any money received by
it. Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(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.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate and/or an Opinion of Counsel, which shall conform to
the provisions of Section 10.05. The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such
certificate or opinion.
(c) The Trustee may act through attorneys and agents of its selection and
shall not be responsible for the misconduct or negligence of any agent or
attorney (other than an agent who is an employee of the Trustee) 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 reasonably believes to be authorized or within
its rights or powers.
(e) The Trustee may consult with counsel of its selection and the advice
or opinion of such counsel as to matters of law shall be full and complete
authorization and protection from liability in respect of any action taken,
omitted or suffered by it hereunder in good faith and in accordance with
the advice or opinion of such counsel.
(f) Any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution.
(g) 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 Securityholders pursuant to this Indenture, unless such
Securityholders 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.
(h) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney.
(i) The Trustee shall not be deemed to have notice of any Event of Default
unless a Trust Officer of the Trustee has actual knowledge thereof or
unless the Trustee shall have received written notice thereof at the
Corporate Trust Office of the Trustee, and such notice references the
Securities and this Indenture.
(j) The rights, privileges, protections, immunities and benefits given to
the Trustee, including, without limitation, its right to be indemnified,
are extended to, and shall be enforceable by, the Trustee in each of its
capacities hereunder, and to each agent, custodian and other Person
employed to act hereunder.
<PAGE> 40
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Securities and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee,
subject to Section 7.10 hereof. Any Agent may do the same with like rights.
However, the Trustee is subject to 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 or the Securities, it shall not
be accountable for the Company's use of the proceeds from the Securities,
and it shall not be responsible for any statement of the Company in this
Indenture or any document issued in connection with the sale of Securities
or any statement in the Securities other than the Trustee's certificate of
authentication.
SECTION 7.05. Notice of Defaults.
If a Default occurs and is continuing and the Trustee actually knows of
such Default, the Trustee shall mail to each Securityholder notice of the
Default within 30 days after the occurrence thereof. Except in the case of
a Default in payment of principal of or interest on any Security 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
interest of Securityholders. This Section 7.05 shall be in lieu of the
proviso to Section 315(b) of the TIA and such proviso to Section 315(b) of
the TIA is hereby expressly excluded from this Indenture and the
Securities, as permitted by the TIA.
SECTION 7.06. Reports by Trustee to Holders.
If required by TIA Section 313(a), within 60 days after each September 1
beginning with September 1, 1999, the Trustee shall mail to each
Securityholder a report dated as of such September 1 that complies with TIA
Section 313(a). The Trustee also shall comply with TIA Section 313(b), (c)
and (d).
A copy of each such report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange, if any, on which the
Securities are listed.
The Company shall promptly notify the Trustee in writing if the Securities
become listed on any stock exchange or of any delisting thereof.
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time such compensation as
the Company and the Trustee shall from time to time agree in writing for
its services. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse
the Trustee upon request for all reasonable disbursements, expenses and
advances (including fees, disbursements and expenses of its agents and
counsel) incurred or made by it in addition to the compensation for its
services except any such disbursements, expenses and advances as may be
attributable to the Trustee's negligence or bad faith. Such expenses shall
include the reasonable compensation, disbursements and expenses of the
Trustee's agents, accountants, experts and counsel and any taxes or other
expenses incurred by a trust created pursuant to Section 8.01 hereof.
The Company shall indemnify the Trustee, its agents and officers, for, and
hold it harmless against any and all loss, damage, claims, liability or
expense, including taxes (other than franchise taxes imposed on the Trustee
and taxes based upon, measured by or determined by the income of the
Trustee), arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs and
expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder,
except to the extent that such loss, damage, claim, liability or expense is
due to its own negligence or bad faith. The Trustee shall notify the
Company promptly of any claim asserted against the Trustee for which it may
seek indemnity. However, the failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The
Company shall defend the claim and the Trustee shall cooperate in the
defense (and may employ its own counsel) at the Company's expense;
provided, however, that the Company's reimbursement obligation with respect
to counsel employed by the Trustee will be limited to the reasonable fees
and expenses of such counsel.
The Company need not pay for any settlement made without its written
consent, which consent shall not be unreasonably withheld.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a Lien prior to the Securities against all money or
property held or collected by the Trustee, in its capacity as Trustee,
except money or property held in trust to pay principal of or interest on
particular Securities or the Purchase Price or redemption
<PAGE> 41
price of any Securities to be purchased or pursuant to an Offer to Purchase
or redeemed.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(8) or (9) occurs, the expenses (including
the reasonable fees and expenses of its agents and counsel) and the
compensation for the services shall be preferred over the status of the
Holders in a proceeding under any Bankruptcy Law and are intended to
constitute expenses of administration under any Bankruptcy Law. The
Company's obligations under this Section 7.07 and any claim arising
hereunder shall survive the resignation or removal of any Trustee, the
discharge of the Company's obligations pursuant to Article Eight and any
rejection or termination under any Bankruptcy Law, and the termination of
this Indenture.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign at any time by so notifying the Company in writing.
The Holders of a majority in principal amount of the outstanding Securities
may remove the Trustee by so notifying the Trustee and the Company in
writing and may appoint a successor Trustee with the Company's consent. The
Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent under any
Bankruptcy Law;
(3) a custodian or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes
office, the Holders of a majority in principal amount of the Securities may
appoint a successor Trustee to replace the successor Trustee appointed by
the Company.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. As promptly as practicable
after that, the retiring Trustee shall transfer, after payment of all sums
then owing to the Trustee pursuant to Section 7.07, all property held by it
as Trustee to the successor Trustee, subject to the Lien provided in
Section 7.07, the resignation or removal of the retiring Trustee shall
become effective, and the successor Trustee shall have the rights, powers
and duties of the Trustee under this Indenture. A successor Trustee shall
mail notice of its succession to each Securityholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company
or the Holders of at least 10% in principal amount of the outstanding
Securities may petition, at the expense of the Company, any court of
competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder may
petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section 7.08,
the Company's obligations under Section 7.07 shall continue for the benefit
of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another
corporation or banking corporation, the resulting, surviving or transferee
corporation or banking corporation without any further act shall be the
successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee which shall be eligible to act
as Trustee under TIA Sections 310(a)(1), 310(a)(2) and 310(a)(5).
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. If the Trustee has or shall acquire any "conflicting interest"
within the meaning of TIA Section 310(b), the Trustee and the Company shall
comply with the provisions of TIA Section 310(b); provided, however, that
there shall be excluded from the operation of TIA Section 310(b)(1) any
indenture or indentures under which other securities or certificates of
interest or participation in other securities of the Company are
outstanding if the requirements for such exclusion set forth in TIA Section
310(b)(1) are met. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 7.10, the Trustee shall
resign immediately in the manner and with the effect hereinbefore specified
in this Article Seven.
<PAGE> 42
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or
been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations.
The Company may terminate its substantive obligations in respect of the
Securities by delivering all outstanding Securities to the Trustee for
cancellation and paying all sums payable by it on account of principal of
and interest on all Securities or otherwise. In addition to the foregoing,
the Company may terminate its obligation under Sections 4.04, 4.06, 4.08,
4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17, 4.18, 4.19 and 4.20 (and no
Default with respect to such Sections under Section 6.01(5) shall
thereafter apply), by (i) depositing with the Trustee, under the terms of
an irrevocable trust agreement, money or U. S. Government Obligations
sufficient (without reinvestment) to pay all remaining indebtedness on the
Securities at maturity or an earlier redemption, (ii) delivering to the
Trustee either an Opinion of Counsel or a ruling directed to the Trustee
from the Internal Revenue Service to the effect that the Holders of the
Securities will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit and termination of obligations, (iii)
delivering to the Trustee an Opinion of Counsel to the effect that the
Company's exercise of its option under this paragraph will not result in
any of the Company, the Trustee or the trust created by the Company's
deposit of funds pursuant to this provision becoming or being deemed to be
an "investment company" under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), and (iv) delivering to the Trustee
an Officers' Certificate and an Opinion of Counsel each stating compliance
with all conditions precedent provided for herein. In addition, the Company
may, provided that no Default has occurred and is continuing or would arise
therefrom (or, with respect to a Default specified in Section 6.01(8) or
(9), occurs at any time on or prior to the 91st calendar day after the date
of such deposit (it being understood that this condition shall not be
deemed satisfied until after such 91st day)), terminate all of its
substantive obligations in respect of the Securities (including its
obligations to pay the principal of and interest on the Securities) by (i)
depositing with the Trustee, under the terms of an irrevocable trust
agreement, money or U.S. Government Obligations sufficient (without
reinvestment) to pay all remaining indebtedness on the Securities at
maturity or upon earlier redemption, (ii) delivering to the Trustee either
a ruling directed to the Trustee from the Internal Revenue Service to the
effect that the Holders of the Securities will not recognize income, gain
or loss for federal income tax purposes as a result of such deposit and
termination of obligations or an Opinion of Counsel addressed to the
Trustee based upon such a ruling or based on a change in the applicable
Federal tax law since the date of this Indenture to such effect, (iii)
delivering to the Trustee an Opinion of Counsel to the effect that the
Company's exercise of its option under this paragraph will not result in
any of the Company, the Trustee or the trust created by the Company's
deposit of funds pursuant to this provision becoming or being deemed to be
an "investment company" under the Investment Company Act and (iv)
delivering to the Trustee an Officers' Certificate and an Opinion of
Counsel each stating compliance with all conditions precedent provided for
herein.
Notwithstanding the foregoing paragraph, the Company's obligations under
Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.10, 2.12, 2.13 and 4.01 (but
not with respect to termination of substantive obligations pursuant to the
third sentence of the foregoing paragraph), 4.02, 7.07, 7.08, 8.03 and 8.04
shall survive until the Securities are no longer outstanding. Thereafter
the Company's obligations in Sections 7.07, 8.03 and 8.04 shall survive.
After such delivery or irrevocable deposit and delivery of an Officers'
Certificate and Opinion of Counsel, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Securities and this Indenture except for those surviving obligations
specified above.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U. S. Government
Obligations deposited pursuant to this Section 8.01 or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of outstanding
Securities.
SECTION 8.02. Application of Trust Money.
The Trustee shall hold in trust money or U. S. Government Obligations
deposited with it pursuant to Section 8.01, and shall apply the deposited
money and the money from
<PAGE> 43
United States Government Obligations in accordance with this Indenture
solely to the payment of principal of and interest on the Securities.
SECTION 8.03. Repayment to Company.
Subject to Sections 7.07 and 8.01, the Trustee shall promptly pay to the
Company upon written request any excess money held by it at any time. The
Trustee shall pay to the Company upon written request any money held by it
for the payment of principal or interest that remains unclaimed for two
years; provided, however, that the Trustee before being required to make
any payment may at the expense of the Company cause to be published once in
a newspaper of general circulation in The City of New York and in a
newspaper of general circulation in Luxembourg (which is expected to be the
Luxemburger Wort) or mail to each Holder entitled to such money notice that
such money remains unclaimed and that, after a date specified therein which
shall be at least 30 days from the date of such publication or mailing, any
unclaimed balance of such money then remaining shall be repaid to the
Company. After payment to the Company, Securityholders entitled to money
must look to the Company for payment as general creditors unless an
applicable abandoned property law designates another person and all
liability of the Trustee or Paying Agent with respect to such money shall
thereupon cease.
SECTION 8.04. Reinstatement.
If the Trustee is unable to apply any money or U.S. Government Obligations
in accordance with Section 8.01 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
Company's obligations under this Indenture and the Securities shall be
revived and reinstated as though no deposit had occurred pursuant to
Section 8.01 until such time as the Trustee is permitted to apply all such
money or U.S. Government Obligations in accordance with Section 8.01;
provided, however, that if the Company has made any payment of interest on
or principal of any Securities because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders
of such Securities to receive such payment from the money or U.S.
Government Obligations held by the Trustee.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
The Company, when authorized by a resolution of its Board of Directors, and
the Trustee may amend or supplement this Indenture or the Securities
without notice to or consent of any Securityholder:
(i) to cure any ambiguity, defect or inconsistency; provided,
however, that such amendment or supplement does not materially
adversely affect the rights of any Holder;
(ii) to effect the assumption by a successor Person of all
obligations of the Company under the Securities, this Indenture and
the Registration Rights Agreement in connection with any transaction
complying with Article Five of this Indenture;
(iii) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(iv) to comply with any requirements of the SEC in order to effect
or maintain the qualification of this Indenture under the TIA;
(v) to make any change that would provide any additional benefit or
rights to the Holders;
(vi) to make any other change that does not materially adversely
affect the rights of any Holder under this Indenture;
(vii) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; or
(viii) to secure the Securities pursuant to the requirements of
Section 4.20 or otherwise;
provided, however, that the Company has delivered to the Trustee an Opinion
of Counsel stating that such amendment or supplement complies with the
provisions of this Section 9.01.
SECTION 9.02. With Consent of Holders.
Subject to Section 6.07, the Company, when authorized by a resolution of
its Board of Directors, and the Trustee may amend or supplement this
Indenture or the Securities with the written consent of the Holders of a
majority in principal amount of the outstanding Securities. Subject to
Section 6.07, the Holders of a majority in principal amount of the
outstanding Securities may waive compliance by the Company with any
provision of this Indenture or the Securities. However, without the consent
of the Holder of each Security affected, an amendment, supplement or
waiver, including a waiver pursuant to Section 6.04, may not:
<PAGE> 44
(1) change the maturity of the principal of any such Security;
(2) alter the optional redemption or repurchase provisions of any
such Security or this Indenture in a manner adverse to the Holders of
such Security;
(3) reduce the principal amount of any such Security;
(4) reduce the rate of or extend the time for payment of interest on
any such Security;
(5) change the place or currency of payment of the principal of or
interest on any such Security;
(6) modify any provisions of Section 6.04 (other than to add sections
of this Indenture or the Securities subject thereto) or 6.07 or this
Section 9.02 (other than to add sections of this Indenture or the
Securities which may not be amended, supplemented or waived without
the consent of each Securityholder affected);
(7) reduce the percentage of the principal amount of outstanding
Securities necessary for amendment to or waiver of compliance with any
provision of this Indenture or the Securities or for waiver of any
Default in respect thereof;
(8) waive a default in the payment of the principal of or interest on
or redemption payment with respect to any such Security (except a
rescission of acceleration of the Securities by the Holders as
provided in Section 6.02 and a waiver of the payment default that
resulted from such acceleration);
(9) modify the ranking or priority of such Security; or
(10) modify the provisions of any covenant (or the related definitions
in this Indenture) requiring the Company to make any Offer to Purchase
in a manner materially adverse to the Holders.
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, supplement
or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
SECTION 9.03. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Securities shall
comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents.
Until an amendment or waiver becomes effective, a consent to it by a Holder
is a continuing consent by the Holder and every subsequent Holder of that
Security or portion of that Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent is not made
on any Security. Subject to the following paragraph, any such Holder or
subsequent Holder may revoke the consent as to such Holder's Security or
portion of such Security by notice to the Trustee or the Company received
before the date on which the Trustee receives an Officers' Certificate
certifying that the Holders of the requisite principal amount of Securities
have consented (and not theretofore revoked such consent) to the amendment,
supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders of Securities entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then,
notwithstanding the last sentence of the immediately preceding paragraph,
those persons who were Holders of Securities at such record date (or their
duly designated proxies), and only those persons, shall be entitled to
consent to such amendment, supplement or waiver or to revoke any consent
previously given, whether or not such persons continue to be Holders of
such Securities after such record date. No such consent shall be valid or
effective for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall bind
every Securityholder, unless it makes a change described in any of clauses
(1) through (10) of Section 9.02. In that case the amendment, supplement or
waiver shall bind each Holder of a Security who has consented to it and
every subsequent Holder of a Security or portion of a Security that
evidences the same debt as the consenting Holder's Security.
SECTION 9.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security, the
Trustee may require the Holder of the Security to deliver it to the
Trustee. The Trustee may place an appropriate notation on the Security
about the changed terms and return it to the Holder. Alternatively, if the
Company or the Trustee so determines, the Company in exchange for the
Security shall issue and the Trustee shall authenticate a new
<PAGE> 45
Security that reflects the changed terms. Failure to make the appropriate
notation or issue a new Security shall not affect the validity and effect
of such amendment, supplement or waiver.
SECTION 9.06. Trustee To Sign Amendments, etc.
The Trustee shall be entitled to receive, and shall be fully protected in
relying upon, an Opinion of Counsel stating that the execution of any
amendment, supplement or waiver authorized pursuant to this Article Nine is
authorized or permitted by this Indenture and that such amendment,
supplement or waiver constitutes the legal, valid and binding obligation of
the Company, enforceable in accordance with its terms (subject to customary
exceptions). The Trustee may, but shall not be obligated to, execute any
such amendment, supplement or waiver which affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise. In signing
any amendment, supplement or waiver, the Trustee shall be entitled to
receive an indemnity reasonably satisfactory to it.
ARTICLE TEN
MISCELLANEOUS
SECTION 10.01. Trust Indenture Act Controls.
This Indenture is subject to the provisions of the TIA that are required to
be a part of this Indenture, and shall, to the extent applicable, be
governed by such provisions. If any provision of this Indenture modifies
any TIA provision that may be so modified, such TIA provision shall be
deemed to apply to this Indenture as so modified. If any provision of this
Indenture excludes any TIA provision that may be so excluded, such TIA
provision shall be excluded from this Indenture.
The provisions of TIA Section Section 310 through 317 that impose duties on
any Person (including the provisions automatically deemed included unless
expressly excluded by this Indenture) are a part of and govern this
Indenture, whether or not physically contained herein.
SECTION 10.02. Notices.
Any notice or communication shall be sufficiently given if in writing and
delivered in person, by facsimile and confirmed by overnight courier, or
mailed by first-class mail addressed as follows:
if to the Company:
Hermes Europe Railtel B.V.
Terhulpsesteenweg 6A
1560 Hoeilaart
Belgium
Attention: Chief Executive Officer
Facsimile: 32-2-658-5100
Telephone: 32-2-658-5200
with a copy to:
Global TeleSystems Group, Inc.
1751 Pinnacle Drive
North Tower 12th Floor
McLean, Virginia 22102
Attention: Chief Executive Officer
Facsimile: (703) 847-0663
Telephone: (703) 918-4500
and
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022-6069
Attention: John D. Morrison, Jr.
Facsimile: (212) 848-4000
Telephone: (212) 848-7179
if to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Facsimile: (212) 815-5915
Telephone: (212) 815-5919
<PAGE> 46
if to the Paying Agent:
The Bank of New York, London branch
46 Berkeley Street
London, WIX 6AA
England
Attention: Corporate Trust Administration
Facsimile: 44-171-322-6399
Telephone: 44-171-322-6337
if to the Luxembourg Paying and Transfer Agent:
Banque Internationale a Luxembourg
69, route d'Esch
L-1470 Luxembourg
Facsimile: (352) 4590-4227
Telephone: (352) 4590-3550
The Company or the Trustee by notice to the other may designate additional
or different addresses for subsequent notices or communications.
Any notice or communication mailed, first-class, postage prepaid, to a
Holder including any notice delivered in connection with TIA Section
310(b), TIA Section 313(c), TIA Section 314(a) and TIA Section 315(b),
shall be mailed to him at his address as set forth on the Security Register
and shall be sufficiently given to him if so mailed within the time
prescribed. To the extent required by the TIA, any notice or communication
shall also be mailed to any Person described in TIA Section 313(c).
Failure to mail a notice or communication to a Securityholder or any defect
in it shall not affect its sufficiency with respect to other
Securityholders. Except for a notice to the Trustee, which is deemed given
only when received, if a notice or communication is mailed in the manner
provided above, it is duly given, whether or not the addressee receives it.
SECTION 10.03. Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other person
shall have the protection of TIA Section 312(c).
SECTION 10.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take or
refrain from taking any action under this Indenture, the Company shall
furnish to the Trustee at the request of the Trustee:
(1) an Officers' Certificate in form and substance 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 and substance satisfactory to the
Trustee stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
SECTION 10.05. Statements Required in Certificate or Opinion.
Each certificate (other than the certificates provided pursuant to Section
4.07) or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
(1) a statement that the person 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 person, he has made such
examination or investigation as is necessary to enable him to express
an informed opinion as to whether such covenant or condition has been
complied with; and
(4) a statement as to whether, in the opinion of such person, such
condition or covenant has been complied with; provided, however, that
with respect to matters of fact an Opinion of Counsel may rely on an
Officers' Certificate or certificates of public officials.
SECTION 10.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Paying Agent or Registrar may make reasonable rules
for its functions.
<PAGE> 47
SECTION 10.07. Governing Law.
The laws of the State of New York shall govern this Indenture and the
Securities without regard to principles of conflicts of law.
SECTION 10.08. No Recourse Against Others.
A director, officer, employee, incorporator or stockholder of the Company
or any of its Affiliates, as such, shall not have any liability for any
obligations of the Company or any of its Affiliates under the Securities or
this Indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder by accepting a Security
waives and releases all such liability.
SECTION 10.09. Successors.
All agreements of the Company in this Indenture and the Securities shall
bind its successor. All agreements of the Trustee in this Indenture shall
bind its successor.
SECTION 10.10. Counterpart 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.
SECTION 10.11. Severability.
In case any provision in this Indenture or in the Securities 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, and a Holder shall have no claim therefor against any
party hereto.
SECTION 10.12. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or a Subsidiary. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
SECTION 10.13. Legal Holidays.
If a payment date is a not a Business Day at a place of payment, payment
may be made at that place on the next succeeding Business Day, and no
interest shall accrue for the intervening period.
SECTION 10.14. Agent for Service; Submission to Jurisdiction; Waiver of
Immunities.
By the execution and delivery of this Indenture, the Company (i)
acknowledges that it has, by separate written instruments, designated and
appointed CT Corporation System, 1633 Broadway, New York, NY 10019 ("CT
Corporation System") (and any successor entity), as its authorized agent
upon which process may be served in any suit or proceeding arising out of
or relating to this Indenture that may be instituted in any federal or
state court in the Borough of Manhattan, City of New York, State of New
York or brought under federal or state securities laws, and represent and
warrant that CT Corporation System has accepted such designation, (ii)
submit to the jurisdiction of any such court in any such suit or proceeding
and (iii) agree that service of process upon CT Corporation System and
written notice of said service to the Company, in accordance with Section
10.02 shall be deemed in every respect effective service of process upon
the Company in any such suit or proceeding. The Company further agrees to
take any and all action, including the execution and filing of any and all
such documents and instruments, as may be necessary to continue such
designation and appointment of CT Corporation System in full force and
effect for as long as any of the Securities remain outstanding (subject to
the limitation set forth in clause (i)); provided, however, that the
Company may, and to the extent CT Corporation System ceases to be able to
be served on the basis contemplated herein shall, by written notice to the
Trustee, designate such additional or alternative agent for service of
process under this Section 10.14 that (i) maintains an office located in
the Borough of Manhattan, City of New York, State of New York, and (ii) is
either (x) United States counsel for the Company or (y) a corporate service
company which acts as agent for service of process for other persons in the
ordinary course of its busineSection Such written notice shall identify the
name of such agent for service of process and the address of the office of
such agent for service of process in the Borough of Manhattan, City of New
York, State of New York.
To the extent that the Company has or hereafter may acquire any immunity
from jurisdiction of any court of (i) any jurisdiction in which the Company
owns or leases property or assets, (ii) the United States or the State of
New York or (iii) the Netherlands 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 and assets or this Agreement or any of the Notes or actions to
enforce judgments in respect of any thereof, the Company hereby irrevocably
waives such immunity in respect of its obligations under the
above-referenced documents, to the extent permitted by law.
<PAGE> 48
SECTION 10.15. Judgment Currency.
The Company hereby agrees to indemnify the Trustee, its directors, its
officers and each person, if any, who controls the Trustee within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act against
any loss incurred by such person as a result of any judgment or order being
given or made against the Company for any U.S. dollar 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 such party 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 party. 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.
[Signature Page Follows]
<PAGE> 49
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly
executed as of the date first written above.
HERMES EUROPE RAILTEL B.V.
By: /s/ FRANCOIS NOTE
Name: Francois Note
Title: Corporate Financial Director
THE BANK OF NEW YORK,
as Trustee
By: /s/ HECTOR HERRERA
Name: Hector Herrera
Title: Vice President
<PAGE> 50
EXHIBIT A
[FORM OF SERIES A SECURITY]
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST
HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) (A "QIB"), (B) IT IS ACQUIRING THIS NOTE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT
OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES
ACT (AN "IAI") (2) AGREES THAT IT WILL NOT, RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY OF ITS
SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF THE SECURITIES
ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER,
FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE
(THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH
TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS
THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT
SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE
TO THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION
AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE
OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY
RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE
CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING.
<PAGE> 51
HERMES EUROPE RAILTEL B.V.
10 3/8% Senior Note due 2006
No. $_______ CUSIP No.:_________
HERMES EUROPE RAILTEL B.V., a Netherlands limited company (the "Company", which
term includes any successor corporation), for value received promises to pay to
or registered assigns, the principal sum of
Euro, on January 15, 2006.
Interest Payment Dates: January 15 and July 15, commencing July 15, 1999.
Interest Record Dates: January 1 and July 1.
Reference is made to the further provisions of this Security contained herein,
which will for all purposes have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed manually
or by facsimile by its duly authorized officer.
HERMES EUROPE RAILTEL B.V.
By:
-----------------------------------
Name:
Title:
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 10 3/8% Senior Notes due 2006, described in the
within-mentioned Indenture.
Dated: January 4, 1999
THE BANK OF NEW YORK,
as Trustee
By:
-----------------------------------
Authorized Signatory
<PAGE> 52
(REVERSE OF SECURITY)
HERMES EUROPE RAILTEL B.V.
10 3/8% Senior Note due 2006
1. Interest.
HERMES EUROPE RAILTEL B.V., a Netherlands limited company (the "Company"),
promises to pay interest on the principal amount of this Security at the
rate per annum shown above. Cash interest on the Securities will accrue
from the most recent date to which interest has been paid or, if no
interest has been paid, from January 4, 1999. The Company will pay interest
semi-annually in arrears on each Interest Payment Date, commencing July 15,
1999. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
The Company shall pay interest on overdue principal from time to time on
demand at the rate borne by the Securities and on overdue installments of
interest (without regard to any applicable grace periods) at the rate borne
by the Securities to the extent lawful.
2. Method of Payment.
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of
business on the Interest Record Date immediately preceding the Interest
Payment Date even if the Securities are cancelled on registration of
transfer or registration of exchange after such Interest Record Date.
Payments of principal, premium, if any, and interest will be made (in the
case of payments of principal, on presentation of such Securities if in
certificated form) by credit or transfer to a Euro account maintained by
the Holder in the place of payment specified by the Holder. Holders of
Securities who receive payment in any currency other than the Euro must
make arrangements at their own expense. The Company shall deliver any such
interest, principal or other payment to the Paying Agent no later than
12:00 noon London time on the Business Day prior to the date such payment
is due.
3. Paying Agent and Registrar.
Initially, The Bank of New York (the "Trustee") will act through its London
branch as Paying Agent and as Registrar in London, and Banque
Internationale a Luxembourg S.A. will act as Paying Agent and Registrar in
Luxembourg. The Company may change any Paying Agent or Registrar without
notice to the Holders. The Company or any of its Subsidiaries may, subject
to certain exceptions, act as Registrar.
4. Indenture.
The Company issued the Securities under an Indenture, dated as of January
4, 1999 (the "Indenture"), between the Company and the Trustee. Capitalized
terms herein are used as defined in the Indenture unless otherwise defined
herein. The terms of the Securities include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture
Act of 1939 (15 U.S.C. Section Section 77aaa-77bbbb) (the "TIA"), as in
effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which
the Indenture is qualified under the TIA. Notwithstanding anything to the
contrary herein, the Securities are subject to all such terms, and holders
of Securities are referred to the Indenture and the TIA for a statement of
them. This is one of the Series A Securities referred to in the Indenture.
The Series A Securities and the Series B Securities referred to in the
Indenture are general obligations of the Company limited in aggregate
principal amount to Euro 85,000,000.
5. Optional Redemption.
(a) The Securities will be redeemable at the option of the Company, in
whole or in part, at any time or from time to time, on or after January 15,
2003 at the redemption prices (expressed as a percentage of principal
amount) set forth below, plus accrued and unpaid interest thereon, if any,
to the redemption date if redeemed during the twelve-month period
commencing on January 15 of the years set forth below:
<TABLE>
<CAPTION>
Year Redemption Price
<S> <C> <C>
2003 105.188%
2004 102.594%
2005 and thereafter 100.000%
</TABLE>
(b) Redemption Upon Public Equity Offering or Strategic Equity Investment.
At any time, or from time to time, prior to January 15, 2002, the
Company may redeem Securities at a redemption price equal to 110.375%
of the principal amount of the Securities so redeemed, plus accrued
and unpaid interest thereon, if any, to the redemption date, with the
net cash proceeds of one or more Public Equity Offerings or Strategic
Equity Investments resulting in aggregate gross cash proceeds to the
Company of at least $75.0 million; provided, however, that at least
two-thirds of the principal amount of Securities originally issued
would remain outstanding immediately after giving effect to any such
redemption (excluding any Securities owned by the Company or any of
its Affiliates). Notice of any such redemption must be given within 60
days after the date of the last Public Equity Offering or Strategic
Equity Investment resulting in gross cash proceeds to the Company,
when aggregated with all prior Public Equity Offerings and Strategic
Equity Investments, of at least $75.0 million.
(c) Redemption for Changes in Withholding Taxes.
The Company may, at its option, redeem all (but not less than all) of
the Securities then outstanding at 100% of the principal amount
thereof, plus accrued and unpaid interest,
<PAGE> 53
if any, to the date of redemption, if the Company has become or would
become obligated to pay, on the next date on which any amount would be
payable with respect to the Securities, any Additional Amounts as a
result of change in law (including any regulations promulgated
thereunder) or in the interpretation or administration thereof, if
such change is announced and becomes effective on or after the Issue
Date. Notice of any such redemption must be given within 60 days of
the earlier of the announcement and the effectiveness of any such
change.
6. Notice of Redemption.
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the Redemption Date to each
Holder of Securities to be redeemed at its registered address;
provided, however, that notice of redemption pursuant to paragraph
5(b) of this Security will be mailed to each Holder of Securities to
be redeemed no later than 60 days following the consummation of the
last Public Equity Offering resulting in gross cash proceeds to the
Company, when aggregated with all prior Public Equity Offerings, of at
least $75.0 million. The Company will cause a copy of such notice to
be published in a daily newspaper with general circulation in
Luxembourg (which is expected to the Luxemburger Wort). The Trustee
may select for redemption portions of the principal amount of
Securities that have denominations equal to or larger than Euro 1,000
principal amount. Securities and portions of them the Trustee so
selects shall be in amounts of Euro 1,000 principal amount or integral
multiples thereof.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of
the principal amount thereof to be redeemed. A new Security in a
principal amount equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the
original Security. On and after the Redemption Date, interest will
cease to accrue on Securities or portions thereof called for
redemption so long as the Company has deposited with the Paying Agent
for the Securities funds in satisfaction of the redemption price
pursuant to the Indenture.
7. Change of Control Offer.
Upon the occurrence of a Change of Control, the Company will be
required to offer to purchase all outstanding Securities at a purchase
price in cash equal to 101% of the aggregate principal amount thereof,
plus accrued and unpaid interest thereon, if any, to the Purchase
Date. The Company will cause a copy of such notice to be published in
a daily newspaper with general circulation in Luxembourg (which is
expected to the Luxemburger Wort).
8. Limitation on Disposition of Assets.
Upon the occurrence of certain Asset Sales, the Company is, subject to
certain conditions, obligated to make an offer to purchase Securities
at a purchase price in cash equal to 100% of the aggregate principal
amount thereof, plus accrued and unpaid interest thereon, if any, to
the Purchase Date.
9. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of Euro 1,000 and integral multiples of Euro 1,000. A
Holder shall register the transfer of or exchange Securities in
accordance with the Indenture. The Registrar may require a Holder,
among other things, to furnish appropriate endorsements and transfer
documents and to pay certain transfer taxes or similar governmental
charges payable in connection therewith as permitted by the Indenture.
The Registrar need not register the transfer of or exchange any
Securities or portions thereof selected for redemption, except the
unredeemed portion of any security being redeemed in part.
10. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
11. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed for
two years, the Trustee and the Paying Agent will repay the funds to
the Company at its written request. After that, all liability of the
Trustee and such Paying Agent with respect to such funds shall cease.
12. Legal Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the Indenture
and the Securities except for certain provisions thereof, and may be
discharged from obligations to comply with certain covenants contained
in the Indenture and the Securities, in each case upon satisfaction of
certain conditions specified in the Indenture.
13. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture and the Securities may be
amended or supplemented with the written consent of the Holders of at
least a majority in aggregate
<PAGE> 54
principal amount of the Securities then outstanding, and any existing
Default or compliance with any provision may be waived with the
consent of the Holders of a majority in aggregate principal amount of
the Securities then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture and
the Securities to, among other things, cure any ambiguity, defect or
inconsistency, provide for uncertificated Securities in addition to or
in place of certificated Securities, effect the assumption by a
successor person of all obligations of the Company under the
Securities, the Indenture and the Registration Rights Agreement in
connection with any transaction complying with Article Five of the
Indenture or comply with any requirements of the SEC in connection
with the qualification of the Indenture under the TIA, or make any
other change that does not materially adversely affect the rights of
any Holder of a Security.
14. Restrictive Covenants.
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and the Restricted Subsidiaries to
make restricted payments, to incur indebtedness, to create liens, to
sell assets, to permit restrictions on dividends and other payments to
become applicable to Restricted Subsidiaries, to consolidate, merge or
sell all or substantially all of its assets, to engage in transactions
with affiliates or certain other related persons. The limitations are
subject to a number of important qualifications and exceptions. The
Company must annually report to the Trustee on compliance with such
limitations.
15. Defaults and Remedies.
If an Event of Default (other than certain events of bankruptcy,
insolvency or reorganization affecting the Company) occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate
principal amount of Securities then outstanding by notice in writing
to the Company may declare all the Securities to be due and payable
immediately in the manner and with the effect provided in the
Indenture. If certain events of bankruptcy, insolvency or
reorganization affecting the Company occur under the Indenture, the
Securities will ipso facto become immediately due and payable without
any declaration or other act on the part of the Trustee or any Holder
of Securities. Holders of Securities may not enforce the Indenture or
the Securities except as provided in the Indenture. The Trustee is not
obligated to enforce the Indenture or the Securities unless it has
received indemnity reasonably satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Securities then
outstanding to direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of Securities notice of
certain continuing Defaults if it determines that withholding notice
is in their interest.
16. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may
otherwise deal with the Company, its Subsidiaries or their respective
Affiliates as if it were not the Trustee.
17. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such,
of the Company or any of its Affiliates shall have any liability for
any obligation of the Company or any of its Affiliates under the
Securities or the Indenture or for any claim based on, in respect of
or by reason of, such obligations or their creation. Each Holder of a
Security by accepting a Security waives and releases all such
liability. The waiver and release are part of the consideration for
0 the issuance of the Securities.
18. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
19. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right
of survivorship and not as tenants in common), CUST (= Custodian), and
U/G/M/A (= Uniform Gifts to Minors Act).
20. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP
numbers to be printed on the Securities as a convenience to the
Holders of the Securities. No representation is made as to the
accuracy of such numbers as printed on the Securities and reliance may
be placed only on the other identification numbers printed hereon.
21. Governing Law.
The laws of the State of New York shall govern the Indenture and this
Security without regard to principles of conflicts of laws.
<PAGE> 55
ASSIGNMENT FORM
I or we assign and transfer this Security to
(Print or type name, address and zip code of assignee or transferee)
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated: Signed:
---------------------------- --------------------------------
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee:
Participant in a recognized Signature Guarantee Medallion Program
(or other signature guarantor program reasonably acceptable to
the Trustee)
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.10 or Section 4.16 of the Indenture, check the
appropriate box:
Section 4.10 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.10 or Section 4.16 of the Indenture,
state the amount: Euro _____________
Dated:___________________ Your Signature:
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee:
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
<PAGE> 56
EXHIBIT B
(FORM OF SERIES B SECURITY)
HERMES EUROPE RAILTEL B.V.
10 3/8% Senior Note due 2006, Series B
No. $_________ CUSIP No.:_________
HERMES EUROPE RAILTEL B.V., a Netherlands limited company (the "Company"),
which term includes any successor corporation), for value received promises to
pay to or registered assigns, the principal sum of Euro, on January 15, 2006.
Interest Payment Dates: January 15 and July 15, commencing July 15, 1999.
Interest Record Dates: January 1 and July 1.
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officer.
HERMES EUROPE RAILTEL B.V.
By:
----------------------------------------
Name:
Title:
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 10 3/8% Senior Notes due 2006, Series B, described in
the within-mentioned Indenture.
Dated: January 4, 1999
THE BANK OF NEW YORK,
as Trustee
By:
----------------------------------------
Authorized Signatory
<PAGE> 57
(REVERSE OF SECURITY)
HERMES EUROPE RAILTEL B.V.
10 3/8% Senior Note due 2006, Series B
1. Interest.
HERMES EUROPE RAILTEL B.V., a Netherlands limited company (the "Company"),
promises to pay interest on the principal amount of this Security at the
rate per annum shown above. Cash interest on the Securities will accrue
from the most recent date to which interest has been paid or, if no
interest has been paid, from January 4, 1999. The Company will pay interest
semi-annually in arrears on each Interest Payment Date, commencing July 15,
1999. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
The Company shall pay interest on overdue principal from time to time on
demand at the rate borne by the Securities and on overdue installments of
interest (without regard to any applicable grace periods) at the rate borne
by the Securities to the extent lawful.
2. Method of Payment.
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of
business on the Interest Record Date immediately preceding the Interest
Payment Date even if the Securities are cancelled on registration of
transfer or registration of exchange after such Interest Record Date.
Payments of principal, premium, if any, and interest will be made (in the
case of payments of principal, on presentation of such Securities if in
certificated form) by credit or transfer to a Euro account maintained by
the Holder in the place of payment specified by the Holder. Holders of
Securities who receive payment in any currency other than the Euro must
make arrangements at their own expense. The Company shall deliver any such
interest, principal or other payment to the Paying Agent no later than
12:00 noon London time on the Business Day prior to the date such payment
is due.
3. Paying Agent and Registrar.
Initially, The Bank of New York (the "Trustee") will act through its London
branch as Paying Agent and as Registrar in London, and Banque
Internationale a Luxembourg S.A. will act as Paying Agent and Registrar in
Luxembourg. The Company may change any Paying Agent or Registrar without
notice to the Holders. The Company or any of its Subsidiaries may, subject
to certain exceptions, act as Registrar.
4. Indenture.
The Company issued the Securities under an Indenture, dated as of January
4, 1999 (the "Indenture"), among the Company and the Trustee. Capitalized
terms herein are used as defined in the Indenture unless otherwise defined
herein. The terms of the Securities include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture
Act of 1939 (15 U.S.C. Section Section 77aaa-77bbbb) (the "TIA"), as in
effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which
the Indenture is qualified under the TIA. Notwithstanding anything to the
contrary herein, the Securities are subject to all such terms, and holders
of Securities are referred to the Indenture and the TIA for a statement of
them. This is one of the Series A Securities referred to in the Indenture.
The Series A Securities and the Series B Securities referred to in the
Indenture are general obligations of the Company limited in aggregate
principal amount to Euro 85,000,000.
5. Optional Redemption.
(a) The Securities will be redeemable at the option of the Company, in
whole or in part, at any time or from time to time, on or after January 15,
2003 at the redemption prices (expressed as a percentage of principal
amount) set forth below, plus accrued and unpaid interest thereon, if any,
to the redemption date if redeemed during the twelve-month period
commencing on January 15 of the years set forth below:
<TABLE>
<CAPTION>
Year Redemption Price
- ----- --------
<S> <C> <C>
2003 105.188%
2004 102.594%
2005 and thereafter 100.000%
</TABLE>
(b) Redemption Upon Public Equity Offering or Strategic Equity Investment.
At any time, or from time to time, prior to January 15, 2002, the
Company may redeem Securities at a redemption price equal to 110.375%
of the principal amount of the Securities so redeemed, plus accrued
and unpaid interest thereon, if any, to the redemption date, with the
net cash proceeds of one or more Public Equity Offerings or Strategic
Equity Investments resulting in aggregate gross cash proceeds to the
Company
<PAGE> 58
of at least $75.0 million; provided, however, that at least two-thirds
of the principal amount of Securities originally issued would remain
outstanding immediately after giving effect to any such redemption
(excluding any Securities owned by the Company or any of its
Affiliates). Notice of any such redemption must be given within 60
days after the date of the last Public Equity Offering or Strategic
Equity Investment resulting in gross cash proceeds to the Company,
when aggregated with all prior Public Equity Offerings and Strategic
Equity Investments, of at least $75.0 million.
(c) Redemption for Changes in Withholding Taxes.
The Company may, at its option, redeem all (but not less than all) of
the Securities then outstanding at 100% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of
redemption, if the Company has become or would become obligated to
pay, on the next date on which any amount would be payable with
respect to the Securities, any Additional Amounts as a result of
change in law (including any regulations promulgated thereunder) or in
the interpretation or administration thereof, if such change is
announced and becomes effective on or after the Issue Date. Notice of
any such redemption must be given within 60 days of the earlier of the
announcement and the effectiveness of any such change.
6. Notice of Redemption.
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the Redemption Date to each
Holder of Securities to be redeemed at its registered address;
provided, however, that notice of redemption pursuant to paragraph
5(b) of this Security will be mailed to each Holder of Securities to
be redeemed no later than 60 days following the consummation of the
last Public Equity Offering resulting in gross cash proceeds to the
Company, when aggregated with all prior Public Equity Offerings, of at
least $75.0 million. The Company will cause a copy of such notice to
be published in a daily newspaper with general circulation in
Luxembourg (which is expected to the Luxemburger Wort). The Trustee
may select for redemption portions of the principal amount of
Securities that have denominations equal to or larger than Euro 1,000
principal amount. Securities and portions of them the Trustee so
selects shall be in amounts of Euro 1,000 principal amount or integral
multiples thereof.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of
the principal amount thereof to be redeemed. A new Security in a
principal amount equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the
original Security. On and after the Redemption Date, interest will
cease to accrue on Securities or portions thereof called for
redemption so long as the Company has deposited with the Paying Agent
for the Securities funds in satisfaction of the redemption price
pursuant to the Indenture.
7. Change of Control Offer.
Upon the occurrence of a Change of Control, the Company will be
required to offer to purchase all outstanding Securities at a purchase
price in cash equal to 101% of the aggregate principal amount thereof,
plus accrued and unpaid interest thereon, if any, to the Purchase
Date. The Company will cause a copy of such notice to be published in
a daily newspaper with general circulation in Luxembourg (which is
expected to the Luxemburger Wort).
8. Limitation on Disposition of Assets.
Upon the occurrence of certain Asset Sales, the Company is, subject to
certain conditions, obligated to make an offer to purchase Securities
at a purchase price in cash equal to 100% of the aggregate principal
amount thereof, plus accrued and unpaid interest thereon, if any, to
the Purchase Date.
9. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of Euro 1,000 and integral multiples of Euro 1,000. A
Holder shall register the transfer of or exchange Securities in
accordance with the Indenture. The Registrar may require a Holder,
among other things, to furnish appropriate endorsements and transfer
documents and to pay certain transfer taxes or similar governmental
charges payable in connection therewith as permitted by the Indenture.
The Registrar need not register the transfer of or exchange any
Securities or portions thereof selected for redemption, except the
unredeemed portion of any security being redeemed in part.
10. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
11. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed for
two years, the Trustee and the Paying Agent will repay the funds to
the Company at its written request. After that, all liability of the
Trustee and such Paying Agent with respect to such funds shall cease.
<PAGE> 59
12. Legal Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the Indenture
and the Securities except for certain provisions thereof, and may be
discharged from obligations to comply with certain covenants contained
in the Indenture and the Securities, in each case upon satisfaction of
certain conditions specified in the Indenture.
13. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture and the Securities may be
amended or supplemented with the written consent of the Holders of at
least a majority in aggregate principal amount of the Securities then
outstanding, and any existing Default or compliance with any provision
may be waived with the consent of the Holders of a majority in
aggregate principal amount of the Securities then outstanding. Without
notice to or consent of any Holder, the parties thereto may amend or
supplement the Indenture and the Securities to, among other things,
cure any ambiguity, defect or inconsistency, provide for
uncertificated Securities in addition to or in place of certificated
Securities, effect the assumption by a successor person of all
obligations of the Company under the Securities, the Indenture and the
Registration Rights Agreement in connection with any transaction
complying with Article Five of the Indenture or comply with any
requirements of the SEC in connection with the qualification of the
Indenture under the TIA, or make any other change that does not
materially adversely affect the rights of any Holder of a Security.
14. Restrictive Covenants.
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and the Restricted Subsidiaries to
make restricted payments, to incur indebtedness, to create liens, to
sell assets, to permit restrictions on dividends and other payments to
become applicable to Restricted Subsidiaries, to consolidate, merge or
sell all or substantially all of its assets, to engage in transactions
with affiliates or certain other related persons. The limitations are
subject to a number of important qualifications and exceptions. The
Company must annually report to the Trustee on compliance with such
limitations.
15. Defaults and Remedies.
If an Event of Default (other than certain events of bankruptcy,
insolvency or reorganization affecting the Company) occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate
principal amount of Securities then outstanding by notice in writing
to the Company may declare all the Securities to be due and payable
immediately in the manner and with the effect provided in the
Indenture. If certain events of bankruptcy, insolvency or
reorganization affecting the Company occur under the Indenture, the
Securities will ipso facto become immediately due and payable without
any declaration or other act on the part of the Trustee or any Holder
of Securities. Holders of Securities may not enforce the Indenture or
the Securities except as provided in the Indenture. The Trustee is not
obligated to enforce the Indenture or the Securities unless it has
received indemnity reasonably satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Securities then
outstanding to direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of Securities notice of
certain continuing Defaults if it determines that withholding notice
is in their interest.
16. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may
otherwise deal with the Company, its Subsidiaries or their respective
Affiliates as if it were not the Trustee.
17. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such,
of the Company or any of its Affiliates shall have any liability for
any obligation of the Company or any of its Affiliates under the
Securities or the Indenture or for any claim based on, in respect of
or by reason of, such obligations or their creation. Each Holder of a
Security by accepting a Security waives and releases all such
liability. The waiver and release are part of the consideration for
the issuance of the Securities.
18. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
19. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right
of survivorship and not as tenants in common), CUST (= Custodian), and
U/G/M/A (= Uniform Gifts to Minors Act).
<PAGE> 60
20. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP
numbers to be printed on the Securities as a convenience to the
Holders of the Securities. No representation is made as to the
accuracy of such numbers as printed on the Securities and reliance may
be placed only on the other identification numbers printed hereon.
21. Governing Law.
The laws of the State of New York shall govern the Indenture and this
Security without regard to principles of conflicts of laws.
<PAGE> 61
ASSIGNMENT FORM
I or we assign and transfer this Security to
(Print or type name, address and zip code of assignee or transferee)
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated: Signed:
--------------------------- ---------------------------------
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee:
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor program
reasonably acceptable to the Trustee)
<PAGE> 62
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.10 or Section 4.16 of the Indenture, check the
appropriate box:
Section 4.10 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.10 or Section 4.16 of the Indenture,
state the amount: Euro _____________
Dated: Your Signature:
------------------- -----------------------------------
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee:
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
<PAGE> 63
EXHIBIT C
FORM OF LEGEND FOR GLOBAL SECURITIES
Any Global Security authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in substantially the following form:
THIS SECURITY IS HELD BY THE DEPOSITORY (AS DEFINED IN THE INDENTURE
GOVERNING THIS SECURITY) IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS
HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT
THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT
TO SECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL SECURITY MAY BE EXCHANGED IN
WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06 OF THE INDENTURE, (III) THIS
GLOBAL SECURITY MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO
SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL SECURITY MAY BE TRANSFERRED
TO A SUCCESSOR DEPOSITORY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUER.
<PAGE> 64
EXHIBIT D
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Re: 10 3/8% Senior Notes due 2006
(the "Securities"), of Hermes Europe Railtel B.V.
This Certificate relates to Euro _______ principal amount of
Securities held in the form of* ___ a beneficial interest in a
Global Security or* _______ Physical Securities by (the
"Transferor").
The Transferor:*
[ ] has requested by written order that the Registrar deliver in
exchange for its beneficial interest in the Global Security held
by the Depositary a Physical Security or Physical Securities in
definitive, registered form of authorized denominations and an
aggregate number equal to its beneficial interest in such Global
Security (or the portion thereof indicated above); or
[ ] has requested that the Registrar by written order to exchange
or register the transfer of a Physical Security or Physical
Securities.
In connection with such request and in respect of each such
Security, the Transferor does hereby certify that the Transferor
is familiar with the Indenture relating to the above captioned
Securities and the restrictions on transfers thereof as provided
in Section 2.06 of such Indenture, and that the transfer of the
Securities does not require registration under the Securities Act
of 1933, as amended (the "Act"), because*:
[ ] Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.06 of the
Indenture).
[ ] Such Security is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Act), in reliance on
Rule 144A.
[ ] Such Security is being transferred to an institutional
"accredited investor" (within the meaning of subparagraph (a)(1),
(2), (3) or (7) of Rule 501 under the Act) which delivers a
certificate to the Trustee in the form of Exhibit E to the
Indenture. An opinion of counsel to the effect that such transfer
does not require registration under the Securities Act
accompanies this certification.
[ ] Such Security is being transferred in reliance on Regulation S
under the Act. An opinion of counsel to the effect that such
transfer does not require registration under the Securities Act
accompanies this certification.
[ ] Such Security is being transferred in reliance on Rule 144 under
the Act. An opinion of counsel to the effect that such transfer
does not require registration under the Securities Act
accompanies this certification.
[ ] Such Security is being transferred in reliance on and in
compliance with an exemption from the registration requirements
of the Act other than Rule 144A or Rule 144 or Regulation S under
the Act to a person other than an institutional "accredited
investor." An opinion of counsel to the effect that such transfer
does not require registration under the Securities Act
accompanies this certification.
------------------------------
[INSERT NAME OF TRANSFEROR]
By:
---------------------------
[Authorized Signatory]
Date:
---------------
*Check applicable box.
<PAGE> 65
EXHIBIT E
Form of Certificate To Be
Delivered in Connection with
Transfers to Institutional Accredited Investors
-------------------
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Administration
Re: Hermes Europe Railtel B.V. (the "Company")
Indenture (the "Indenture") relating to 10 3/8%
Senior Notes due 2006
Ladies and Gentlemen:
In connection with our proposed purchase of Euro aggregate
principal amount of 10 3/8% Senior Notes due 2006 (the
"Notes") of Hermes Europe Railtel B.V., a Netherlands
limited company (the "Company"), we confirm that:
1. We understand that the Notes have not been registered
under the Securities Act of 1933, as amended (the
"Securities Act"), and may not be sold except as permitted
in the following sentence. We understand and agree, on our
own behalf and on behalf of any accounts for which we are
acting as hereinafter stated, (x) that such Notes are being
offered only in a transaction not involving any public
offering within the meaning of the Securities Act and (y)
that if we decide to resell, pledge or otherwise transfer
such Notes within two years after the date of the original
issuance of the Notes or if within three months after we
cease to be an affiliate (within the meaning of Rule 144
under the Securities Act) of the Company, such Notes may be
resold, pledged or transferred only (i) to the Company, (ii)
so long as the Notes are eligible for resale pursuant to
Rule 144A under the Securities Act ("Rule 144A"), to a
person whom we reasonably believe is a "qualified
institution buyer" (as defined in Rule 144A) ("QIB") that
purchases for its own account or for the account of a QIB to
whom notice is given that the resale, pledge or transfer is
being made in reliance on Rule 144A (as indicated by the box
checked by the transferor on the Certificate of Transfer on
the reverse of the certificate for the Notes), (iii) in an
offshore transaction in accordance with Regulation S under
the Securities Act (as indicated by the box checked by the
transferor on the Certificate of Transfer on the reverse of
the Note if the Note is not in book-entry form), and, if
such transfer is being effected by certain transferors prior
to the expiration of the "40-day distribution compliance
period" (within the meaning of Rule 903(b)(2) of Regulation
S under the Securities Act), a certificate that may be
obtained from the Trustee is delivered by the transferee,
(iv) to an institution that is an "accredited investor" as
defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act (as indicated by the box checked by the
transferor on the Certificate of Transfer on the reverse of
the certificate for the Notes) which has certified to the
Company and the Trustee for the Notes that it is such an
accredited investor and is acquiring the Notes for
investment purposes and not for distribution (provided that
no Notes purchased from a foreign purchaser or from any
person other than a QIB or an institutional accredited
investor pursuant to this clause (iii) shall be permitted to
transfer any Notes so purchased to an institutional
accredited investor pursuant to this clause (iv) prior to
the expiration of the "applicable restricted period" (within
the meaning of Regulation S under the Securities Act)), (v)
pursuant to an exemption from registration under the
Securities Act provided by Rule 144 (if applicable) under
the Securities Act, or (vi) pursuant to an effective
registration statement under the Securities Act, in each
case in accordance with any applicable securities laws of
any state of the United States, and we will notify any
purchaser of the Notes from us of the above resale
restriction, if then applicable. We further understand that
in connection with any transfer of the Notes by us that the
Company and the Trustee for the Notes may request, and if so
requested we will furnish, such certificates, legal opinions
and other information as they may reasonably require to
confirm that any such transfer complies with the foregoing
restrictions.
2. We are able to fend for ourselves in the transactions
contemplated by this Offering Memorandum, we have such
knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of our
investment in the Notes, and we and any accounts for which
we are acting are each able to bear the economic risk of our
or its investment and can afford the complete loss of such
investment.
3. We understand that the minimum principal amount of Notes
that may be purchased by an investor is Euro 250,000.
<PAGE> 66
4. We understand that the Company, Donaldson, Lufkin &
Jenrette International, Merrill Lynch International, Bear,
Stearns International Limited, BT Alex. Brown International,
a division of Bankers Trust International, PLC, and Lehman
Brothers International (Europe), as the initial purchasers
of the Securities ("Initial Purchasers"), and others will
rely upon the truth and accuracy of the foregoing
acknowledgments, representations and agreements and we agree
that if any of the acknowledgments, representations and
warranties deemed to have been made by us by our purchase of
Notes, for our own account or of one or more accounts as to
each of which we exercise sole investment discretion, are no
longer accurate, we shall promptly notify the Company and
the Initial Purchasers.
5. We are acquiring the Notes purchased by us for investment
purposes and not for distribution of our own account or for
one or more accounts as to each of which we exercise sole
investment discretion and we are or such account is an
institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act).
6. You are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or
legal proceeding or official inquiry with respect to the
matters covered hereby.
Very truly yours,
---------------------------------------
(Name of Purchaser)
By:
---------------------------------------
Date:
---------------------------------------
<PAGE> 67
EXHIBIT F
Form of Certificate To Be
Delivered in Connection
with Regulation S Transfers
------------------
The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Administration
Re: Hermes Europe Railtel B.V. (the "Company") 10 3/8%
Senior Notes due 2006 (the "Securities")
Ladies and Gentlemen:
In connection with our proposed sale of Euro ____________
aggregate principal amount of the Securities, we confirm that
such sale has been effected pursuant to and in accordance with
Regulation S under the Securities Act of 1933, as amended (the
"Securities Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a person in the
United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person
acting on our behalf reasonably believed that the transferee was
outside the United States, or (b) the transaction was executed
in, on or through the facilities of a designated off-shore
securities market and neither we nor any person acting on our
behalf knows that the transaction has been prearranged with a
buyer in the United States;
(3) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(a) or
Rule 904(a) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Securities.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to
any interested party in any administrative or legal proceedings
or official inquiry with respect to the matters covered hereby.
Defined terms used herein without definition have the respective
meanings provided in Regulation S.
Very truly yours,
[Name of Transferor]
By:
--------------------------------
<PAGE> 1
EXHIBIT 4.7
REGISTRATION RIGHTS AGREEMENT
BETWEEN
HERMES EUROPE RAILTEL B.V.
AND
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION,
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
BEAR, STEARNS & CO. INC.,
BT ALEX. BROWN INCORPORATED
AND
LEHMAN BROTHERS INC.
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of January
4, 1999, by and between HERMES EUROPE RAILTEL B.V., a company incorporated under
the laws of the Netherlands (the "Company"), and DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
BEAR, STEARNS & CO. INC., BT ALEX. BROWN INCORPORATED and LEHMAN BROTHERS INC.
(the "Initial Purchasers").
This Agreement is entered into in connection with the Purchase Agreement,
dated as of December 21, 1998, between the Company and the Initial Purchasers
and certain of their affiliates (the "Purchase Agreement") relating to the sale
by the Company to the Initial Purchasers of $200,000,000 aggregate principal
amount of its 10-3/8% Senior Notes due 2009 (the "Notes"). In order to induce
the Initial Purchasers to enter into the Purchase Agreement, the Company has
agreed to provide the registration rights set forth in this Agreement for the
equal benefit of the Initial Purchasers and its direct and indirect transferees.
The execution and delivery of this Agreement is a condition to the Initial
Purchasers' obligation to purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
Additional Interest: See Section 4(a).
Advice: See the last paragraph of Section 5.
Applicable Period: See Section 2(b).
Commission: The Securities and Exchange Commission.
Company: See the introductory paragraph to this Agreement.
Effectiveness Date: The 135th day after the Issue Date; provided, however,
that, with respect to the Initial Shelf Registration Statement, (i) if the
Filing Date in respect thereof is fewer than 60 days prior to the 135th day
after the Issue Date, then the Effectiveness Date in respect thereof shall be
the 60th day after such Filing Date and (ii) if the Filing Date is after the
filing of the Exchange Offer Registration Statement with the Commission, then
the Effectiveness Date in respect thereof shall be the 60th day after such
Filing Date.
Effectiveness Period: See Section 3(a).
Event Date: See Section 4(b).
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission promulgated thereunder.
Exchange Offer: See Section 2(a).
Exchange Offer Registration Statement: See Section 2(a).
Exchange Securities: See Section 2(a).
Expiration Date: See Section 2(a).
Filing Date: The 90th day after the Issue Date; provided, however, that,
with respect to the Initial Shelf Registration Statement, (i) if a Shelf
Registration Event shall have occurred fewer than 30 days prior to the 30th day
after the Issue Date, then the Filing Date in respect thereof shall be the 30th
day after such Shelf Registration Event and (ii) if a Shelf Registration Event
shall have occurred after the filing of the Exchange Offer Registration
Statement with the Commission, then the Filing Date in respect thereof shall be
the 30th day after such Shelf Registration Event.
<PAGE> 3
Guarantors: See Section 10(d).
Holder: Any record holder of Registrable Securities.
Indemnified Person: See the third paragraph of Section 7.
Indemnifying Person: See the third paragraph of Section 7.
Indenture: The Indenture, dated as of January 4, 1999, between the Company
and The Bank of New York, as trustee, pursuant to which the Notes are being
issued, as amended or supplemented from time to time in accordance with the
terms thereof.
Initial Purchasers: See the introductory paragraph to this Agreement.
Initial Shelf Registration Statement: See Section 3(a).
Inspectors: See Section 5(o).
Issue Date: The date of original issuance of the Notes.
NASD: See Section 5(t).
Notes: See the second introductory paragraph to this Agreement.
Participant: See the first paragraph of Section 7.
Participating Broker-Dealer: See Section 2(b).
Person: An individual, corporation, limited or general partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
Private Exchange: See Section 2(b).
Private Exchange Securities: See Section 2(b).
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by such
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
Purchase Agreement: See the second introductory paragraph to this
Agreement.
Records: See Section 5(o).
Registrable Securities: The Notes upon original issuance thereof and at all
times subsequent thereto, each Exchange Security as to which Section 2(c)(v)
hereof is applicable upon original issuance and at all times subsequent thereto
and, if issued, the Private Exchange Securities, until in the case of any such
Notes, Exchange Securities or Private Exchange Securities, as the case may be,
(i) a Registration Statement (other than, with respect to any Exchange Security
as to which Section 2(c)(v) hereof is applicable, the Exchange Offer
Registration Statement) covering such Notes, Exchange Securities or Private
Exchange Securities has been declared effective by the Commission and such
Notes, Exchange Securities or Private Exchange Securities, as the case may be,
have been disposed of in accordance with such effective Registration Statement,
(ii) such Notes, Exchange Securities or Private Exchange Securities, as the case
may be, are sold in compliance with Rule 144, (iii) such Note has been exchanged
for an Exchange Note pursuant to the Exchange Offer and Section 2(c)(v) is not
applicable thereto, or (iv) such Notes, Exchange Securities or Private Exchange
Securities, as the case may be, cease to be outstanding.
Registration Statement: Any registration statement of the Company,
including, but not limited to, the Exchange Offer Registration Statement, that
covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such Rule may
be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the Commission providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such Rule may
be amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the Commission.
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission.
Securities Act: The Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder.
<PAGE> 4
Shelf Notice: See Section 2(c).
Shelf Registration Statement: See Section 3(b).
Shelf Registration Event: See Section 2(c).
Subsequent Shelf Registration Statement: See Section 3(b).
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and, if applicable, the trustee
under any indenture governing the Exchange Securities and Private Exchange
Securities (if any).
Underwritten registration or underwritten offering: A registration in which
securities of the Company are sold to an underwriter for reoffering to the
public.
2. EXCHANGE OFFER
(a) The Company agrees to file with the Commission on or before the Filing
Date an offer to exchange (the "Exchange Offer") any and all of the Registrable
Securities for a like aggregate principal amount of senior debt securities of
the Company that are identical to the Notes (the "Exchange Securities") (and
that are entitled to the benefits of the Indenture or a trust indenture that is
substantially identical to the Indenture (other than such changes as are
necessary to comply with any requirements of the Commission to effect or
maintain the qualification of such trust indenture under the TIA) and that has
been qualified under the TIA), except that the Exchange Securities shall have
been registered pursuant to an effective Registration Statement under the
Securities Act and shall contain no restrictive legend thereon. The Exchange
Offer will be registered under the Securities Act on the appropriate form (the
"Exchange Offer Registration Statement") and will comply with all applicable
tender offer rules and regulations under the Exchange Act. The Company agrees to
use its reasonable best efforts (i) to cause the Exchange Offer Registration
Statement to become effective and to commence the Exchange Offer on or prior to
the Effectiveness Date, (ii) to keep the Exchange Offer open for 30 days (or
longer if required by applicable law) (the last day of such period, the
"Expiration Date") and (iii) to exchange Exchange Securities for all Notes
validly tendered and not withdrawn pursuant to the Exchange Offer on or prior to
the fifth day following the Expiration Date.
Each Holder who participates in the Exchange Offer will be deemed to
represent that any Exchange Securities received by it will be acquired in the
ordinary course of its business, that at the time of the consummation of the
Exchange Offer such Holder will have no arrangement with any person to
participate in the distribution of the Exchange Securities in violation of the
provisions of the Securities Act, and that such Holder is not an affiliate of
the Company within the meaning of the Securities Act.
Upon consummation of the Exchange Offer in accordance with this Section 2,
the provisions of this Agreement shall continue to apply, mutatis mutandis,
solely with respect to Registrable Securities that are Private Exchange
Securities, Exchange Securities to which Section 2(c)(v) is applicable and
Exchange Securities held by Participating Broker-Dealers, and the Company shall
have no further obligation to register Registrable Securities (other than
Private Exchange Securities and other than Exchange Securities as to which
Section 2(c)(v) hereof applies) pursuant to Section 3 of this Agreement. No
Securities other than the Exchange Securities shall be included in the Exchange
Offer Registration Statement.
(b) The Company shall include within the Prospectus contained in the
Exchange Offer Registration Statement a Section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchasers, which shall contain a summary
statement of the positions taken or policies made by the Staff of the Commission
(and publicly disseminated) with respect to the potential "underwriter" status
of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3
under the Exchange Act) of Exchange Securities received by such broker-dealer in
the Exchange Offer (a "Participating Broker-Dealer"). Such "Plan of
Distribution" section shall also allow the use of the prospectus by all persons
subject to the prospectus delivery requirements of the Securities Act, including
all Participating Broker-Dealers, and include a statement describing the means
by which Participating Broker-Dealers may resell the Exchange Securities.
The Company shall use its reasonable best efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
Prospectus contained therein in order to permit such Prospectus to be lawfully
delivered by all persons subject to the prospectus delivery requirements of the
Securities Act, whether as a result of market-making activities or other trading
activities or otherwise, for at least 180 days following the first bona fide
offering of securities under such Registration Statement (or such shorter time
during which such persons must comply with such requirements in order to resell
the Exchange Securities) (the "Applicable Period").
<PAGE> 5
If, prior to consummation of the Exchange Offer, the Initial Purchasers
hold any Notes acquired by them and having, or which are reasonably likely to be
determined to have, the status of an unsold allotment in the initial
distribution, the Company upon the request of the Initial Purchasers shall,
simultaneously with the delivery of the Exchange Securities in the Exchange
Offer, issue and deliver to the Initial Purchasers, in exchange (the "Private
Exchange") for the Notes held by the Initial Purchasers, a like principal amount
of debt securities of the Company that are identical to the Exchange Securities
(the "Private Exchange Securities") (and which are issued pursuant to the same
indenture as the Exchange Securities) (except for the placement of a restrictive
legend on such Private Exchange Securities). The Private Exchange Securities
shall bear the same CUSIP number as the Exchange Securities. Interest on the
Exchange Securities and Private Exchange Securities will accrue from the last
interest payment date on which interest was paid on the Notes surrendered in
exchange therefor or, if no interest has been paid on the Notes, from the Issue
Date.
Any indenture under which the Exchange Securities or the Private Exchange
Securities will be issued shall provide that the holders of any of the Exchange
Securities and the Private Exchange Securities will vote and consent together on
all matters to which such holders are entitled to vote or consent as one class
and that none of the holders of the Exchange Securities and the Private Exchange
Securities will have the right to vote or consent as a separate class on any
matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the Staff of the Commission, the Company is not permitted to
effect the Exchange Offer, (ii) the Exchange Offer is not commenced on or prior
to the Effectiveness Date, (iii) the Exchange Offer is, for any reason, not
consummated on or prior to the 165th day after the Issue Date, (iv) any Holder
of Private Exchange Securities so requests, (v) in the case of any Holder
entitled to participate in the Exchange Offer, such Holder reasonably believes
that it would not receive Exchange Securities on the date of the exchange that
would be permitted to be sold without restriction under state and federal
securities laws and such Holder so requests or (vi) any Initial Purchaser or any
affiliate (within the meaning of the Securities Act) thereof is required to
deliver a prospectus in connection with sales of Notes or Exchange Securities
(the occurrence of any such event, a "Shelf Registration Event"), then, in the
case of each of clauses (i) to and including (v) of this sentence, the Company
shall promptly deliver to the Holders and the Trustee notice thereof (the "Shelf
Notice") and shall thereafter file an Initial Shelf Registration Statement
pursuant to Section 3.
3. SHELF REGISTRATION
If a Shelf Registration Event has occurred (and whether or not an Exchange
Offer Registration Statement has been filed with the Commission or has become
effective, or the Exchange Offer has been consummated), then:
(a) Initial Shelf Registration Statement. The Company shall promptly
prepare and file with the Commission a Registration Statement for an offering to
be made on a continuous basis pursuant to Rule 415 covering all of the
Registrable Securities (the "Initial Shelf Registration Statement"). The Company
shall file with the Commission the Initial Shelf Registration Statement on or
prior to the Filing Date. The Initial Shelf Registration Statement shall be on
Form S-1 or another appropriate form, if available, permitting registration of
such Registrable Securities for resale by such holders in the manner designated
by them (including, without limitation, in one or more underwritten offerings).
The Company shall not permit any securities other than the Registrable
Securities to be included in the Initial Shelf Registration Statement or any
Subsequent Shelf Registration Statement. The Company shall use its reasonable
best efforts to cause the Initial Shelf Registration Statement to be declared
effective under the Securities Act on or prior to the Effectiveness Date, and to
keep the Initial Shelf Registration Statement continuously effective under the
Securities Act for as long as any Notes or Exchange Securities are outstanding
and for as long as any Initial Purchaser or any affiliate (within the meaning of
the Securities Act) thereof is required to deliver a prospectus in connection
with sales of Notes or Exchange Securities (such period, the "Effectiveness
Period").
(b) Subsequent Shelf Registration Statements. If the Initial Shelf
Registration Statement or any Subsequent Shelf Registration Statement ceases to
be effective for any reason at any time during the Effectiveness Period (other
than because of the sale of all of the securities registered thereunder), the
Company shall use its reasonable best efforts to obtain the prompt withdrawal of
any order suspending the effectiveness thereof, and in any event the Company
shall within 45 days of such cessation of effectiveness amend the Shelf
Registration Statement in a manner reasonably expected to obtain the withdrawal
of the order suspending the effectiveness thereof, or file an additional "shelf"
Registration Statement pursuant to Rule 415 covering all of the Registrable
Securities (a "Subsequent Shelf Registration Statement"). If a Subsequent Shelf
Registration Statement is filed, the Company shall use its reasonable best
efforts to cause the Subsequent Shelf Registration Statement to be declared
effective as soon as reasonably practicable after such filing and to keep such
Registration Statement continuously effective until the end of the Effectiveness
Period. As used herein the term "Shelf Registration Statement" means the Initial
Shelf Registration Statement and any Subsequent Shelf Registration Statement.
<PAGE> 6
(c) Supplements and Amendments. The Company shall promptly supplement and
amend the Shelf Registration Statement if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration Statement to permit the sale of the Registrable Securities by the
Holders thereof, if required by the Securities Act, or if reasonably requested
by the Holders of a majority in aggregate principal amount of the Registrable
Securities covered by such Registration Statement or by any underwriter of such
Registrable Securities.
(d) Hold-Back Agreements.
(i) Restrictions on Public Sale by Holders of Registrable Securities.
Each Holder of Registrable Securities whose Registrable Securities are
covered by a Shelf Registration Statement (which Registrable Securities are
not being sold in the underwritten offering described below) agrees, if
requested (pursuant to a timely written notice) by the Company or by the
managing underwriter or underwriters in an underwritten offering of
Registrable Securities, not to effect any public sale or distribution of
any securities within the class of securities covered by such Shelf
Registration Statement or any similar class of securities of the Company,
including a sale pursuant to Rule 144 or Rule 144A (except as part of such
underwritten offering), during the period beginning 10 days prior to, and
ending 60 days after, the Issue Date of each underwritten offering made
pursuant to each Shelf Registration Statement, to the extent timely
notified in writing by the Company or by the managing underwriter or
underwriters; provided, however, that each holder of Registrable Securities
shall be subject to the hold-back restrictions of this Section 3(d)(i) only
once during the term of this Agreement.
The foregoing provisions shall not apply to any Holder of Registrable
Securities if such Holder is prevented by applicable statute or regulation
from entering into any such agreement; provided, however, that any such
Holder shall undertake, in its request to participate in any such
underwritten offering, not to effect any public sale or distribution of the
class of securities covered by such Shelf Registration Statement (except as
part of such underwritten offering) during such period unless it has
provided 45 days' prior written notice of such sale or distribution to the
Company or the managing underwriter or underwriters, as the case may be.
(ii) Restrictions on the Company and Others. The Company agrees (A)
not to effect any public or private sale or distribution (including,
without limitation, a sale pursuant to Regulation D under the Securities
Act) of any securities the same as or similar to those covered by a Shelf
Registration Statement or any securities convertible into or exchangeable
or exercisable for such securities, during the 10 days prior to, and during
the 60-day period beginning on, the commencement of an underwritten public
distribution of Registrable Securities, where the managing underwriter or
underwriters so requests pursuant to timely written notice; (B) to include
in any agreements entered into by the Company on or after the date of this
Agreement (other than any underwriting agreement relating to a public
offering registered under the Securities Act) pursuant to which the Company
issues or agrees to issue securities the same as or similar to the Notes a
provision substantially identical to Section 3(d)(i); and (C) not to grant
or agree to grant any "piggy-back registration" or other similar rights to
any holder of the Company's or any of its subsidiaries' securities issued
on or after the date of this Agreement with respect to any Registration
Statement.
4. ADDITIONAL INTEREST
(a) The Company and the Initial Purchasers agree that the Holders of Notes
will suffer damages if the Company fails to fulfill its obligations under
Section 2 or Section 3 hereof and that it would not be feasible to ascertain the
extent of such damages with precision. Accordingly, the Company agrees to pay,
as liquidated damages, additional interest on the Notes ("Additional Interest")
under the circumstances and to the extent set forth below (each of which shall
be given independent effect):
(i) if either the Exchange Offer Registration Statement or the Initial
Shelf Registration Statement has not been filed on or prior to the Filing
Date (unless, with respect to the Exchange Offer Registration Statement, a
Shelf Registration Event described in Section 2(c)(i) shall have occurred
prior to the Filing Date), Additional Interest shall accrue on the Notes
over and above the stated interest on the principal of a rate equal to 50
basis points for the first 90 days (or any part thereof) immediately
following such date, such Additional Interest rate increasing by an
additional 50 basis points for each subsequent 90-day period (or any part
thereof);
(ii) if either the Exchange Offer Registration Statement or the
Initial Shelf Registration Statement is not declared effective by the
Commission on or prior to the Effectiveness Date (unless, with respect to
the Exchange Offer Registration Statement, a Shelf Registration Event
described in Section 2(c)(i) shall have occurred), Additional Interest
shall accrue on the Notes included or which should have been included in
such Registration Statement over and above the stated interest on the
principal at a rate equal
<PAGE> 7
to 50 basis points for the first 90 days (or any part thereof) immediately
following the day after such date, such Additional Interest rate increasing
by an additional 50 basis points for each subsequent 90-day period (or any
part thereof); and
(iii) if (A) the Company has not exchanged Exchange Securities for all
Notes validly tendered and not withdrawn in accordance with the terms of
the Exchange Offer on or prior to the fifth day after the Expiration Date,
or (B) the Exchange Offer Registration Statement ceases to be effective at
any time prior to the Expiration Date, or (C) if applicable, any Shelf
Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time during the
Effectiveness Period, then Additional Interest shall accrue on the Notes
(over and above any interest otherwise payable on principal of the Notes)
at a rate equal to 50 basis points for the first 90 days (or any part
thereof) commencing on (x) the sixth day after the Expiration Date, in the
case of (A) above, or (y) the day the Exchange Offer Registration Statement
ceases to be effective in the case of (B) above, or (z) the day such Shelf
Registration Statement ceases to be effective in the case of (C) above,
such Additional Interest rate increasing by an additional 50 basis points
for each such subsequent 90-day period (or any part thereof); provided,
however, that the Additional Interest rate on the Notes may not exceed at
any one time in the aggregate 150 basis points; provided, further, that (1)
upon the filing of the Exchange Offer Registration Statement or a Shelf
Registration Statement as required hereunder (in the case of clause (i) of
this Section 4(a)), (2) upon the effectiveness of the Exchange Offer
Registration Statement or the Shelf Registration Statement as required
hereunder (in the case of clause (ii) of this Section 4(a)) or (3) upon the
exchange of Exchange Securities for all Notes validly tendered and not
withdrawn (in the case of clause (iii)(A) of this Section 4(a)), or upon
the effectiveness of the Exchange Offer Registration Statement which had
ceased to remain effective (in the case of clause (iii)(B) of this Section
4(a)), or upon the effectiveness of the Shelf Registration Statement which
had ceased to remain effective (in the case of clause (iii)(C) of this
Section 4(a)), Additional Interest on the Notes as a result of such clause
(or the relevant subclause thereof), as the case may be, shall cease to
accrue (but any accrued amount shall be payable).
(b) The Company shall notify the Trustee within one business day after each
and every date on which an event occurs in respect of which Additional Interest
is required to be paid (an "Event Date"). The Company shall pay the Additional
Interest due on the Registrable Securities by depositing with the Trustee, in
trust, for the benefit of the Holders thereof, on or before the applicable
semi-annual interest payment date, immediately available funds in sums
sufficient to pay the Additional Interest then due to Holders of Registrable
Securities. Each obligation to pay Additional Interest shall be deemed to accrue
immediately following the occurrence of the applicable Event Date. Any accrued
Additional Interest amount shall be due and payable on each interest payment
date immediately after the applicable Event Date to the record Holder of
Registrable Securities entitled to receive the interest payment to be made on
such date as set forth in the Indenture. The parties hereto agree that the
Additional Interest provided for in this Section 4 constitutes a reasonable
estimate of the damages that may be incurred by Holders of Registrable
Securities by reason of the failure of a Shelf Registration Statement or
Exchange Offer Registration Statement to be filed or declared effective, or a
Shelf Registration Statement to remain effective, as the case may be, in
accordance with this Section 4.
5. REGISTRATION PROCEDURES
In connection with the registration of any Registrable Securities pursuant
to Sections 2 or 3 hereof, the Company shall use its reasonable best efforts to
effect such registrations to permit the sale of such Registrable Securities in
accordance with the intended method or methods of disposition thereof, and
pursuant thereto the Company shall:
(a) prepare and file with the Commission on or before the Filing Date, a
Registration Statement or Registration Statements as prescribed by Section 2 or
3, and to use its reasonable best efforts to cause each such Registration
Statement to become effective and remain effective as provided herein; provided,
however, that, if (1) such filing is pursuant to Section 3, or (2) a Prospectus
contained in an Exchange Offer Registration Statement filed pursuant to Section
2 is required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Securities during the Applicable
Period, before filing any Registration Statement or Prospectus or any amendments
or supplements thereto, the Company shall furnish to and afford the Holders of
the Registrable Securities and each such Participating Broker-Dealer, as the
case may be, covered by such Registration Statement, their counsel and the
managing underwriters, if any, a reasonable opportunity to review copies of all
such documents (including copies of any documents to be incorporated by
reference therein) proposed to be filed; the Company shall not file any
Registration Statement or Prospectus or any amendments or supplements thereto in
respect of which the Holders must be afforded a reasonable opportunity to review
prior to the filing of such document, if the Holders of a majority in aggregate
principal amount of the Registrable Securities covered by such Registration
Statement, or such Participating Broker-Dealer, as the case may be, their
counsel, or the managing underwriters, if any, shall not have been afforded such
opportunity or shall reasonably object, except for any amendment or supplement
or document that counsel to the Company shall advise the Company in writing is
required in order to comply with applicable law;
<PAGE> 8
(b) prepare and file with the Commission such amendments and post-effective
amendments to each Shelf Registration Statement or Exchange Offer Registration
Statement, as the case may be, as may be necessary to keep such Registration
Statement continuously effective for the Effectiveness Period, in the case of a
Shelf Registration Statement, or until the later of the Expiration Date and the
Applicable Period (if applicable), in the case of the Exchange Offer
Registration Statement; cause the related Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 (or any similar provisions then in force) under the Securities Act; and
comply with the provisions of the Securities Act, the Exchange Act and the rules
and regulations of the Commission promulgated thereunder applicable to it with
respect to the disposition of all securities covered by such Registration
Statement as so amended or in such Prospectus as so supplemented and with
respect to the subsequent resale of any securities being sold by a Participating
Broker-Dealer covered by any such Prospectus;
(c) if (1) a Shelf Registration Statement is filed pursuant to Section 3,
or (2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, notify the selling Holders of Registrable Securities, or each
such Participating Broker-Dealer, as the case may be, their counsel and the
managing underwriters, if any, promptly, and confirm such notice in writing, (i)
when a Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective (including in such notice a
written statement that any Holder may, upon request, obtain, without charge, one
conformed copy of such Registration Statement or post-effective amendment
including financial statements and schedules, but without documents incorporated
or deemed to be incorporated by reference or exhibits unless specifically
requested); (ii) of the issuance by the Commission of any stop order suspending
the effectiveness of a Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus or the initiation of any
proceedings for that purpose; (iii) if at any time when a prospectus is required
by the Securities Act to be delivered in connection with sales of the
Registrable Securities the representations and warranties of the Company
contained in any agreement (including any underwriting agreement) contemplated
by Section 5(n) below cease to be true and correct; (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of a Registration Statement or any of the
Registrable Securities or the Exchange Securities to be sold by any
Participating Broker-Dealer for offer or sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose; (v) of the
happening of any event or any information becoming known that makes any
statement made in such Registration Statement or related Prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires the making of any changes in such
Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that such notification need not
specifically identify such event if notification of the occurrence thereof would
in the Company's reasonable judgment, involve the disclosure of confidential
non-public information; and (vi) of the Company's reasonable determination that
a post-effective amendments to the Registration Statement would be appropriate;
(d) if (1) a Shelf Registration Statement is filed pursuant to Section 3,
or (2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, use its reasonable best efforts to prevent the issuance of
any order suspending the effectiveness of a Registration Statement or of any
order preventing or suspending the use of a Prospectus or suspending the
qualification (or exemption from qualification) of any of the Registrable
Securities or the Exchange Securities to be sold by any Participating
Broker-Dealer, for sale in any jurisdiction, and, if any such order is issued,
to use its reasonable best efforts to obtain the withdrawal of any such order at
the earliest possible moment;
(e) if a Shelf Registration Statement is filed pursuant to Section 3 and if
requested by the managing underwriters, if any, or the Holders of a majority in
aggregate principal amount of the Registrable Securities being sold in
connection with an underwritten offering, (i) promptly incorporate in a
prospectus supplement or post-effective amendment such information as the
managing underwriters, if any, or such Holders or their respective counsel
reasonably request to be included therein; and (ii) make all required filings of
such prospectus supplement or such post-effective amendment as soon as
reasonably practicable after the Company has received notification of the
matters to be incorporated in such prospectus supplement or post-effective
amendment;
(f) if (1) a Shelf Registration Statement is filed pursuant to Section 3,
or (2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, furnish to each selling Holder of Registrable Securities and
to each
<PAGE> 9
such Participating Broker-Dealer who so requests and upon request to their
respective counsel and each managing underwriter, if any, without charge,
one conformed copy of the Registration Statement or Statements and each
post-effective amendment thereto, including financial statements and schedules,
all documents incorporated or deemed to be incorporated therein by reference and
all exhibits;
(g) if (1) a Shelf Registration Statement is filed pursuant to Section 3,
or (2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, deliver to each selling Holder of Registrable Securities, or
each such Participating Broker-Dealer, as the case may be, their counsel, and
the underwriters, if any, without charge, as many copies of the Prospectus or
Prospectuses (including each form of preliminary prospectus) and each amendment
or supplement thereto and any documents incorporated by reference therein as
such Persons may reasonably request; and, subject to the last paragraph of this
Section 5, the Company hereby consents to the use of such Prospectus and each
amendment or supplement thereto by each of the selling holders of Registrable
Securities or each such Participating Broker-Dealer, as the case may be, and the
underwriters or agents, if any, and dealers (if any), in connection with the
offering and sale of the Registrable Securities covered by or the sale by
Participating Broker-Dealers of the Exchange Securities pursuant to such
Prospectus and any amendment or supplement thereto provided such use complies
with all applicable laws and regulations;
(h) prior to any public offering of Registrable Securities or any delivery
of a Prospectus contained in the Exchange Offer Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, use its reasonable best efforts to register or qualify, and
to cooperate with the selling Holders of Registrable Securities or each such
Participating Broker-Dealer, as the case may be, the underwriters, if any, and
their respective counsel in connection with the registration or qualification
(or exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any selling Holder, Participating
Broker-Dealer, or the managing underwriters reasonably request in writing;
provided, however, that where Exchange Securities held by Participating
Broker-Dealers or Registrable Securities are offered other than through an
underwritten offering, the Company shall cause its counsel to (i) perform Blue
Sky investigations and file registrations and qualifications required to be
filed pursuant to this Section 5(h); (ii) use its reasonable best efforts to
keep each such registration or qualification (or exemption therefrom) effective
during the period such Registration Statement is required to be kept effective;
and (iii) do any and all other acts or things necessary or advisable to enable
the disposition in such jurisdictions of the Exchange Securities held by
Participating Broker-Dealers or the Registrable Securities covered by the
applicable Registration Statement; provided, further, that the Company shall not
in any case be required to (A) qualify generally to do business in any
jurisdiction where it is not then so qualified, (B) take any action that would
subject it to general service of process in any such jurisdiction where it is
not then so subject, (C) subject itself to taxation in excess of a nominal
dollar amount in any such jurisdiction;
(i) if a Shelf Registration Statement is filed pursuant to Section 3,
cooperate with the selling Holders of Registrable Securities and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold, which certificates
shall not bear any restrictive legends and shall be in a form eligible for
deposit with The Depository Trust Company; and enable such Registrable
Securities to be in such denominations and registered in such names as the
managing underwriter or underwriters, if any, or Holders may reasonably request;
(j) use its reasonable best efforts to cause the Registrable Securities
covered by the Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof or the underwriters, if any, to consummate the
disposition of such Registrable Securities, except as may be required solely as
a consequence of the nature of such selling Holder's business, in which case the
Company will cooperate in all reasonable respects with the filing of such
Registration Statement and the granting of such approvals; provided, further,
that the Company shall not in any case be required to (A) qualify generally to
do business in any jurisdiction where it is not then so qualified, (B) take any
action that would subject it to general service of process in any such
jurisdiction where it is not then so subject, (C) subject itself to taxation in
excess of a nominal dollar amount in any such jurisdiction;
(k) if (1) a Shelf Registration Statement is filed pursuant to Section 3,
or (2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, upon the occurrence of any event contemplated by paragraph
5(c)(v) or 5(c)(vi) above, as promptly as practicable prepare and (subject to
Section 5(a) above) file with the Commission, solely at the expense of the
Company, a supplement or post-effective amendment to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable Securities
being sold thereunder or to the purchasers of the Exchange Securities to whom
such Prospectus will be delivered by a Participating Broker-Dealer, any such
Prospectus will not contain an untrue statement of a material fact or omit to
state a material fact required to
<PAGE> 10
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The Company agrees
to notify the Holders to suspend use of any such Prospectus as promptly as
practicable after the occurrence of such event, and the Holders agree, upon
receipt of such notice, to suspend use of any such Prospectus until the Company
has amended or supplemented such Prospectus to correct such misstatement or
omission;
(l) use its reasonable best efforts to cause the Registrable Securities
covered by a Registration Statement or the Exchange Securities, as the case may
be, to be rated with the appropriate rating agencies, if so requested by the
Holders of a majority in aggregate principal amount of Registrable Securities
covered by such Registration Statement or the Exchange Securities, as the case
may be, or the managing underwriters, if any;
(m) prior to the effective date of the first Registration Statement
relating to the Registrable Securities, (i) provide the Trustee with
certificates for the Registrable Securities in a form eligible for deposit with
The Depository Trust Company; and (ii) provide a CUSIP number for the
Registrable Securities;
(n) in connection with an underwritten offering of Registrable Securities
pursuant to a Shelf Registration Statement, enter into an underwriting agreement
as is customary in underwritten offerings, provided such agreement is reasonably
acceptable to the Company and provided that the underwriters are reasonably
acceptable to the Company, and take all such other actions as are reasonably
requested by the managing underwriters in order to expedite or facilitate the
registration or the disposition of such Registrable Securities, and in such
connection if reasonably requested, (i) make such representations and warranties
to the underwriters, with respect to the business of the Company and its
subsidiaries and the Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein, in each case, as
are customarily made by issuers to underwriters in underwritten offerings, and
confirm the same if and when reasonably requested; (ii) use its reasonable best
efforts to obtain opinions of counsel to the Company and updates thereof in form
and substance reasonably satisfactory to the managing underwriters, addressed to
the underwriters covering the matters customarily covered in opinions requested
in underwritten offerings and such other matters as may be reasonably requested
by underwriters; (iii) use its reasonable best efforts to obtain "cold comfort"
letters and updates thereof in form and substance reasonably satisfactory to the
managing underwriters from the independent certified public accountants of the
Company (and, if necessary, any other independent certified public accountants
of any subsidiary of the Company or of any business acquired by the Company or
any of its subsidiaries for which financial statements and financial data are,
or are required to be, included in the Registration Statement), addressed to
each of the underwriters, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in connection
with underwritten offerings and such other matters as reasonably requested by
underwriters; and (iv) if an underwriting agreement is entered into, the same
shall contain indemnification provisions and procedures comparable to those set
forth in Section 7 hereof (or such other provisions and procedures reasonably
acceptable to the Company and the Holders of a majority in aggregate principal
amount of Registrable Securities covered by such Registration Statement and the
managing underwriters or agents) with respect to all parties to be indemnified
pursuant to said section, all of which shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder;
(o) if (1) a Shelf Registration Statement is filed pursuant to Section 3,
or (2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, subject to the prior receipt by the Company of undertakings
to use commercially reasonable best efforts to preserve the confidentiality of
any information disclosed by the Company pursuant hereto in form and substance
reasonably satisfactory to the Company, make available for inspection by any
selling Holder of such Registrable Securities being sold, or each such
Participating Broker-Dealer, as the case may be, any underwriter participating
in any such disposition of Registrable Securities, if any, and any attorney,
accountant or other agent retained by any such selling holder or each such
Participating Broker-Dealer, as the case may be, or underwriter (collectively,
the "Inspectors"), at the offices where normally kept, during reasonable
business hours, all relevant financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries (collectively, the
"Records") as shall be necessary to enable them to exercise any applicable due
diligence responsibilities, and cause the officers, directors and employees of
the Company and its subsidiaries to supply all information in each case
requested by any such Inspector in connection with such Registration Statement;
however, records which the Company determines, in good faith, to be confidential
and any Records which the Company notifies the Inspectors are confidential shall
not be disclosed by the Inspectors unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in such Registration
Statement; (ii) the release of such Records is ordered pursuant to a subpoena or
other order from a court of competent jurisdiction; (iii) the information in
such Records has been made generally available to the public; or (iv) release
thereof is necessary or advisable in connection with any action, suit or
proceeding involving any Holder or other Inspector;
<PAGE> 11
(p) provide for an indenture trustee for the Registrable Securities or the
Exchange Securities, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a), as the case may be, to be qualified
under the TIA not later than the effective date of the Exchange Offer or the
first Registration Statement relating to the Registrable Securities; and in
connection therewith, cooperate with the trustee under any such indenture and
the holders of the Registrable Securities, to effect such changes to such
indenture as may be required for such indenture to be so qualified in accordance
with the terms of the TIA; and execute, and use its reasonable best efforts to
cause such trustee to execute, all documents as may be required to effect such
changes, and all other forms and documents required to be filed with the
Commission to enable such indenture to be so qualified in a timely manner;
(q) comply with all applicable rules and regulations of the Commission to
the extent and so long as they are applicable to the Exchange Offer Registration
Statement or the Shelf Registration Statement and make generally available to
their Securityholders earning statements satisfying the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder (or any similar rule
promulgated under the Securities Act) no later than 45 days after the end of any
12-month period (or 90 days after the end of any 12-month period if such period
is a fiscal year) (i) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to underwriters in a firm commitment or best
efforts underwritten offering; and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the Company
after the effective date of a Registration Statement, which statements shall
cover said 12-month periods;
(r) upon consummation of an Exchange Offer or a Private Exchange, obtain an
opinion of counsel to the Company in customary form, relating to the Exchange
Securities or the Private Exchange Securities, as the case may be, addressed to
the Trustee for the benefit of all Holders of Registrable Securities
participating in the Exchange Offer or the Private Exchange, as the case may be,
and which includes an opinion that (i) the Company has duly authorized, executed
and delivered the Exchange Securities and Private Exchange Securities and the
related indenture; and (ii) each of the Exchange Securities or the Private
Exchange Securities, as the case may be, and related indenture constitute valid
and legally binding obligations of the Company, enforceable against the Company
in accordance with their respective terms (with customary exceptions);
(s) if an Exchange Offer or a Private Exchange is to be consummated, upon
delivery of the Registrable Securities by Holders to the Company (or to such
other Person as directed by the Company) in exchange for the Exchange Securities
or the Private Exchange Securities, as the case may be, mark, or caused to be
marked, on such Registrable Securities that such Registrable Securities are
being canceled in exchange for the Exchange Securities or the Private Exchange
Securities, as the case may be; in no event shall such Registrable Securities be
marked as paid or otherwise satisfied;
(t) cooperate with each seller of Registrable Securities covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Securities and their respective counsel in
connection with any filings required to be made with the National Association of
Securities Dealers, Inc. (the "NASD"); and
(u) use its reasonable best efforts to take all other steps necessary to
effect the registration of the Registrable Securities covered by a Registration
Statement contemplated hereby.
The Company may require each seller of Registrable Securities or
Participating Broker-Dealer as to which any registration is being effected to
furnish to the Company such information regarding such seller or Participating
Broker-Dealer and the distribution of such Registrable Securities or Exchange
Securities to be sold by such Participating Broker-Dealer, as the case may be,
as the Company may, from time to time, reasonably request. The Company may
exclude from such registration the Registrable Securities of any seller or
Participating Broker-Dealer who unreasonably fails to furnish such information
within a reasonable time after receiving such request.
Each Holder of Registrable Securities and each Participating Broker-Dealer
agrees by acquisition of such Registrable Securities or Exchange Securities to
be sold by such Participating Broker-Dealer, as the case may be, that, upon
receipt of any notice from the Company of the happening of any event of the kind
described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi), such Holder will
forthwith discontinue disposition of such Registrable Securities covered by such
Registration Statement or Prospectus or Exchange Securities to be sold by such
Participating Broker-Dealer, as the case may be, until such holder's receipt of
the copies of the supplemented or amended Prospectus contemplated by Section
5(k), or until it is advised in writing (the "Advice") by the Company that the
use of the applicable Prospectus may be resumed, and has received copies of any
amendments or supplements thereto.
6. REGISTRATION EXPENSES
(a) All fees and expenses incident to the performance of or compliance with
this Agreement by the Company shall be borne by the Company whether or not the
Exchange Offer Registration Statement or a Shelf Registration Statement is filed
or becomes effective, including, without limitation, (i) all registration and
filing fees (including, without limitation, (A) fees with respect to filings
required to be made with the NASD in connection with an underwritten offering
and (B) fees and expenses of compliance with state securities or Blue Sky laws
(including, without limitation, reasonable fees and disbursements of counsel) in
such jurisdictions (x) where the holders of Registrable Securities are located,
<PAGE> 12
in the case of the Exchange Securities, or (y) as provided in Section 5(h), in
the case of Registrable Securities to be sold in a public offering or Exchange
Securities to be sold by a Participating Broker-Dealer during the Applicable
Period)); (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities or Exchange Securities in a
form eligible for deposit with The Depository Trust Company and of printing
prospectuses if the printing of prospectuses is requested by the managing
underwriters, if any, or, in respect of Registrable Securities or Exchange
Securities to be sold by any Participating Broker-Dealer during the Applicable
Period, by the Holders of a majority in aggregate principal amount of the
Registrable Securities included in any Registration Statement or of such
Exchange Securities, as the case may be); (iii) messenger, telephone and
delivery expenses incurred by the Company; (iv) fees and disbursements of
counsel for the Company and all documentation related thereto, including any
underwriting agreement and all related documentation (subject to the provisions
of Section 6(b)); (v) fees and disbursements of all independent certified public
accountants referred to in Section 5(n)(iii) (including, without limitation, the
expenses of any special audit and "cold comfort" letters required by or incident
to such performance); (vi) the reasonable fees and expenses of any "qualified
independent underwriter" or other independent appraiser participating in an
offering pursuant to the Conduct Rules of the NASD; (vii) rating agency fees;
(viii) Securities Act liability insurance, if the Company desires such
insurance; (ix) fees and expenses of all other Persons retained by the Company;
(x) internal expenses of the Company (including, without limitation, all
salaries and expenses of officers and employees of the Company performing legal
or accounting duties); (xi) the expense of any annual audit of the Company;
(xii) the fees and expenses incurred by the Company in connection with the
listing of the Registrable Securities on any Securities exchange; and (xiii) the
expenses relating to printing, word processing and distributing all Registration
Statements, underwriting agreements, securities sales agreements, indentures and
any other documents necessary in order to comply with this Agreement. Anything
contained herein to the contrary notwithstanding, the Company shall not have any
obligation whatsoever in respect of any fees or expenses of counsel to any
underwriters, underwriters' discounts or commissions, brokerage commissions,
dealers' selling concessions, transfer taxes or any other selling expenses
(other than those expressly enumerated in clauses (i) through (xiii) above)
incurred in connection with the underwriting, offering or sale of Registrable
Securities or Exchange Securities by or on behalf of any Person.
(b) In connection with any Shelf Registration Statement hereunder, the
Company shall reimburse the Holders of the Registrable Securities being
registered in such registration for the reasonable fees and disbursements of not
more than one counsel (in addition to appropriate local counsel) chosen by the
Holders of a majority in aggregate principal amount of the Registrable
Securities to be included in such Registration Statement and other reasonable
out-of-pocket expenses of the Holders of Registrable Securities incurred in
connection with the registration of the Registrable Securities.
7. INDEMNIFICATION
The Company agrees to indemnify and hold harmless each Holder of
Registrable Securities and each Participating Broker-Dealer selling Exchange
Securities during the Applicable Period, the officers and directors of each such
person, and each person, if any, who controls any such person within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act
(each, a "Participant"), from and against any and all losses, claims, damages
and liabilities (including, without limitation, the reasonable legal fees and
other expenses incurred in connection with any suit, action or proceeding or any
claim asserted) caused by any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement (or any amendment thereto)
or Prospectus (as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) or any preliminary prospectus, or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except insofar as
such losses, claims, damages or liabilities are caused by any untrue statement
or omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to such Participant furnished to the
Company in writing by such Participant (or, if such Participant is not a Holder
or a Participating Broker-Dealer, furnished in writing by the Holder or
Participating Broker-Dealer in respect of which such person is a Participant
relating to such Participant) expressly for use therein; provided, however, that
the foregoing indemnity with respect to any preliminary prospectus shall not
inure to the benefit of any Participant (or, if such Participant is not a Holder
or a Participating Broker-Dealer, furnished in writing by the Holder or
Participating Broker-Dealer in respect of which such person is a Participant
relating to such Participant) from whom the person asserting any such losses,
claims, damages or liabilities purchased Registrable Securities to the extent
that such untrue statement or omission or alleged untrue statement or omission
made in such preliminary prospectus is eliminated or remedied in the related
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) and a copy of the related Prospectus (as so
amended or supplemented) shall not have been furnished to such person at or
prior to the sale of such Registrable Securities or Exchange Securities, as the
case may be, to such person .
<PAGE> 13
Each Participant will be required to agree, severally and not jointly, to
indemnify and hold harmless each of the Company, its directors, its officers who
sign the Registration Statement and each person who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act to the same extent as the foregoing indemnity from the Company to each
Participant, but only with reference to information relating to such Participant
furnished to the Company in writing by such Participant expressly for use in any
Registration Statement or Prospectus, any amendment or supplement thereto, or
any preliminary prospectus. The liability of any Participant under this
paragraph shall in no event exceed the proceeds received by such Participant
from sales of Registrable Securities giving rise to such obligations.
If any suit, action, proceeding (including any governmental or regulatory
investigation), claim or demand shall be brought or asserted against any person
in respect of which indemnity may be sought pursuant to either of the two
preceding paragraphs, such person (the "Indemnified Person") shall promptly
notify the person against whom such indemnity may be sought (the "Indemnifying
Person") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may designate in such proceeding; and shall pay the
reasonable fees and expenses incurred by such counsel related to such
proceeding, provided, however, that the failure to so notify the Indemnifying
Person shall not relieve it of any obligation or liability which it may have
hereunder or otherwise (unless and only to the extent that such failure actually
prejudices the Indemnifying Person). In any such proceeding, any Indemnified
Person shall have the right to retain its own counsel, but, other than in
circumstances involving a conflict among Indemnified Persons, the fees and
expenses of such counsel shall be at the expense of such Indemnified Person
unless (i) the Indemnifying Person and the Indemnified Person shall have agreed
to the contrary; (ii) the Indemnifying Person has failed within a reasonable
time to retain counsel reasonably satisfactory to the Indemnified Person; or
(iii) the named parties in any such proceeding (including any impleaded parties)
include both the Indemnifying Person and the Indemnified Person and
representation of both parties by the same counsel would be inappropriate due to
an actual or potential conflict of interest. It is understood that, other than
in circumstances involving a conflict among Indemnified Persons, the
Indemnifying Person shall not, in connection with any proceeding or related
proceeding in the same jurisdiction, be liable for the fees and expenses of more
than one separate firm (in addition to any local counsel) for all Indemnified
Persons, and that all such fees and expenses shall be reimbursed as they are
incurred. Any such separate firm for the Participants shall be designated in
writing by Participants who sold a majority in interest of Registrable
Securities sold by all such Participants and any such separate firm for the
Company, its directors, its officers and such control persons of the Company
shall be designated in writing by the Company. The Indemnifying Person shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the Indemnifying Person agrees to indemnify any Indemnified
Person from and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified
Person shall have requested an Indemnifying Person to reimburse the Indemnified
Person for reasonable fees and expenses incurred by counsel as contemplated by
the third sentence of this paragraph, the Indemnifying Person agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 60 days after
receipt by such Indemnifying Person of the aforesaid request and (ii) such
Indemnifying Person shall not have reimbursed the Indemnified Person in
accordance with such request prior to the date of such settlement. No
Indemnifying Person shall, without the prior written consent of the Indemnified
Person, effect any settlement of any pending or threatened proceeding in respect
of which any Indemnified Person is or could have been a party, unless such
settlement includes an unconditional written release of such Indemnified Person
in form and substance satisfactory to the Indemnified Persons from all liability
on claims that are the subject matter of such proceeding.
If the indemnification provided for in the first and second paragraphs of
this Section 7 is for any reason unavailable to, or insufficient to hold
harmless, an Indemnified Person in respect of any losses, claims, damages or
liabilities referred to therein, then each Indemnifying Person under such
paragraphs, in lieu of indemnifying such Indemnified Person thereunder and in
order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
(i) the
<PAGE> 14
relative benefits received by the Indemnifying Person or Persons on the one hand
and the Indemnified Person or Persons on the other from the initial offering of
the Notes or (ii) if the allocation provided by the foregoing clause (i) is not
permitted by applicable law, not only such relative benefits but also the
relative fault of the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof) as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Participants on the other shall be deemed to be
in the same proportion as the total proceeds from the initial offering (net of
discounts and commissions but before deducting expenses) of the Notes received
by the Company bears to the total proceeds received by such Participant from the
sale of Registrable Securities. The relative fault of the parties shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, on the one hand,
or such Participant or such other Indemnified Person, as the case may be, on the
other, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission, and any other
equitable considerations appropriate in the circumstances.
The parties shall agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Securities
exceeds the amount of any damages that such Participant 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.
The indemnity and contribution agreements contained in this Section 7 will
be in addition to any liability which the Indemnifying Persons may otherwise
have to the Indemnified Persons referred to above.
8. RULE 144 AND RULE 144A
The Company covenants that it will file the reports required to be filed by
it under the Securities Act and the Exchange Act and the rules and regulations
adopted by the Commission thereunder in a timely manner and, if at any time the
Company is not required to file such reports, it will, upon the request of any
Holder of Registrable Securities, make publicly available other information so
long as necessary to permit sales pursuant to Rule 144 and Rule 144A under the
Securities Act. The Company further covenants that it will take such further
action as any Holder of Registrable Securities may reasonably request, to the
extent required from time to time to enable such Holder to sell Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rule 144 and Rule 144A under the Securities Act.
9. UNDERWRITTEN REGISTRATIONS
If any of the Registrable Securities covered by any Shelf Registration
Statement are to be sold in an underwritten offering, the investment banker or
investment bankers and manager or managers that will manage the offering will be
selected by the Holders of a majority in aggregate principal amount of such
Registrable Securities included in such offering and reasonably acceptable to
the Company.
No Holder of Registrable Securities may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Securities on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements (however
the terms applicable to each Holder shall be identical in all respects) and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements applicable to all Holders.
10. MISCELLANEOUS
(a) Remedies. In the event of a breach by the Company of any of its
obligations under this Agreement, each Holder of Registrable Securities, in
addition to being entitled to exercise all rights
<PAGE> 15
provided herein, in the Indenture or, in the case of the Initial Purchasers, in
the Purchase Agreement or granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The Company
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of any of the provisions of this Agreement
and hereby further agrees that, in the event of any action for specific
performance in respect of such breach, it shall waive the defense that a remedy
at law would be adequate.
(b) No Inconsistent Agreements. The Company has not, as of the date hereof,
entered into and shall not, after the date of this Agreement, enter into any
agreement with respect to any of its Securities that is inconsistent with the
rights granted to the Holders of Registrable Securities in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not entered into
and will not enter into any agreement with respect to any of its securities
which will grant to any Person "piggy-back" rights with respect to a
Registration Statement.
(c) Adjustments Affecting Registrable Securities. The Company shall not,
directly or indirectly, take any action with respect to the Registrable
Securities as a class that would adversely affect the ability of the Holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken pursuant to this Agreement.
(e) Amendments and Waivers. Except as provided in paragraph (d) above, the
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
otherwise than by an instrument executed and delivered by (A) the Holders of not
less than a majority in aggregate principal amount of the then outstanding
Registrable Securities and (B) in circumstances that would adversely affect the
Participating Broker-Dealers, the Participating Broker-Dealers holding not less
than a majority in aggregate principal amount of the Exchange Securities held by
all Participating Broker-Dealers; provided, however, that Section 7 and this
Section 10(e) may not be amended, modified or supplemented except by an
instrument executed and delivered by each Holder and each Participating
Broker-Dealer (including any person who was a Holder or Participating
Broker-Dealer of Registrable Securities or Exchange Securities, as the case may
be, disposed of pursuant to any Registration Statement) affected by any such
amendment, modification or supplement. Notwithstanding the foregoing, a waiver
or consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders of Registrable Securities whose
Securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect, impair, limit or compromise the rights of other
Holders of Registrable Securities may be given pursuant to an instrument
executed and delivered by Holders of at least a majority in aggregate principal
amount of the Registrable Securities being sold by such Holders pursuant to such
Registration Statement.
(f) Notices. All notices and other communications (including without
limitation any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or telecopier:
(i) if to a Holder of Registrable Securities, at the most current
address given by the Trustee to the Company; and
(ii) if to the Company, at Hermes Europe Railtel B.V.,
Terhulpsesteenweg 6A, 1560 Hoeilaart, Belgium, Attention: Chief Financial
Officer with a copy to Global TeleSystems Group, Inc., 1751 Pinnacle Drive,
North Tower, 12th Floor, McLean, VA 22102, Attention: Chief Executive
Officer.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; one business day after
being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if telecopied. Copies of all such notices,
demands or other communications shall be concurrently delivered by the Person
giving the same to the trustee under the Indenture at the address specified in
such Indenture.
(g) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Registrable Securities.
(h) 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.
(i) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(k) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the
<PAGE> 16
terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their commercially reasonable best efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions, covenants
and restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
(l) Entire Agreement. This Agreement, together with the Purchase Agreement,
is intended by the parties as a final expression of their agreement, and is
intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein.
(m) Securities Held by the Company or Its Affiliates. Whenever the consent
or approval of Holders of a specified percentage of Registrable Securities is
required hereunder, Registrable Securities held by the Company or its affiliates
(as such term is defined in Rule 405 under the Securities Act) shall not be
deemed to be not outstanding for purposes of determining whether such consent or
approval was given by the Holders of such required percentage.
(n) Agent for Service; Submission to Jurisdiction; Waiver of Immunities. By
the execution and delivery of this Agreement, the Company (i) acknowledges that
it has, by separate written instruments, designated and appointed CT Corporation
System, 1633 Broadway, New York, NY 10019 ("CT Corporation System") (and any
successor entity), as its authorized agent upon which process may be served in
any suit or proceeding arising out of or relating to this Agreement that may be
instituted in any federal or state court in the Borough of Manhattan, City of
New York, State of New York or brought under federal or state securities laws,
and represent and warrant that CT Corporation System has accepted such
designation, (ii) submit to the jurisdiction of any such court in any such suit
or proceeding and (iii) agree that service of process upon CT Corporation System
and written notice of said service to the Company in accordance with the
provisions of this Agreement shall be deemed in every respect effective service
of process upon the Company in any such suit or proceeding. The Company further
agrees to take any and all action, including the execution and filing of any and
all such documents and instruments, as may be necessary to continue such
designation and appointment of CT Corporation System in full force and effect
for as long as any of the Notes remain outstanding (subject to the limitation
set forth in clause (i)); provided, however, that the Company may, and to the
extent CT Corporation System ceases to be able to be served on the basis
contemplated herein shall, by written notice to the Initial Purchasers,
designate such additional or alternative agent for service of process that (i)
maintains an office located in the Borough of Manhattan, City of New York, State
of New York, and (ii) is either (x) United States counsel for the Company or (y)
a corporate service company which acts as agent for service of process for other
persons in the ordinary course of its business. Such written notice shall
identify the name of such agent for service of process and the address of the
office of such agent for service of process in the Borough of Manhattan, City of
New York, State of New York.
To the extent that the Company has or hereafter may acquire any immunity
from jurisdiction of any court of (i) any jurisdiction in which the Company owns
or leases property or assets, (ii) the United States or the State of New York or
(iii) the Netherlands 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 and assets or this
Agreement or any of the Notes or actions to enforce judgments in respect of any
thereof, the Company hereby irrevocably waives such immunity in respect of its
obligations under the above-referenced documents, to the extent permitted by
law.
(o) Judgment Currency. The Company hereby agrees to indemnify each
Participant against any loss incurred by such person as a result of any judgment
or order being given or made against the Company for any U.S. dollar 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 such party 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 party. 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.
[Signature Pages Follow]
<PAGE> 17
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
HERMES EUROPE RAILTEL B.V.
By: /s/ FRANCOIS NOTE
Name: Francois Note
Title:Corporate Financial Director
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
BEAR, STEARNS & CO. INC.
BT ALEX. BROWN INCORPORATED
LEHMAN BROTHERS INC.
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ ANTHONY BELINKOFF
Name: Anthony Belinkoff
Title:Managing Director
<PAGE> 1
EXHIBIT 4.8
REGISTRATION RIGHTS AGREEMENT
BETWEEN
HERMES EUROPE RAILTEL B.V.
AND
DONALDSON, LUFKIN & JENRETTE INTERNATIONAL,
MERRILL LYNCH INTERNATIONAL,
BEAR, STEARNS INTERNATIONAL LIMITED,
BT ALEX. BROWN INTERNATIONAL
A DIVISION OF BANKERS TRUST INTERNATIONAL, PLC
AND
LEHMAN BROTHERS INTERNATIONAL (EUROPE)
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of January
4, 1999, by and between HERMES EUROPE RAILTEL B.V., a company incorporated under
the laws of the Netherlands (the "Company"), and DONALDSON, LUFKIN & JENRETTE
INTERNATIONAL, MERRILL LYNCH INTERNATIONAL, BEAR, STEARNS INTERNATIONAL LIMITED,
BT ALEX. BROWN INTERNATIONAL, a division of Bankers Trust International, PLC and
LEHMAN BROTHERS INTERNATIONAL (EUROPE) (the "Initial Purchasers").
This Agreement is entered into in connection with the Purchase Agreement,
dated as of December 21, 1998, between the Company and the Initial Purchasers
and certain of their affiliates (the "Purchase Agreement") relating to the sale
by the Company to the Initial Purchasers of Euro 85,000,000 aggregate principal
amount of its 10-3/8% Senior Notes due 2006 (the "Notes"). In order to induce
the Initial Purchasers to enter into the Purchase Agreement, the Company has
agreed to provide the registration rights set forth in this Agreement for the
equal benefit of the Initial Purchasers and its direct and indirect transferees.
The execution and delivery of this Agreement is a condition to the Initial
Purchasers' obligation to purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
Additional Interest: See Section 4(a).
Advice: See the last paragraph of Section 5.
Applicable Period: See Section 2(b).
Commission: The Securities and Exchange Commission.
Company: See the introductory paragraph to this Agreement.
Effectiveness Date: The 135th day after the Issue Date; provided, however,
that, with respect to the Initial Shelf Registration Statement, (i) if the
Filing Date in respect thereof is fewer than 60 days prior to the 135th day
after the Issue Date, then the Effectiveness Date in respect thereof shall be
the 60th day after such Filing Date and (ii) if the Filing Date is after the
filing of the Exchange Offer Registration Statement with the Commission, then
the Effectiveness Date in respect thereof shall be the 60th day after such
Filing Date.
Effectiveness Period: See Section 3(a).
Event Date: See Section 4(b).
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission promulgated thereunder.
Exchange Offer: See Section 2(a).
Exchange Offer Registration Statement: See Section 2(a).
Exchange Securities: See Section 2(a).
Expiration Date: See Section 2(a).
Filing Date: The 90th day after the Issue Date; provided, however, that,
with respect to the Initial Shelf Registration Statement, (i) if a Shelf
Registration Event shall have occurred fewer than 30 days prior to the 30th day
after the Issue Date, then the Filing Date in respect thereof shall be the 30th
day after such Shelf Registration Event and (ii) if a Shelf Registration Event
shall have occurred after the filing of the Exchange Offer
<PAGE> 3
Registration Statement with the Commission, then the Filing Date in respect
thereof shall be the 30th day after such Shelf Registration Event.
Guarantors: See Section 10(d).
Holder: Any record holder of Registrable Securities.
Indemnified Person: See the third paragraph of Section 7.
Indemnifying Person: See the third paragraph of Section 7.
Indenture: The Indenture, dated as of January 4, 1999, between the Company
and The Bank of New York, as trustee, pursuant to which the Notes are being
issued, as amended or supplemented from time to time in accordance with the
terms thereof.
Initial Purchasers: See the introductory paragraph to this Agreement.
Initial Shelf Registration Statement: See Section 3(a).
Inspectors: See Section 5(o).
Issue Date: The date of original issuance of the Notes.
NASD: See Section 5(t).
Notes: See the second introductory paragraph to this Agreement.
Participant: See the first paragraph of Section 7.
Participating Broker-Dealer: See Section 2(b).
Person: An individual, corporation, limited or general partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
Private Exchange: See Section 2(b).
Private Exchange Securities: See Section 2(b).
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by such
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
Purchase Agreement: See the second introductory paragraph to this
Agreement.
Records: See Section 5(o).
Registrable Securities: The Notes upon original issuance thereof and at all
times subsequent thereto, each Exchange Security as to which Section 2(c)(v)
hereof is applicable upon original issuance and at all times subsequent thereto
and, if issued, the Private Exchange Securities, until in the case of any such
Notes, Exchange Securities or Private Exchange Securities, as the case may be,
(i) a Registration Statement (other than, with respect to any Exchange Security
as to which Section 2(c)(v) hereof is applicable, the Exchange Offer
Registration Statement) covering such Notes, Exchange Securities or Private
Exchange Securities has been declared effective by the Commission and such
Notes, Exchange Securities or Private Exchange Securities, as the case may be,
have been disposed of in accordance with such effective Registration Statement,
(ii) such Notes, Exchange Securities or Private Exchange Securities, as the case
may be, are sold in compliance with Rule 144, (iii) such Note has been exchanged
for an Exchange Note pursuant to the Exchange Offer and Section 2(c)(v) is not
applicable thereto, or (iv) such Notes, Exchange Securities or Private Exchange
Securities, as the case may be, cease to be outstanding.
Registration Statement: Any registration statement of the Company,
including, but not limited to, the Exchange Offer Registration Statement, that
covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such Rule may
be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the Commission providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such Rule may
be amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the Commission.
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission.
Securities Act: The Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder.
<PAGE> 4
Shelf Notice: See Section 2(c).
Shelf Registration Statement: See Section 3(b).
Shelf Registration Event: See Section 2(c).
Subsequent Shelf Registration Statement: See Section 3(b).
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and, if applicable, the trustee
under any indenture governing the Exchange Securities and Private Exchange
Securities (if any).
Underwritten registration or underwritten offering: A registration in which
securities of the Company are sold to an underwriter for reoffering to the
public.
2. EXCHANGE OFFER
(a) The Company agrees to file with the Commission on or before the Filing
Date an offer to exchange (the "Exchange Offer") any and all of the Registrable
Securities for a like aggregate principal amount of senior debt securities of
the Company that are identical to the Notes (the "Exchange Securities") (and
that are entitled to the benefits of the Indenture or a trust indenture that is
substantially identical to the Indenture (other than such changes as are
necessary to comply with any requirements of the Commission to effect or
maintain the qualification of such trust indenture under the TIA) and that has
been qualified under the TIA), except that the Exchange Securities shall have
been registered pursuant to an effective Registration Statement under the
Securities Act and shall contain no restrictive legend thereon. The Exchange
Offer will be registered under the Securities Act on the appropriate form (the
"Exchange Offer Registration Statement") and will comply with all applicable
tender offer rules and regulations under the Exchange Act. The Company agrees to
use its reasonable best efforts (i) to cause the Exchange Offer Registration
Statement to become effective and to commence the Exchange Offer on or prior to
the Effectiveness Date, (ii) to keep the Exchange Offer open for 30 days (or
longer if required by applicable law) (the last day of such period, the
"Expiration Date") and (iii) to exchange Exchange Securities for all Notes
validly tendered and not withdrawn pursuant to the Exchange Offer on or prior to
the fifth day following the Expiration Date.
Each Holder who participates in the Exchange Offer will be deemed to
represent that any Exchange Securities received by it will be acquired in the
ordinary course of its business, that at the time of the consummation of the
Exchange Offer such Holder will have no arrangement with any person to
participate in the distribution of the Exchange Securities in violation of the
provisions of the Securities Act, and that such Holder is not an affiliate of
the Company within the meaning of the Securities Act.
Upon consummation of the Exchange Offer in accordance with this Section 2,
the provisions of this Agreement shall continue to apply, mutatis mutandis,
solely with respect to Registrable Securities that are Private Exchange
Securities, Exchange Securities to which Section 2(c)(v) is applicable and
Exchange Securities held by Participating Broker-Dealers, and the Company shall
have no further obligation to register Registrable Securities (other than
Private Exchange Securities and other than Exchange Securities as to which
Section 2(c)(v) hereof applies) pursuant to Section 3 of this Agreement. No
Securities other than the Exchange Securities shall be included in the Exchange
Offer Registration Statement.
(b) The Company shall include within the Prospectus contained in the
Exchange Offer Registration Statement a Section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchasers, which shall contain a summary
statement of the positions taken or policies made by the Staff of the Commission
(and publicly disseminated) with respect to the potential "underwriter" status
of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3
under the Exchange Act) of Exchange Securities received by such broker-dealer in
the Exchange Offer (a "Participating Broker-Dealer"). Such "Plan of
Distribution" section shall also allow the use of the prospectus by all persons
subject to the prospectus delivery requirements of the Securities Act, including
all Participating Broker-Dealers, and include a statement describing the means
by which Participating Broker-Dealers may resell the Exchange Securities.
The Company shall use its reasonable best efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
Prospectus contained therein in order to permit such Prospectus to be lawfully
delivered by all persons subject to the prospectus delivery requirements of the
Securities Act, whether as a result of market-making activities or other trading
activities or otherwise, for at least 180 days following the first bona fide
offering of securities under such Registration Statement (or such shorter time
during which such persons must comply with such requirements in order to resell
the Exchange Securities) (the "Applicable Period").
<PAGE> 5
If, prior to consummation of the Exchange Offer, the Initial Purchasers
hold any Notes acquired by them and having, or which are reasonably likely to be
determined to have, the status of an unsold allotment in the initial
distribution, the Company upon the request of the Initial Purchasers shall,
simultaneously with the delivery of the Exchange Securities in the Exchange
Offer, issue and deliver to the Initial Purchasers, in exchange (the "Private
Exchange") for the Notes held by the Initial Purchasers, a like principal amount
of debt securities of the Company that are identical to the Exchange Securities
(the "Private Exchange Securities") (and which are issued pursuant to the same
indenture as the Exchange Securities) (except for the placement of a restrictive
legend on such Private Exchange Securities). The Private Exchange Securities
shall bear the same CUSIP number as the Exchange Securities. Interest on the
Exchange Securities and Private Exchange Securities will accrue from the last
interest payment date on which interest was paid on the Notes surrendered in
exchange therefor or, if no interest has been paid on the Notes, from the Issue
Date.
Any indenture under which the Exchange Securities or the Private Exchange
Securities will be issued shall provide that the holders of any of the Exchange
Securities and the Private Exchange Securities will vote and consent together on
all matters to which such holders are entitled to vote or consent as one class
and that none of the holders of the Exchange Securities and the Private Exchange
Securities will have the right to vote or consent as a separate class on any
matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the Staff of the Commission, the Company is not permitted to
effect the Exchange Offer, (ii) the Exchange Offer is not commenced on or prior
to the Effectiveness Date, (iii) the Exchange Offer is, for any reason, not
consummated on or prior to the 165th day after the Issue Date, (iv) any Holder
of Private Exchange Securities so requests, (v) in the case of any Holder
entitled to participate in the Exchange Offer, such Holder reasonably believes
that it would not receive Exchange Securities on the date of the exchange that
would be permitted to be sold without restriction under state and federal
securities laws and such Holder so requests or (vi) any Initial Purchaser or any
affiliate (within the meaning of the Securities Act) thereof is required to
deliver a prospectus in connection with sales of Notes or Exchange Securities
(the occurrence of any such event, a "Shelf Registration Event"), then, in the
case of each of clauses (i) to and including (v) of this sentence, the Company
shall promptly deliver to the Holders and the Trustee notice thereof (the "Shelf
Notice") and shall thereafter file an Initial Shelf Registration Statement
pursuant to Section 3.
3. SHELF REGISTRATION
If a Shelf Registration Event has occurred (and whether or not an Exchange
Offer Registration Statement has been filed with the Commission or has become
effective, or the Exchange Offer has been consummated), then:
(a) Initial Shelf Registration Statement. The Company shall promptly
prepare and file with the Commission a Registration Statement for an offering to
be made on a continuous basis pursuant to Rule 415 covering all of the
Registrable Securities (the "Initial Shelf Registration Statement"). The Company
shall file with the Commission the Initial Shelf Registration Statement on or
prior to the Filing Date. The Initial Shelf Registration Statement shall be on
Form S-1 or another appropriate form, if available, permitting registration of
such Registrable Securities for resale by such holders in the manner designated
by them (including, without limitation, in one or more underwritten offerings).
The Company shall not permit any securities other than the Registrable
Securities to be included in the Initial Shelf Registration Statement or any
Subsequent Shelf Registration Statement. The Company shall use its reasonable
best efforts to cause the Initial Shelf Registration Statement to be declared
effective under the Securities Act on or prior to the Effectiveness Date, and to
keep the Initial Shelf Registration Statement continuously effective under the
Securities Act for as long as any Notes or Exchange Securities are outstanding
and for as long as any Initial Purchaser or any affiliate (within the meaning of
the Securities Act) thereof is required to deliver a prospectus in connection
with sales of Notes or Exchange Securities (such period, the "Effectiveness
Period").
(b) Subsequent Shelf Registration Statements. If the Initial Shelf
Registration Statement or any Subsequent Shelf Registration Statement ceases to
be effective for any reason at any time during the Effectiveness Period (other
than because of the sale of all of the securities registered thereunder), the
Company shall use its reasonable best efforts to obtain the prompt withdrawal of
any order suspending the effectiveness thereof, and in any event the Company
shall within 45 days of such cessation of effectiveness amend the Shelf
Registration Statement in a manner reasonably expected to obtain the withdrawal
of the order suspending the effectiveness thereof, or file an additional "shelf"
Registration Statement pursuant to Rule 415 covering all of the Registrable
Securities (a "Subsequent Shelf Registration Statement"). If a Subsequent Shelf
Registration Statement is filed, the Company shall use its reasonable best
efforts to cause the Subsequent Shelf Registration Statement to be declared
effective as soon as reasonably practicable after such filing and to keep such
Registration Statement continuously effective until the end of the Effectiveness
Period. As used herein the term "Shelf Registration Statement" means the Initial
Shelf Registration Statement and any Subsequent Shelf Registration Statement.
<PAGE> 6
(c) Supplements and Amendments. The Company shall promptly supplement and
amend the Shelf Registration Statement if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration Statement to permit the sale of the Registrable Securities by the
Holders thereof, if required by the Securities Act, or if reasonably requested
by the Holders of a majority in aggregate principal amount of the Registrable
Securities covered by such Registration Statement or by any underwriter of such
Registrable Securities.
(d) Hold-Back Agreements.
(i) Restrictions on Public Sale by Holders of Registrable Securities.
Each Holder of Registrable Securities whose Registrable Securities are
covered by a Shelf Registration Statement (which Registrable Securities are
not being sold in the underwritten offering described below) agrees, if
requested (pursuant to a timely written notice) by the Company or by the
managing underwriter or underwriters in an underwritten offering of
Registrable Securities, not to effect any public sale or distribution of
any securities within the class of securities covered by such Shelf
Registration Statement or any similar class of securities of the Company,
including a sale pursuant to Rule 144 or Rule 144A (except as part of such
underwritten offering), during the period beginning 10 days prior to, and
ending 60 days after, the Issue Date of each underwritten offering made
pursuant to each Shelf Registration Statement, to the extent timely
notified in writing by the Company or by the managing underwriter or
underwriters; provided, however, that each holder of Registrable Securities
shall be subject to the hold-back restrictions of this Section 3(d)(i) only
once during the term of this Agreement.
The foregoing provisions shall not apply to any Holder of Registrable
Securities if such Holder is prevented by applicable statute or regulation
from entering into any such agreement; provided, however, that any such
Holder shall undertake, in its request to participate in any such
underwritten offering, not to effect any public sale or distribution of the
class of securities covered by such Shelf Registration Statement (except as
part of such underwritten offering) during such period unless it has
provided 45 days' prior written notice of such sale or distribution to the
Company or the managing underwriter or underwriters, as the case may be.
(ii) Restrictions on the Company and Others. The Company agrees (A)
not to effect any public or private sale or distribution (including,
without limitation, a sale pursuant to Regulation D under the Securities
Act) of any securities the same as or similar to those covered by a Shelf
Registration Statement or any securities convertible into or exchangeable
or exercisable for such securities, during the 10 days prior to, and during
the 60-day period beginning on, the commencement of an underwritten public
distribution of Registrable Securities, where the managing underwriter or
underwriters so requests pursuant to timely written notice; (B) to include
in any agreements entered into by the Company on or after the date of this
Agreement (other than any underwriting agreement relating to a public
offering registered under the Securities Act) pursuant to which the Company
issues or agrees to issue securities the same as or similar to the Notes a
provision substantially identical to Section 3(d)(i); and (C) not to grant
or agree to grant any "piggy-back registration" or other similar rights to
any holder of the Company's or any of its subsidiaries' securities issued
on or after the date of this Agreement with respect to any Registration
Statement.
4. ADDITIONAL INTEREST
(a) The Company and the Initial Purchasers agree that the Holders of Notes
will suffer damages if the Company fails to fulfill its obligations under
Section 2 or Section 3 hereof and that it would not be feasible to ascertain the
extent of such damages with precision. Accordingly, the Company agrees to pay,
as liquidated damages, additional interest on the Notes ("Additional Interest")
under the circumstances and to the extent set forth below (each of which shall
be given independent effect):
(i) if either the Exchange Offer Registration Statement or the Initial
Shelf Registration Statement has not been filed on or prior to the Filing
Date (unless, with respect to the Exchange Offer Registration Statement, a
Shelf Registration Event described in Section 2(c)(i) shall have occurred
prior to the Filing Date), Additional Interest shall accrue on the Notes
over and above the stated interest on the principal of a rate equal to 50
basis points for the first 90 days (or any part thereof) immediately
following such date, such Additional Interest rate increasing by an
additional 50 basis points for each subsequent 90-day period (or any part
thereof);
(ii) if either the Exchange Offer Registration Statement or the
Initial Shelf Registration Statement is not declared effective by the
Commission on or prior to the Effectiveness Date (unless, with respect to
the Exchange Offer Registration Statement, a Shelf Registration Event
described in Section 2(c)(i) shall have occurred), Additional Interest
shall accrue on the Notes included or which should have been included in
such Registration Statement over and above the stated interest on the
principal at a rate equal
<PAGE> 7
to 50 basis points for the first 90 days (or any part thereof)
immediately following the day after such date, such Additional Interest
rate increasing by an additional 50 basis points for each subsequent 90-day
period (or any part thereof); and
(iii) if (A) the Company has not exchanged Exchange Securities for all
Notes validly tendered and not withdrawn in accordance with the terms of
the Exchange Offer on or prior to the fifth day after the Expiration Date,
or (B) the Exchange Offer Registration Statement ceases to be effective at
any time prior to the Expiration Date, or (C) if applicable, any Shelf
Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time during the
Effectiveness Period, then Additional Interest shall accrue on the Notes
(over and above any interest otherwise payable on principal of the Notes)
at a rate equal to 50 basis points for the first 90 days (or any part
thereof) commencing on (x) the sixth day after the Expiration Date, in the
case of (A) above, or (y) the day the Exchange Offer Registration Statement
ceases to be effective in the case of (B) above, or (z) the day such Shelf
Registration Statement ceases to be effective in the case of (C) above,
such Additional Interest rate increasing by an additional 50 basis points
for each such subsequent 90-day period (or any part thereof);
provided, however, that the Additional Interest rate on the Notes may not
exceed at any one time in the aggregate 150 basis points; provided, further,
that (1) upon the filing of the Exchange Offer Registration Statement or a Shelf
Registration Statement as required hereunder (in the case of clause (i) of this
Section 4(a)), (2) upon the effectiveness of the Exchange Offer Registration
Statement or the Shelf Registration Statement as required hereunder (in the case
of clause (ii) of this Section 4(a)) or (3) upon the exchange of Exchange
Securities for all Notes validly tendered and not withdrawn (in the case of
clause (iii)(A) of this Section 4(a)), or upon the effectiveness of the Exchange
Offer Registration Statement which had ceased to remain effective (in the case
of clause (iii)(B) of this Section 4(a)), or upon the effectiveness of the Shelf
Registration Statement which had ceased to remain effective (in the case of
clause (iii)(C) of this Section 4(a)), Additional Interest on the Notes as a
result of such clause (or the relevant subclause thereof), as the case may be,
shall cease to accrue (but any accrued amount shall be payable).
(b) The Company shall notify the Trustee within one business day after each
and every date on which an event occurs in respect of which Additional Interest
is required to be paid (an "Event Date"). The Company shall pay the Additional
Interest due on the Registrable Securities by depositing with the Trustee, in
trust, for the benefit of the Holders thereof, on or before the applicable
semi-annual interest payment date, immediately available funds in sums
sufficient to pay the Additional Interest then due to Holders of Registrable
Securities. Each obligation to pay Additional Interest shall be deemed to accrue
immediately following the occurrence of the applicable Event Date. Any accrued
Additional Interest amount shall be due and payable on each interest payment
date immediately after the applicable Event Date to the record Holder of
Registrable Securities entitled to receive the interest payment to be made on
such date as set forth in the Indenture. The parties hereto agree that the
Additional Interest provided for in this Section 4 constitutes a reasonable
estimate of the damages that may be incurred by Holders of Registrable
Securities by reason of the failure of a Shelf Registration Statement or
Exchange Offer Registration Statement to be filed or declared effective, or a
Shelf Registration Statement to remain effective, as the case may be, in
accordance with this Section 4.
5. REGISTRATION PROCEDURES
In connection with the registration of any Registrable Securities pursuant
to Sections 2 or 3 hereof, the Company shall use its reasonable best efforts to
effect such registrations to permit the sale of such Registrable Securities in
accordance with the intended method or methods of disposition thereof, and
pursuant thereto the Company shall:
(a) prepare and file with the Commission on or before the Filing Date, a
Registration Statement or Registration Statements as prescribed by Section 2 or
3, and to use its reasonable best efforts to cause each such Registration
Statement to become effective and remain effective as provided herein; provided,
however, that, if (1) such filing is pursuant to Section 3, or (2) a Prospectus
contained in an Exchange Offer Registration Statement filed pursuant to Section
2 is required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Securities during the Applicable
Period, before filing any Registration Statement or Prospectus or any amendments
or supplements thereto, the Company shall furnish to and afford the Holders of
the Registrable Securities and each such Participating Broker-Dealer, as the
case may be, covered by such Registration Statement, their counsel and the
managing underwriters, if any, a reasonable opportunity to review copies of all
such documents (including copies of any documents to be incorporated by
reference therein) proposed to be filed; the Company shall not file any
Registration Statement or Prospectus or any amendments or supplements thereto in
respect of which the Holders must be afforded a reasonable opportunity to review
prior to the filing of such document, if the Holders of a majority in aggregate
principal amount of the Registrable Securities covered by such Registration
Statement, or such Participating Broker-Dealer, as the case may be, their
counsel, or the managing underwriters, if any, shall not have been afforded such
opportunity or shall reasonably object, except for any amendment or supplement
or document that counsel to the Company shall advise the Company in writing is
required in order to comply with applicable law;
<PAGE> 8
(b) prepare and file with the Commission such amendments and post-effective
amendments to each Shelf Registration Statement or Exchange Offer Registration
Statement, as the case may be, as may be necessary to keep such Registration
Statement continuously effective for the Effectiveness Period, in the case of a
Shelf Registration Statement, or until the later of the Expiration Date and the
Applicable Period (if applicable), in the case of the Exchange Offer
Registration Statement; cause the related Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 (or any similar provisions then in force) under the Securities Act; and
comply with the provisions of the Securities Act, the Exchange Act and the rules
and regulations of the Commission promulgated thereunder applicable to it with
respect to the disposition of all securities covered by such Registration
Statement as so amended or in such Prospectus as so supplemented and with
respect to the subsequent resale of any securities being sold by a Participating
Broker-Dealer covered by any such Prospectus;
(c) if (1) a Shelf Registration Statement is filed pursuant to Section 3,
or (2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, notify the selling Holders of Registrable Securities, or each
such Participating Broker-Dealer, as the case may be, their counsel and the
managing underwriters, if any, promptly, and confirm such notice in writing, (i)
when a Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective (including in such notice a
written statement that any Holder may, upon request, obtain, without charge, one
conformed copy of such Registration Statement or post-effective amendment
including financial statements and schedules, but without documents incorporated
or deemed to be incorporated by reference or exhibits unless specifically
requested); (ii) of the issuance by the Commission of any stop order suspending
the effectiveness of a Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus or the initiation of any
proceedings for that purpose; (iii) if at any time when a prospectus is required
by the Securities Act to be delivered in connection with sales of the
Registrable Securities the representations and warranties of the Company
contained in any agreement (including any underwriting agreement) contemplated
by Section 5(n) below cease to be true and correct; (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of a Registration Statement or any of the
Registrable Securities or the Exchange Securities to be sold by any
Participating Broker-Dealer for offer or sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose; (v) of the
happening of any event or any information becoming known that makes any
statement made in such Registration Statement or related Prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires the making of any changes in such
Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that such notification need not
specifically identify such event if notification of the occurrence thereof would
in the Company's reasonable judgment, involve the disclosure of confidential
non-public information; and (vi) of the Company's reasonable determination that
a post-effective amendments to the Registration Statement would be appropriate;
(d) if (1) a Shelf Registration Statement is filed pursuant to Section 3,
or (2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, use its reasonable best efforts to prevent the issuance of
any order suspending the effectiveness of a Registration Statement or of any
order preventing or suspending the use of a Prospectus or suspending the
qualification (or exemption from qualification) of any of the Registrable
Securities or the Exchange Securities to be sold by any Participating
Broker-Dealer, for sale in any jurisdiction, and, if any such order is issued,
to use its reasonable best efforts to obtain the withdrawal of any such order at
the earliest possible moment;
(e) if a Shelf Registration Statement is filed pursuant to Section 3 and
if requested by the managing underwriters, if any, or the Holders of a majority
in aggregate principal amount of the Registrable Securities being sold in
connection with an underwritten offering, (i) promptly incorporate in a
prospectus supplement or post-effective amendment such information as the
managing underwriters, if any, or such Holders or their respective counsel
reasonably request to be included therein; and (ii) make all required filings of
such prospectus supplement or such post-effective amendment as soon as
reasonably practicable after the Company has received notification of the
matters to be incorporated in such prospectus supplement or post-effective
amendment;
(f) if (1) a Shelf Registration Statement is filed pursuant to Section 3,
or (2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, furnish to each selling Holder of Registrable Securities and
to each
<PAGE> 9
such Participating Broker-Dealer who so requests and upon request to their
respective counsel and each managing underwriter, if any, without charge, one
conformed copy of the Registration Statement or Statements and each
post-effective amendment thereto, including financial statements and schedules,
all documents incorporated or deemed to be incorporated therein by reference and
all exhibits;
(g) if (1) a Shelf Registration Statement is filed pursuant to Section 3,
or (2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, deliver to each selling Holder of Registrable Securities, or
each such Participating Broker-Dealer, as the case may be, their counsel, and
the underwriters, if any, without charge, as many copies of the Prospectus or
Prospectuses (including each form of preliminary prospectus) and each amendment
or supplement thereto and any documents incorporated by reference therein as
such Persons may reasonably request; and, subject to the last paragraph of this
Section 5, the Company hereby consents to the use of such Prospectus and each
amendment or supplement thereto by each of the selling holders of Registrable
Securities or each such Participating Broker-Dealer, as the case may be, and the
underwriters or agents, if any, and dealers (if any), in connection with the
offering and sale of the Registrable Securities covered by or the sale by
Participating Broker-Dealers of the Exchange Securities pursuant to such
Prospectus and any amendment or supplement thereto provided such use complies
with all applicable laws and regulations;
(h) prior to any public offering of Registrable Securities or any delivery
of a Prospectus contained in the Exchange Offer Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, use its reasonable best efforts to register or qualify, and
to cooperate with the selling Holders of Registrable Securities or each such
Participating Broker-Dealer, as the case may be, the underwriters, if any, and
their respective counsel in connection with the registration or qualification
(or exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any selling Holder, Participating
Broker-Dealer, or the managing underwriters reasonably request in writing;
provided, however, that where Exchange Securities held by Participating
Broker-Dealers or Registrable Securities are offered other than through an
underwritten offering, the Company shall cause its counsel to (i) perform Blue
Sky investigations and file registrations and qualifications required to be
filed pursuant to this Section 5(h); (ii) use its reasonable best efforts to
keep each such registration or qualification (or exemption therefrom) effective
during the period such Registration Statement is required to be kept effective;
and (iii) do any and all other acts or things necessary or advisable to enable
the disposition in such jurisdictions of the Exchange Securities held by
Participating Broker-Dealers or the Registrable Securities covered by the
applicable Registration Statement; provided, further, that the Company shall not
in any case be required to (A) qualify generally to do business in any
jurisdiction where it is not then so qualified, (B) take any action that would
subject it to general service of process in any such jurisdiction where it is
not then so subject, (C) subject itself to taxation in excess of a nominal
dollar amount in any such jurisdiction;
(i) if a Shelf Registration Statement is filed pursuant to Section 3,
cooperate with the selling Holders of Registrable Securities and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold, which certificates
shall not bear any restrictive legends and shall be in a form eligible for
deposit with The Depository Trust Company; and enable such Registrable
Securities to be in such denominations and registered in such names as the
managing underwriter or underwriters, if any, or Holders may reasonably request;
(j) use its reasonable best efforts to cause the Registrable Securities
covered by the Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof or the underwriters, if any, to consummate the
disposition of such Registrable Securities, except as may be required solely as
a consequence of the nature of such selling Holder's business, in which case the
Company will cooperate in all reasonable respects with the filing of such
Registration Statement and the granting of such approvals; provided, further,
that the Company shall not in any case be required to (A) qualify generally to
do business in any jurisdiction where it is not then so qualified, (B) take any
action that would subject it to general service of process in any such
jurisdiction where it is not then so subject, (C) subject itself to taxation in
excess of a nominal dollar amount in any such jurisdiction;
(k) if (1) a Shelf Registration Statement is filed pursuant to Section 3,
or (2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, upon the occurrence of any event contemplated by paragraph
5(c)(v) or 5(c)(vi) above, as promptly as practicable prepare and (subject to
Section 5(a) above) file with the Commission, solely at the expense of the
Company, a supplement or post-effective amendment to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable Securities
being sold thereunder or to the purchasers of the Exchange Securities to whom
such Prospectus will be delivered by a Participating Broker-Dealer, any such
Prospectus will not contain an untrue statement of a material fact or omit to
state a material fact required to
<PAGE> 10
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The Company agrees
to notify the Holders to suspend use of any such Prospectus as promptly as
practicable after the occurrence of such event, and the Holders agree, upon
receipt of such notice, to suspend use of any such Prospectus until the Company
has amended or supplemented such Prospectus to correct such misstatement or
omission;
(l) use its reasonable best efforts to cause the Registrable Securities
covered by a Registration Statement or the Exchange Securities, as the case may
be, to be rated with the appropriate rating agencies, if so requested by the
Holders of a majority in aggregate principal amount of Registrable Securities
covered by such Registration Statement or the Exchange Securities, as the case
may be, or the managing underwriters, if any;
(m) prior to the effective date of the first Registration Statement
relating to the Registrable Securities, (i) provide the Trustee with
certificates for the Registrable Securities in a form eligible for deposit with
The Depository Trust Company; and (ii) provide a CUSIP number for the
Registrable Securities;
(n) in connection with an underwritten offering of Registrable Securities
pursuant to a Shelf Registration Statement, enter into an underwriting agreement
as is customary in underwritten offerings, provided such agreement is reasonably
acceptable to the Company and provided that the underwriters are reasonably
acceptable to the Company, and take all such other actions as are reasonably
requested by the managing underwriters in order to expedite or facilitate the
registration or the disposition of such Registrable Securities, and in such
connection if reasonably requested, (i) make such representations and warranties
to the underwriters, with respect to the business of the Company and its
subsidiaries and the Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein, in each case, as
are customarily made by issuers to underwriters in underwritten offerings, and
confirm the same if and when reasonably requested; (ii) use its reasonable best
efforts to obtain opinions of counsel to the Company and updates thereof in form
and substance reasonably satisfactory to the managing underwriters, addressed to
the underwriters covering the matters customarily covered in opinions requested
in underwritten offerings and such other matters as may be reasonably requested
by underwriters; (iii) use its reasonable best efforts to obtain "cold comfort"
letters and updates thereof in form and substance reasonably satisfactory to the
managing underwriters from the independent certified public accountants of the
Company (and, if necessary, any other independent certified public accountants
of any subsidiary of the Company or of any business acquired by the Company or
any of its subsidiaries for which financial statements and financial data are,
or are required to be, included in the Registration Statement), addressed to
each of the underwriters, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in connection
with underwritten offerings and such other matters as reasonably requested by
underwriters; and (iv) if an underwriting agreement is entered into, the same
shall contain indemnification provisions and procedures comparable to those set
forth in Section 7 hereof (or such other provisions and procedures reasonably
acceptable to the Company and the Holders of a majority in aggregate principal
amount of Registrable Securities covered by such Registration Statement and the
managing underwriters or agents) with respect to all parties to be indemnified
pursuant to said section, all of which shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder;
(o) if (1) a Shelf Registration Statement is filed pursuant to Section 3,
or (2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act by
any Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, subject to the prior receipt by the Company of undertakings
to use commercially reasonable best efforts to preserve the confidentiality of
any information disclosed by the Company pursuant hereto in form and substance
reasonably satisfactory to the Company, make available for inspection by any
selling Holder of such Registrable Securities being sold, or each such
Participating Broker-Dealer, as the case may be, any underwriter participating
in any such disposition of Registrable Securities, if any, and any attorney,
accountant or other agent retained by any such selling holder or each such
Participating Broker-Dealer, as the case may be, or underwriter (collectively,
the "Inspectors"), at the offices where normally kept, during reasonable
business hours, all relevant financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries (collectively, the
"Records") as shall be necessary to enable them to exercise any applicable due
diligence responsibilities, and cause the officers, directors and employees of
the Company and its subsidiaries to supply all information in each case
requested by any such Inspector in connection with such Registration Statement;
however, records which the Company determines, in good faith, to be confidential
and any Records which the Company notifies the Inspectors are confidential shall
not be disclosed by the Inspectors unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in such Registration
Statement; (ii) the release of such Records is ordered pursuant to a subpoena or
other order from a court of competent jurisdiction; (iii) the information in
such Records has been made generally available to the public; or (iv) release
thereof is necessary or advisable in connection with any action, suit or
proceeding involving any Holder or other Inspector;
(p) provide for an indenture trustee for the Registrable Securities or the
Exchange Securities, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a),
<PAGE> 11
as the case may be, to be qualified under the TIA not later than the effective
date of the Exchange Offer or the first Registration Statement relating to the
Registrable Securities; and in connection therewith, cooperate with the trustee
under any such indenture and the holders of the Registrable Securities, to
effect such changes to such indenture as may be required for such indenture to
be so qualified in accordance with the terms of the TIA; and execute, and use
its reasonable best efforts to cause such trustee to execute, all documents as
may be required to effect such changes, and all other forms and documents
required to be filed with the Commission to enable such indenture to be so
qualified in a timely manner;
(q) comply with all applicable rules and regulations of the Commission to
the extent and so long as they are applicable to the Exchange Offer Registration
Statement or the Shelf Registration Statement and make generally available to
their Securityholders earning statements satisfying the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder (or any similar rule
promulgated under the Securities Act) no later than 45 days after the end of any
12-month period (or 90 days after the end of any 12-month period if such period
is a fiscal year) (i) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to underwriters in a firm commitment or best
efforts underwritten offering; and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the Company
after the effective date of a Registration Statement, which statements shall
cover said 12-month periods;
(r) upon consummation of an Exchange Offer or a Private Exchange, obtain an
opinion of counsel to the Company in customary form, relating to the Exchange
Securities or the Private Exchange Securities, as the case may be, addressed to
the Trustee for the benefit of all Holders of Registrable Securities
participating in the Exchange Offer or the Private Exchange, as the case may be,
and which includes an opinion that (i) the Company has duly authorized, executed
and delivered the Exchange Securities and Private Exchange Securities and the
related indenture; and (ii) each of the Exchange Securities or the Private
Exchange Securities, as the case may be, and related indenture constitute valid
and legally binding obligations of the Company, enforceable against the Company
in accordance with their respective terms (with customary exceptions);
(s) if an Exchange Offer or a Private Exchange is to be consummated, upon
delivery of the Registrable Securities by Holders to the Company (or to such
other Person as directed by the Company) in exchange for the Exchange Securities
or the Private Exchange Securities, as the case may be, mark, or caused to be
marked, on such Registrable Securities that such Registrable Securities are
being canceled in exchange for the Exchange Securities or the Private Exchange
Securities, as the case may be; in no event shall such Registrable Securities be
marked as paid or otherwise satisfied;
(t) cooperate with each seller of Registrable Securities covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Securities and their respective counsel in
connection with any filings required to be made with the National Association of
Securities Dealers, Inc. (the "NASD"); and
(u) use its reasonable best efforts to take all other steps necessary to
effect the registration of the Registrable Securities covered by a Registration
Statement contemplated hereby.
The Company may require each seller of Registrable Securities or
Participating Broker-Dealer as to which any registration is being effected to
furnish to the Company such information regarding such seller or Participating
Broker-Dealer and the distribution of such Registrable Securities or Exchange
Securities to be sold by such Participating Broker-Dealer, as the case may be,
as the Company may, from time to time, reasonably request. The Company may
exclude from such registration the Registrable Securities of any seller or
Participating Broker-Dealer who unreasonably fails to furnish such information
within a reasonable time after receiving such request.
Each Holder of Registrable Securities and each Participating Broker-Dealer
agrees by acquisition of such Registrable Securities or Exchange Securities to
be sold by such Participating Broker-Dealer, as the case may be, that, upon
receipt of any notice from the Company of the happening of any event of the kind
described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi), such Holder will
forthwith discontinue disposition of such Registrable Securities covered by such
Registration Statement or Prospectus or Exchange Securities to be sold by such
Participating Broker-Dealer, as the case may be, until such holder's receipt of
the copies of the supplemented or amended Prospectus contemplated by Section
5(k), or until it is advised in writing (the "Advice") by the Company that the
use of the applicable Prospectus may be resumed, and has received copies of any
amendments or supplements thereto.
6. REGISTRATION EXPENSES
(a) All fees and expenses incident to the performance of or compliance with
this Agreement by the Company shall be borne by the Company whether or not the
Exchange Offer Registration Statement or a Shelf Registration Statement is filed
or becomes effective, including, without limitation, (i) all registration and
filing fees (including, without limitation, (A) fees with respect to filings
required to be made with the NASD in connection with an underwritten offering
and (B) fees and expenses of compliance with state securities or Blue Sky laws
(including, without limitation, reasonable fees and disbursements of counsel) in
such jurisdictions (x) where the holders of Registrable Securities are located,
<PAGE> 12
in the case of the Exchange Securities, or (y) as provided in Section 5(h), in
the case of Registrable Securities to be sold in a public offering or Exchange
Securities to be sold by a Participating Broker-Dealer during the Applicable
Period)); (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities or Exchange Securities in a
form eligible for deposit with The Depository Trust Company and of printing
prospectuses if the printing of prospectuses is requested by the managing
underwriters, if any, or, in respect of Registrable Securities or Exchange
Securities to be sold by any Participating Broker-Dealer during the Applicable
Period, by the Holders of a majority in aggregate principal amount of the
Registrable Securities included in any Registration Statement or of such
Exchange Securities, as the case may be); (iii) messenger, telephone and
delivery expenses incurred by the Company; (iv) fees and disbursements of
counsel for the Company and all documentation related thereto, including any
underwriting agreement and all related documentation (subject to the provisions
of Section 6(b)); (v) fees and disbursements of all independent certified public
accountants referred to in Section 5(n)(iii) (including, without limitation, the
expenses of any special audit and "cold comfort" letters required by or incident
to such performance); (vi) the reasonable fees and expenses of any "qualified
independent underwriter" or other independent appraiser participating in an
offering pursuant to the Conduct Rules of the NASD; (vii) rating agency fees;
(viii) Securities Act liability insurance, if the Company desires such
insurance; (ix) fees and expenses of all other Persons retained by the Company;
(x) internal expenses of the Company (including, without limitation, all
salaries and expenses of officers and employees of the Company performing legal
or accounting duties); (xi) the expense of any annual audit of the Company;
(xii) the fees and expenses incurred by the Company in connection with the
listing of the Registrable Securities on any Securities exchange; and (xiii) the
expenses relating to printing, word processing and distributing all Registration
Statements, underwriting agreements, securities sales agreements, indentures and
any other documents necessary in order to comply with this Agreement. Anything
contained herein to the contrary notwithstanding, the Company shall not have any
obligation whatsoever in respect of any fees or expenses of counsel to any
underwriters, underwriters' discounts or commissions, brokerage commissions,
dealers' selling concessions, transfer taxes or any other selling expenses
(other than those expressly enumerated in clauses (i) through (xiii) above)
incurred in connection with the underwriting, offering or sale of Registrable
Securities or Exchange Securities by or on behalf of any Person.
(b) In connection with any Shelf Registration Statement hereunder, the
Company shall reimburse the Holders of the Registrable Securities being
registered in such registration for the reasonable fees and disbursements of not
more than one counsel (in addition to appropriate local counsel) chosen by the
Holders of a majority in aggregate principal amount of the Registrable
Securities to be included in such Registration Statement and other reasonable
out-of-pocket expenses of the Holders of Registrable Securities incurred in
connection with the registration of the Registrable Securities.
7. INDEMNIFICATION
The Company agrees to indemnify and hold harmless each Holder of
Registrable Securities and each Participating Broker-Dealer selling Exchange
Securities during the Applicable Period, the officers and directors of each such
person, and each person, if any, who controls any such person within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act
(each, a "Participant"), from and against any and all losses, claims, damages
and liabilities (including, without limitation, the reasonable legal fees and
other expenses incurred in connection with any suit, action or proceeding or any
claim asserted) caused by any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement (or any amendment thereto)
or Prospectus (as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) or any preliminary prospectus, or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except insofar as
such losses, claims, damages or liabilities are caused by any untrue statement
or omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to such Participant furnished to the
Company in writing by such Participant (or, if such Participant is not a Holder
or a Participating Broker-Dealer, furnished in writing by the Holder or
Participating Broker-Dealer in respect of which such person is a Participant
relating to such Participant) expressly for use therein; provided, however, that
the foregoing indemnity with respect to any preliminary prospectus shall not
inure to the benefit of any Participant (or, if such Participant is not a Holder
or a Participating Broker-Dealer, furnished in writing by the Holder or
Participating Broker-Dealer in respect of which such person is a Participant
relating to such Participant) from whom the person asserting any such losses,
claims, damages or liabilities purchased Registrable Securities to the extent
that such untrue statement or omission or alleged untrue statement or omission
made in such preliminary prospectus is eliminated or remedied in the related
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) and a copy of the related Prospectus (as so
amended or supplemented) shall not have been furnished to such person at or
prior to the sale of
<PAGE> 13
such Registrable Securities or Exchange Securities, as the case may be, to such
person Each Participant will be required to agree, severally and not jointly, to
indemnify and hold harmless each of the Company, its directors, its officers who
sign the Registration Statement and each person who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act to the same extent as the foregoing indemnity from the Company to each
Participant, but only with reference to information relating to such Participant
furnished to the Company in writing by such Participant expressly for use in any
Registration Statement or Prospectus, any amendment or supplement thereto, or
any preliminary prospectus. The liability of any Participant under this
paragraph shall in no event exceed the proceeds received by such Participant
from sales of Registrable Securities giving rise to such obligations.
If any suit, action, proceeding (including any governmental or regulatory
investigation), claim or demand shall be brought or asserted against any person
in respect of which indemnity may be sought pursuant to either of the two
preceding paragraphs, such person (the "Indemnified Person") shall promptly
notify the person against whom such indemnity may be sought (the "Indemnifying
Person") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may designate in such proceeding; and shall pay the
reasonable fees and expenses incurred by such counsel related to such
proceeding, provided, however, that the failure to so notify the Indemnifying
Person shall not relieve it of any obligation or liability which it may have
hereunder or otherwise (unless and only to the extent that such failure actually
prejudices the Indemnifying Person). In any such proceeding, any Indemnified
Person shall have the right to retain its own counsel, but, other than in
circumstances involving a conflict among Indemnified Persons, the fees and
expenses of such counsel shall be at the expense of such Indemnified Person
unless (i) the Indemnifying Person and the Indemnified Person shall have agreed
to the contrary; (ii) the Indemnifying Person has failed within a reasonable
time to retain counsel reasonably satisfactory to the Indemnified Person; or
(iii) the named parties in any such proceeding (including any impleaded parties)
include both the Indemnifying Person and the Indemnified Person and
representation of both parties by the same counsel would be inappropriate due to
an actual or potential conflict of interest. It is understood that, other than
in circumstances involving a conflict among Indemnified Persons, the
Indemnifying Person shall not, in connection with any proceeding or related
proceeding in the same jurisdiction, be liable for the fees and expenses of more
than one separate firm (in addition to any local counsel) for all Indemnified
Persons, and that all such fees and expenses shall be reimbursed as they are
incurred. Any such separate firm for the Participants shall be designated in
writing by Participants who sold a majority in interest of Registrable
Securities sold by all such Participants and any such separate firm for the
Company, its directors, its officers and such control persons of the Company
shall be designated in writing by the Company. The Indemnifying Person shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the Indemnifying Person agrees to indemnify any Indemnified
Person from and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified
Person shall have requested an Indemnifying Person to reimburse the Indemnified
Person for reasonable fees and expenses incurred by counsel as contemplated by
the third sentence of this paragraph, the Indemnifying Person agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 60 days after
receipt by such Indemnifying Person of the aforesaid request and (ii) such
Indemnifying Person shall not have reimbursed the Indemnified Person in
accordance with such request prior to the date of such settlement. No
Indemnifying Person shall, without the prior written consent of the Indemnified
Person, effect any settlement of any pending or threatened proceeding in respect
of which any Indemnified Person is or could have been a party, unless such
settlement includes an unconditional written release of such Indemnified Person
in form and substance satisfactory to the Indemnified Persons from all liability
on claims that are the subject matter of such proceeding.
If the indemnification provided for in the first and second paragraphs of
this Section 7 is for any reason unavailable to, or insufficient to hold
harmless, an Indemnified Person in respect of any losses, claims, damages or
liabilities referred to therein, then each Indemnifying Person under such
paragraphs, in lieu of indemnifying such Indemnified Person thereunder and in
order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
(i) the
<PAGE> 14
relative benefits received by the Indemnifying Person or Persons on the one hand
and the Indemnified Person or Persons on the other from the initial offering of
the Notes or (ii) if the allocation provided by the foregoing clause (i) is not
permitted by applicable law, not only such relative benefits but also the
relative fault of the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof) as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Participants on the other shall be deemed to be
in the same proportion as the total proceeds from the initial offering (net of
discounts and commissions but before deducting expenses) of the Notes received
by the Company bears to the total proceeds received by such Participant from the
sale of Registrable Securities. The relative fault of the parties shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, on the one hand,
or such Participant or such other Indemnified Person, as the case may be, on the
other, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission, and any other
equitable considerations appropriate in the circumstances.
The parties shall agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Securities
exceeds the amount of any damages that such Participant 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.
The indemnity and contribution agreements contained in this Section 7 will
be in addition to any liability which the Indemnifying Persons may otherwise
have to the Indemnified Persons referred to above.
8. RULE 144 AND RULE 144A
The Company covenants that it will file the reports required to be filed by
it under the Securities Act and the Exchange Act and the rules and regulations
adopted by the Commission thereunder in a timely manner and, if at any time the
Company is not required to file such reports, it will, upon the request of any
Holder of Registrable Securities, make publicly available other information so
long as necessary to permit sales pursuant to Rule 144 and Rule 144A under the
Securities Act. The Company further covenants that it will take such further
action as any Holder of Registrable Securities may reasonably request, to the
extent required from time to time to enable such Holder to sell Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rule 144 and Rule 144A under the Securities Act.
9. UNDERWRITTEN REGISTRATIONS
If any of the Registrable Securities covered by any Shelf Registration
Statement are to be sold in an underwritten offering, the investment banker or
investment bankers and manager or managers that will manage the offering will be
selected by the Holders of a majority in aggregate principal amount of such
Registrable Securities included in such offering and reasonably acceptable to
the Company.
No Holder of Registrable Securities may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Securities on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements (however
the terms applicable to each Holder shall be identical in all respects) and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements applicable to all Holders.
10. MISCELLANEOUS
(a) Remedies. In the event of a breach by the Company of any of its
obligations under this Agreement, each Holder of Registrable Securities, in
addition to being entitled to exercise all rights
<PAGE> 15
provided herein, in the Indenture or, in the case of the Initial Purchasers, in
the Purchase Agreement or granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The Company
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of any of the provisions of this Agreement
and hereby further agrees that, in the event of any action for specific
performance in respect of such breach, it shall waive the defense that a remedy
at law would be adequate.
(b) No Inconsistent Agreements. The Company has not, as of the date hereof,
entered into and shall not, after the date of this Agreement, enter into any
agreement with respect to any of its Securities that is inconsistent with the
rights granted to the Holders of Registrable Securities in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not entered into
and will not enter into any agreement with respect to any of its securities
which will grant to any Person "piggy-back" rights with respect to a
Registration Statement.
(c) Adjustments Affecting Registrable Securities. The Company shall not,
directly or indirectly, take any action with respect to the Registrable
Securities as a class that would adversely affect the ability of the Holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken pursuant to this Agreement.
(e) Amendments and Waivers. Except as provided in paragraph (d) above, the
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
otherwise than by an instrument executed and delivered by (A) the Holders of not
less than a majority in aggregate principal amount of the then outstanding
Registrable Securities and (B) in circumstances that would adversely affect the
Participating Broker-Dealers, the Participating Broker-Dealers holding not less
than a majority in aggregate principal amount of the Exchange Securities held by
all Participating Broker-Dealers; provided, however, that Section 7 and this
Section 10(e) may not be amended, modified or supplemented except by an
instrument executed and delivered by each Holder and each Participating
Broker-Dealer (including any person who was a Holder or Participating
Broker-Dealer of Registrable Securities or Exchange Securities, as the case may
be, disposed of pursuant to any Registration Statement) affected by any such
amendment, modification or supplement. Notwithstanding the foregoing, a waiver
or consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders of Registrable Securities whose
Securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect, impair, limit or compromise the rights of other
Holders of Registrable Securities may be given pursuant to an instrument
executed and delivered by Holders of at least a majority in aggregate principal
amount of the Registrable Securities being sold by such Holders pursuant to such
Registration Statement.
(f) Notices. All notices and other communications (including without
limitation any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or telecopier:
(i) if to a Holder of Registrable Securities, at the most current
address given by the Trustee to the Company; and
(ii) if to the Company, at Hermes Europe Railtel B.V.,
Terhulpsesteenweg 6A, 1560 Hoeilaart, Belgium, Attention: Chief Financial
Officer with a copy to Global TeleSystems Group, Inc., 1751 Pinnacle Drive,
North Tower, 12th Floor, McLean, VA 22102, Attention: Chief Executive
Officer.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; one business
day after being timely delivered to a next-day air courier; and when
receipt is acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the trustee under
the Indenture at the address specified in such Indenture.
(g) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Registrable Securities.
(h) 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.
(i) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(k) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the
<PAGE> 16
terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their commercially reasonable best efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions, covenants
and restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
(l) Entire Agreement. This Agreement, together with the Purchase Agreement,
is intended by the parties as a final expression of their agreement, and is
intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein.
(m) Securities Held by the Company or Its Affiliates. Whenever the consent
or approval of Holders of a specified percentage of Registrable Securities is
required hereunder, Registrable Securities held by the Company or its affiliates
(as such term is defined in Rule 405 under the Securities Act) shall not be
deemed to be not outstanding for purposes of determining whether such consent or
approval was given by the Holders of such required percentage.
(n) Agent for Service; Submission to Jurisdiction; Waiver of Immunities. By
the execution and delivery of this Agreement, the Company (i) acknowledges that
it has, by separate written instruments, designated and appointed CT Corporation
System, 1633 Broadway, New York, NY 10019 ("CT Corporation System") (and any
successor entity), as its authorized agent upon which process may be served in
any suit or proceeding arising out of or relating to this Agreement that may be
instituted in any federal or state court in the Borough of Manhattan, City of
New York, State of New York or brought under federal or state securities laws,
and represent and warrant that CT Corporation System has accepted such
designation, (ii) submit to the jurisdiction of any such court in any such suit
or proceeding and (iii) agree that service of process upon CT Corporation System
and written notice of said service to the Company in accordance with the
provisions of this Agreement shall be deemed in every respect effective service
of process upon the Company in any such suit or proceeding. The Company further
agrees to take any and all action, including the execution and filing of any and
all such documents and instruments, as may be necessary to continue such
designation and appointment of CT Corporation System in full force and effect
for as long as any of the Notes remain outstanding (subject to the limitation
set forth in clause (i)); provided, however, that the Company may, and to the
extent CT Corporation System ceases to be able to be served on the basis
contemplated herein shall, by written notice to the Initial Purchasers,
designate such additional or alternative agent for service of process that (i)
maintains an office located in the Borough of Manhattan, City of New York, State
of New York, and (ii) is either (x) United States counsel for the Company or (y)
a corporate service company which acts as agent for service of process for other
persons in the ordinary course of its business. Such written notice shall
identify the name of such agent for service of process and the address of the
office of such agent for service of process in the Borough of Manhattan, City of
New York, State of New York.
To the extent that the Company has or hereafter may acquire any immunity
from jurisdiction of any court of (i) any jurisdiction in which the Company owns
or leases property or assets, (ii) the United States or the State of New York or
(iii) the Netherlands 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 and assets or this
Agreement or any of the Notes or actions to enforce judgments in respect of any
thereof, the Company hereby irrevocably waives such immunity in respect of its
obligations under the above-referenced documents, to the extent permitted by
law.
(o) Judgment Currency. The Company hereby agrees to indemnify each
Participant against any loss incurred by such person as a result of any judgment
or order being given or made against the Company for any U.S. dollar 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 such party 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 party. 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.
<PAGE> 17
[Signature Pages Follow]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
HERMES EUROPE RAILTEL B.V.
By: /s/ FRANCOIS NOTE
Name: Francois Note
Title: Corporate Financial Director
DONALDSON, LUFKIN & JENRETTE
INTERNATIONAL
MERRILL LYNCH INTERNATIONAL
BEAR, STEARNS INTERNATIONAL
LIMITED
BT ALEX. BROWN INTERNATIONAL,
a division of Bankers Trust
International, PLC
LEHMAN BROTHERS INTERNATIONAL (EUROPE)
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ ANTHONY S. BELINKOFF
Name: Anthony S. Belinkoff
Title: Managing Director
<PAGE> 1
EXHIBIT 5.1
[SHEARMAN & STERLING LETTERHEAD]
January 15, 1999
Hermes Europe Railtel B.V.
Terhulpsesteenweg 6A
1560 Hoeilaart, Belgium
Ladies and Gentlemen:
We have acted as special United States counsel to Hermes
Europe Railtel B.V., a Netherlands company (the "Company"), in connection with
the filing by the Company under the Securities Act of 1933, as amended (the
"Act") of a registration statement on Form S-4 (the "Registration Statement")
with the United States Securities and Exchange Commission (the "Commission").
Pursuant to the Registration Statement, up to U.S.$200,000,000 aggregate
principal amount of the Company's outstanding 10 3/8% Senior Notes due 2009 (the
"Dollar Notes") and Euro 85,000,000 aggregate principal amount of the Company's
outstanding 10 3/8% Senior Notes due 2006 (the "Euro Notes", and, together with
the Dollar Notes, the "Outstanding Notes") are exchangeable for up to a like
principal amount of the Company's 10 3/8% Senior Notes due 2009 and the
Company's 10 3/8% Senior Notes due 2006, respectively (the "Exchange Notes").
The Outstanding Notes were, and the Exchange Notes will be, issued pursuant to
an Indenture dated as of January 4, 1999 relating to the Dollar Notes (the
"Dollar Notes Indenture") between the Company and The Bank of New York, as
trustee (the "Trustee"), registrar, paying agent and transfer agent, and an
Indenture dated as of January 4, 1999 relating to the Euro Notes (the "Euro
Notes Indenture" and, together with the Dollar Notes Indenture, the
"Indentures") between the Company and the Trustee, registrar, paying agent and
transfer agent. The Exchange Notes and the Outstanding Notes are collectively
referred to herein as the "Notes."
In our capacity as special United States counsel to the
Company, we have examined the Registration Statement, the Indentures filed as
Exhibit 4.5 and Exhibit 4.6 to the Registration Statement, the Outstanding
Notes, a form of the Exchange Notes contained in such Indentures and originals
or copies certified or otherwise identified to our satisfaction of such
documents as we have deemed necessary or appropriate to enable us to render the
opinions expressed below.
<PAGE> 2
Hermes Europe Railtel B.V. 2 January 15, 1999
Based upon the foregoing, it is our opinion that when the
Exchange Notes are exchanged for the Outstanding Notes as contemplated in the
Registration Statement, assuming they have been duly authorized, executed,
issued and delivered by the Company under the laws of the Netherlands and have
been duly authenticated by the Trustee, the Notes will constitute the legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium and other similar laws
relating to or affecting enforcement of creditors' rights generally and by
possible judicial action giving effect to foreign governmental actions or
foreign laws affecting creditors' rights and except as enforcement thereof is
subject to general principles of equity (regardless of whether such enforcement
may be sought in a proceeding in equity or law).
The opinion set forth in the above paragraph is qualified to
the extent that we have assumed the due authorization, execution and delivery of
the Indentures by the Trustee and the Company.
We are attorneys admitted to practice law in the State of New
York and we do not express herein any opinion as to any matters governed by or
involving conclusions under the laws of any other jurisdiction other than the
federal law of the United States of America. In rendering the opinion expressed
herein, we have, with your approval, relied without independent investigation as
to all matters governed by or involving conclusions under the law of the
Netherlands upon the opinion (including the qualifications, assumptions and
limitations expressed therein) of Loeff Claeys Verbeke, Dutch counsel for the
Company, of even date herewith, a copy of which is attached hereto.
This opinion may be delivered to Loeff Claeys Verbeke which
may rely on this opinion to the same extent as if such opinion were addressed to
it.
We hereby consent to the use of this opinion as Exhibit 5.1 to
the Registration Statement and to the use of our name under the caption "Legal
Matters" contained in the prospectus which is included in the Registration
Statement.
Very truly yours,
/s/ Shearman & Sterling
JDM/PJP/DTW
<PAGE> 1
EXHIBIT 5.2
[LOEFF CLAEYS VERBEKE LETTERHEAD]
Hermes Europe Railtel B.V.
Terhulpsesteenweg 6A
1560 Hoeilaart
BELGIUM
Amsterdam, 15 January 1999
Gentlemen,
Re: US $200 million 10 3/8% Senior Notes and Euro 85 million 10 3/8% Senior
Notes Exchange Offer by Hermes Europe Railtel B.V.
We have been requested to issue this opinion letter as your special counsel on
matters of Dutch law in connection with the filing by Hermes Europe Railtel
B.V. (the "Company") of a registration statement with the United States
Securities and Exchange Commission (the "Registration Statement"). Pursuant to
the Registration Statement, the abovementioned Senior Notes (the "Outstanding
Notes") are exchangeable for up to a like principal amount of the Company's
Notes (the "Exchange Notes"). The exchange of the Exchange Notes will be made
pursuant to the Dollar Notes Indenture and the Euro Notes Indenture (together
the "Indentures") each dated January 4, 1999 among the Company and The Bank of
New York, as trustee.
In rendering this opinion, we have examined and relied upon the following
documents:
(1) an executed copy of the Purchase Agreement (the "Purchase Agreement") dated
December 21, 1998 among Donaldson, Lufkin & Jenrette Securities
Corporation, Donaldson, Lufkin & Jenrette International, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Merrill Lynch International, Bear,
Stearns & Co. Inc., Bear, Stearns International Ltd, BT Alex. Brown
Incorporated, BT Alex. Brown International, a division of Bankers Trust
International, PLC, Lehman Brothers Inc., Lehman Brothers International
(Europe), as Initial Purchasers and the Company;
(2) an executed copy of the Indentures:
<PAGE> 2
(3) a form of the Outstanding Notes and of the Exchange Notes of the Company
as set forth in the Indentures;
(4) an executed copy of the Dollar Notes Registration Rights Agreement and
the Euro Notes Registration Rights Agreement (together the "Registration
Rights Agreements"), dated January 4, 1999 between the Company and the
Initial Purchasers;
(5) a copy of the Preliminary Offering Memorandum (the "Preliminary Offering
Memorandum") in relation to the issue of the Outstanding Notes, dated
December 11, 1998 and the Offering Memorandum (the "Offering Memorandum")
in relation to the issue of the Outstanding Notes, dated December 31,
1998;
(6) an excerpt dated 31 December 1998 of the registration of the Company in
the Trade Register of the Chamber of Commerce of Amsterdam, the
Netherlands, confirmed by telephone to be correct as of the date hereof
(the "Excerpt");
(7) the articles of association (statuten) of the Company dated 7 July 1997,
as, according to the Excerpt, deposited with the Trade Register as being
in force on the date hereof (the "Articles");
(8) a copy of the Deed of Incorporation of the Company (the "Deed of
Incorporation"), executed on 6 July 1999, before Mr. R.J.F. Blokhuis,
civil-law notary, officiating in Amsterdam, the Netherlands;
(9) copies of the resolutions of the supervisory board of the Company dated
December 11, 1998 and January 15, 1999 respectively, pertaining to,
inter alia, the approval of the entering into by the Company of the
Agreements;
and such other documents and such treaties, laws, rules, regulations, and the
like, as we have deemed necessary as a basis for the opinions hereinafter
expressed.
The documents referred to under (1) through (5) above shall hereinafter
collectively be referred to as the "Agreements".
We have assumed:
(i) the genuineness of all signatures;
<PAGE> 3
(ii) the authenticity of all agreements, certificates, instruments, and
other documents submitted to us as originals;
(iii) the conformity to the originals of all documents submitted to us as
copies;
(iv) that the deed of incorporation of the Company dated 6 July 1993, of
which we received a copy from civil-law notary R.J.F. Blokhuis, is a
valid notarial deed (authentieke akte), that the contents thereof are
correct and complete, and that there were no defects in the
incorporation (not appearing on the face of the deed of incorporation)
on the basis of which a court might dissolve the Company. No defects in
the incorporation appear on the face of the Deed of Incorporation;
(v) that the Company has not been dissolved (ontbonden), granted a
suspension of payments (surseance verleend), or declared bankrupt
(failliet verklaard); although not constituting conclusive evidence
thereof, our assumption is supported by (a) the contents of the
Excerpts, and (b) information obtained by telephone today from the
bankruptcy clerk's office (faillissementsgriffie) of the District Court
of Amsterdam;
(vi) that the Articles are the articles of association (statuten) of the
Company as in force on the date hereof. Although not constituting
conclusive evidence thereof, our assumption is supported by the
contents of the Excerpt and of the Amendment;
(vii) that the resolutions referred to above under (9). (a) correctly reflect
and are the only resolutions made by the supervisory board of the
Company in respect of the entering into of the Agreements by the
Company, and (b) have not been and will not be amended or revoked or
declared null and void by a competent court;
(viii) that the Agreements have not been supplemented, terminated, rescinded
or declared null and void by a court;
(ix) that the selling restrictions as set forth on page (iii)-(v) of the
Offering Memorandum, in the Purchase Agreement and in the Registration
Statement, will be complied with;
Based on the foregoing and subject to any factual matters or documents not
disclosed to us in the course of our investigation, and subject to the
qualifications and limitations stated hereafter, we are of the opinion that:
<PAGE> 4
A. The Company has been duly incorporated and is validly existing as a
"besloten vennootschap met beperket aansprake" (private company with
limited liability) under the laws of the Netherlands.
B. The choice of New York law as the law governing the Exchange Notes is valid
and binding under the laws of the Netherlands except (i) to the extent that
any term thereof or any provision of New York law applicable thereto is
manifestly incompatible with the public policy (ordre public) of the
Netherlands, and except (ii) that a Dutch court may give effect to
mandatory rules of the laws of another jurisdiction with which the
situation has a close connection, if and insofar as, under the laws of that
other jurisdiction those rules must be applied, whatever the chosen law.
C. The Exchange Notes, to be exchanged for the Outstanding Notes as
contemplated in the Registration Statement, have been duly authorized and,
provided that the choice of the laws of New York as the laws governing the
Exchange Notes will be held valid and binding upon the Company as discussed
in B. above, will, when duly executed, authenticated, issued and delivered
in accordance with the provisions of the Indentures, constitute the legal,
valid, binding and enforceable obligations of the Company.
This opinion is subject to the following qualifications:
a. The opinions expressed herein may be affected or limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorion
and other similar laws of general application now or hereafter in effect
relating to or affecting the enforcement or protection of creditor's
rights.
b. In the absence of an applicable treaty between the United States and the
Netherlands, a judgement rendered by a United States court will not be
enforced by the courts in the Netherlands. In order to obtain a judgement
which is enforceable in the Netherlands the claim must be relitigated
before a competent Dutch court.
c. The enforcement on the Netherlands of the Exchange Notes will be subject to
the rules of civil procedure as applied by Dutch courts. Specific
performance may not always be available under Dutch law.
We express no opinion on any law other than the law of the Netherlands as it
currently stands and has been interpreted in published case law of the courts of
the
<PAGE> 5
Netherlands as per the date hereof, we express no opinion on any laws of the
European Communities (insofar as not implemented in the Netherlands in statutes
or other regulations of general application or on any anti-trust laws (other
than anti-trust laws of the Netherlands).
In this opinion Dutch legal concepts are expressed in English terms and not in
their original Dutch terms. The concepts concerned may not be identical to the
concepts described by the same English term as they exist under the laws of
other jurisdictions. This opinion may, therefore, only be relied upon under the
express condition that any issues of interpretation or liability arising
hereunder will be governed by Netherlands law and be brought before a Dutch
court.
This opinion is strictly limited to the matters stated herein and may not be
read as extending by implication to any matters not specifically referred to.
Nothing in this opinion should be taken as expressing an opinion in respect of
any representations or warranties, or other information, or any other document
examined in connection with this opinion except as expressly confirmed herein.
This opinion is addressed to you and may only be relied upon by you in
connection with the transactions to which the Exchange Offer relates, and may
not be relied upon by, or (except as required by applicable law) be transmitted
to, or filed with any other person, firm, company, or institution without our
prior written consent.
Yours sincerely,
/s/ E. Kooij /s/ N.R. van de Vijver
E. Kooij N.R. van de Vijver
<PAGE> 1
EXHIBIT 8.1
[SHEARMAN & STERLING LETTERHEAD]
January 15, 1999
Hermes Europe Railtel B.V.
Terhulpsesteenweg 6A
1560 Hoeilaart, Belgium
Ladies and Gentlemen:
We have acted as special United States tax counsel for Hermes
Europe Railtel B.V., a Netherlands company (the "Company"), in connection with
the preparation and filing by the Company with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act"), of a registration statement on Form S-4 (the "Registration Statement").
Pursuant to the Registration Statement, up to U.S. $200,000,000 aggregate
principal amount of the Company's outstanding 10 3/8% Senior Notes due 2009 and
Euro 85,000,000 aggregate principal amount of the Company's outstanding 10 3/8%
Senior Notes due 2006 (the "Outstanding Notes") are exchangeable for up to U.S.
$200,000,000 aggregate principal amount of the Company's 10 3/8% Senior Notes
due 2009 and up to Euro 85,000,000 aggregate principal amount of the Company's
outstanding 10 3/8% Senior Notes due 2006 (the "Exchange Notes"; and the offer
of the Company to exchange the Exchange Notes for the Outstanding Notes, the
"Exchange Offer"), respectively. The Outstanding Notes were, and the Exchange
Notes will be, issued pursuant to an indenture (the "Indenture") dated as of
January 4, 1999 among the Company, and The Bank of New York, as trustee (the
"Trustee"), registrar, paying agent and transfer agent.
Based upon and subject to the foregoing and consideration of
applicable law, we are of the opinion that, subject to the limitations set forth
therein, the discussion under the caption "Certain Tax Considerations -- United
States" accurately describes the material United States federal income tax
considerations relevant to the acquisition, ownership and disposition of the
Exchange Notes in general and in the context of the Exchange Offer. The
foregoing opinion is based upon the Internal Revenue Code of 1986, as amended,
Treasury Regulations (including proposed Regulations and temporary Regulations)
promulgated thereunder, rulings, official pronouncements and judicial decisions,
all as in effect on the date hereof and all of which are subject to change,
possibly with retroactive effect, or to different interpretations.
<PAGE> 2
We hereby consent to the use of this opinion as an exhibit to
the Registration Statement and to the reference to us in the Registration
Statement. 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
the rules and regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ Shearman & Sterling
LMB/KY
<PAGE> 1
EXHIBIT 10.15
FRAMEWORK AGREEMENT - FINAL VERSION
DATED 24 NOVEMBER, 1997
(1) HERMES EUROPE RAILTEL B.V.
(2) COLT TELECOM GROUP PLC
FRAMEWORK AGREEMENT
FOR THE
PROVISION OF TRANSMISSION SERVICES
PAGE 1 OF 25
<PAGE> 2
FRAMEWORK AGREEMENT - FINAL VERSION
CONTENTS
1. Scope and Term of the Agreement...........................................3
2. HER Service Offerings.....................................................3
3. Provision of Services.....................................................4
4. Customer Obligations......................................................4
5. Charges and Billing.......................................................4
6. Service Quality...........................................................5
7. Liability.................................................................6
8. Force Majeure.............................................................6
9. Suspension and Early Termination..........................................7
10. Confidentiality...........................................................8
11. Intellectual Property Rights..............................................9
12. Assignment................................................................9
13. Definition and Interpretation.............................................9
14. Entire Contract..........................................................10
15. Variation................................................................10
16. No Waiver................................................................10
17. No Partnership...........................................................10
18. Survival.................................................................10
19. Severability.............................................................11
20. Notices..................................................................11
21. Dispute Resolution and Governing Law.....................................11
SCHEDULES
SCHEDULE 1: SERVICE LEVEL GUARANTEES..........................................16
SCHEDULE 2: SERVICE LEVEL AGREEMENT...........................................18
SCHEDULE 3: RING SERVICE CONTRACT.............................................25
PAGE 2 OF 25
<PAGE> 3
CONFIDENTIAL TREATMENT
FRAMEWORK AGREEMENT - FINAL VERSION
This Agreement made this 24th day of November 1997,
BETWEEN:
HERMES EUROPE RAILTEL B.V., a private company with limited liability,
incorporated under the laws of the Netherlands, having its registered office at
Strawinskylaan 305, 1077 XX. Amsterdam, the Netherlands,
(hereinafter referred to as "HER"):
and
COLT TELECOM GROUP PLC, a company incorporated under the laws of England and
Wales and having its registered office at Bishopsgate Court, 4 Norton Folgate,
London E1 6DQ.
(hereinafter referred to as "CUSTOMER").
WHEREAS
A. HER operates telecommunications facilities between locations in Europe for
the purpose of providing cross-border transmission capacity to
telecommunications operators and other service providers as a "carriers'
carrier":
B. CUSTOMER is a telecommunications operator desiring to procure such
capacity from HER;
NOW THEREFORE the parties hereto agree with each other as follows:
1. SCOPE AND TERM OF THE AGREEMENT
1.1 The purpose to this Agreement is to establish the terms and conditions for
the provisioning and supply of services by HER to CUSTOMER in the future
through the execution of Service Contracts.
1.2 This Agreement shall enter into effect on execution by the Parties and
shall continue for a term of ##MATERIAL OMITTED AND SEPARATELY FILED UNDER
A REQUEST FOR CONFIDENTIAL TREATMENT## except to the extent that it is
extended in accordance with Clause 1.3, and provided that it has not been
terminated earlier in accordance with Clause 9.
1.3 The initial term of each Service Contract shall be expressly stated
therein. At the end of the initial term of a Service Contract, it shall
continue in accordance with the terms of this Agreement until terminated
by either party on 1 (one) year's written notice to expire at the end of
the initial term or at the end of the relevant month thereafter. If a
Service Contract is entered into for a term which extends beyond that
stated in Clause 1.2, the terms and conditions of this Agreement shall
continue in effect in relation to that Service Contract until the expiry
of its term.
2. HER SERVICE OFFERINGS
2.1 The services available from HER are set out in HER's Services Catalogue,
as published from time to time, and may be ordered in accordance with
Clause 3 below.
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<PAGE> 4
FRAMEWORK AGREEMENT - FINAL VERSION
3. PROVISION OF SERVICES
3.1 CUSTOMER may order Transmission Services in accordance with the
provisioning process described in the Service Level Agreement by placing
orders. The Initial Service Contract is attached as Schedule 3.
3.2 Each Service Order Form is subject to acceptance by HER. Once an order is
signed by both parties, it shall constitute a binding Service Contract.
Under the terms of this Agreement CUSTOMER agrees that Service Contracts
may be entered into between HER and any of CUSTOMER Subsidiaries listed in
Appendix B. Customer further agrees that CUSTOMER shall remain liable at
all times for the performance of the obligations undertaken by the CUSTOMER
Subsidiaries under such Service Contracts without HER first having to seek
any recourse against the Subsidiaries. In particular, HER shall be
entitled to direct invoices for services rendered to those Subsidiaries to
CUSTOMER and CUSTOMER shall be liable to pay those invoices.
3.3 CUSTOMER agrees to purchase and HER agrees to provide the Transmission
Services identified in each Service Contract, on the terms and conditions
of this Agreement.
3.4 All Service Contracts shall be governed by the terms and conditions of
this Agreement provided that in the event of inconsistency the Service
Contract shall prevail in relation to the Services to which that Service
Contract relates.
3.5 CUSTOMER may state on each Service Order a Requested Delivery Date. HER
shall not be obliged to provide a Committed Delivery Date until two months
prior to the Requested Delivery Date. The Committed Delivery Date shall
then bind HER and HER's failure to meet that date shall, subject to Clause
6.6, entitle the CUSTOMER to Credits in accordance with Clause 6.3(a).
4. CUSTOMER OBLIGATIONS
4.1 CUSTOMER agrees:
(a) to pay the Charges provided for in each Service Contract in
accordance with the provisions of Clause 5.
(b) to provide HER and its contractors with all reasonable access to its
POPs and any other premises to enable HER to carry out its obligations
under this Agreement and Service Contracts.
(c) to comply with all relevant local, national and supranational laws in
each jurisdiction in which HER provides Transmission Services to
CUSTOMER.
5. CHARGES AND BILLING
5.1 Charges may include both a non-recurring element and a recurring element.
The Charges will be set out in each Service Contract.
5.2 Non-recurring Charges (where applicable) are due and payable within 10
working days of the Actual Service Delivery Date.
5.3 The recurring Charges are due and payable in twelve equal installments
following receipt of the relevant invoices from HER. The first such payment
is due and payable on the date of service commencement under the relevant
Service Contract. Subsequent payments are due and payable at calendar
monthly intervals, on the first day of the relevant month. Where in
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<PAGE> 5
FRAMEWORK AGREEMENT - FINAL VERSION
any calendar month the Transmission Services are to be provided for a
period less than a full calendar month, the monthly recurring Charges
shall be pro-rated accordingly.
5.4 Charges are exclusive of VAT and other consumption taxes, unless otherwise
stated.
5.5 All payments are to be made net of charges and in the currency specified
in the Service Contract and are to be made to the Bank specified by HER.
Any change in the specified Bank will be communicated to CUSTOMER no later
than ten working days prior to the due date of the next payment.
5.6 Where any payment is expressed to be "due and payable" on a particular
date, payment shall be credited to HER's bank account by that date.
Payments shall only be deemed to have been made on the Value Date in
respect of such payment.
5.7 HER represents to CUSTOMER that all Transmission Services provided by HER
to CUSTOMER under this Agreement are provided at prices and upon terms
that are no less favourable to CUSTOMER than the prices and terms offered
by HER to its most favoured customers for substantially similar services,
subject to volume discounts, payment conditions, contract duration,
service levels, flexibility and other terms which materially affect
pricing. HER will adjust its prices as necessary to remain in compliance
with this commitment on a going forward basis.
5.8 If CUSTOMER fails to pay any Charges due within 30 days of the due date
for payment, HER shall, without prejudice to any other rights or remedies
it might have, be entitled to charge CUSTOMER interest on all sums due at
the rate of 1.5 per cent per month. Such interest shall be charged from the
date payment becomes due until the Value Date (both before and after
judgement) and shall accrue on a daily basis.
5.9 If CUSTOMER should terminate a Service Contract prior to the end of the
initial term specified therein, CUSTOMER shall pay HER in addition to any
Charges outstanding a cancellation charge equal to 25% of the Charges which
would have been payable on that Service Contract had it run its full term.
6. SERVICE QUALITY
6.1 Transmission Services shall be provided in accordance with the Service
Level Guarantees in Schedule 1. HER shall use reasonable endeavours to
provide the Transmission Services in accordance with the Service Level
Agreement in Schedule 2.
6.2 HER may from time to time vary the technical parameters applicable to
services, whether specified in the Service Level Agreement or otherwise, so
long as quality of service or the Service Level Guarantees are not
adversely affected.
6.3 (a) If Transmission Services fail to meet guaranteed Service Level
Guarantees during any billing month, subject to 6.3(b), CUSTOMER
shall be eligible for a credit against the Charges otherwise payable
in respect of the relevant Link. The Service Level Guarantees and
credits are detailed in Schedule 1.
(b) In the event that Customer cancels a Service Contract under Clause
9.7.1, no credits shall be payable in respect of that Service
Contract.
6.4 In no event shall the total credits payable under Clause 6.3 in respect of
any single circuit exceed, in any given month, the Monthly Circuit Charges
payable in respect of that circuit.
6.5 HER shall issue a credit note for any Credits to which the CUSTOMER is
eligible within 30 days following the month in which the credit arose.
PAGE 5 of 25
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CONFIDENTIAL TREATMENT
FRAMEWORK AGREEMENT - FINAL VERSION
6.6 The Credits provided for in this Clause shall not apply to the extent that
deviation from service levels or failure to meet a delivery date is due to:
(a) an event of Force Majeure;
(b) an act or omission of CUSTOMER which constitutes a breach of this
Agreement, including in the case of failure to comply with a delivery
date, CUSTOMER's failure to cooperate in the timely completion of
Acceptance Tests or CUSTOMER's inability to accept service.
6.7 Except in the case of Persistent Service Failures, CUSTOMER's only
remedies for deviation from the Service Levels by HER or for failure by HER
to meet a delivery date are the credits provided for in this Clause.
6.8 HER shall have the right from time to time to modify, extend, repair or
replace any part of the Network, provided that, after completion of the
work, the modification or replacement does not materially impair the
provision of Transmission Service to CUSTOMER. The process for carrying out
service affecting works is set out in the Service Level Agreement.
6.9 Save that there shall be no degradation in service quality, HER may route
CUSTOMER traffic through facilities provided by a third party at its
discretion and in particular, to connect CUSTOMER's POPs, to HER's POPs or
to maintain service levels.
7. LIABILITY
7.1 Except in the case of death or personal injury, the maximum aggregate
liability of either party to the other for any loss sustained by the other
party (whether as a result of negligence or otherwise) in connection with
anything done or omitted to be done under this Agreement or any Service
Contract shall be ##MATERIAL OMITTED AND SEPARATELY FILED UNDER A REQUEST
FOR CONFIDENTIAL TREATMENT## per link affected in respect of any single
incident or series of related incidents; subject to a maximum liability of
HER under this Agreement or any Service Contract of ##MATERIAL OMITTED AND
SEPARATELY FILED UNDER A REQUEST FOR CONFIDENTIAL TREATMENT## for all
incidents in any twelve-month period.
7.2 Neither party shall be liable to the other for any indirect or
consequential loss or damage. For these purposes, "indirect or
consequential loss or damage" includes, but is not limited to, loss of
revenue, profit, anticipated savings, business or goodwill, loss or
corruption or destruction of data.
8. FORCE MAJEURE
8.1 Subject to Clauses 8.2 ad 8.3, a party shall not be held liable for
failure in performing any of its obligations under this Agreement or a
Service Contract if such failure is caused by or arises as a result of an
event of Force Majeure.
8.2 The affected party shall promptly notify the other party in writing of the
occurrence of an event of Force Majeure and the estimated extent and
duration of its inability to perform its obligations.
8.3 Upon the cessation of the event of Force Majeure, the affected party shall
promptly notify the other party in writing of such cessation and shall
resume performance of tis obligations.
8.4 Both parties shall use reasonable endeavours to minimise the effects of an
event of Force Majeure.
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FRAMEWORK AGREEMENT - FINAL VERSION
9. SUSPENSION AND EARLY TERMINATION
9.1 If a party (referred to herein as the "defaulting party") commits any
material breach of a Service Contract (or a provision of this Agreement
pertaining to a Service Contract) which, in the case of a breach capable
of remedy, shall not have been remedied within thirty days (30) of a
written request to do so being received from the other party, then the
other party may terminate this Agreement and the relevant Service
Contract immediately by giving the defaulting party notice in writing
to that effect.
9.2 If a party (referred to herein as the "affected party") has ceased to
perform its obligations under a Service Contract as a result of an event
of Force Majeure for a period greater than thirty (30) days, the other
party may terminate the relevant Service Contract immediately by giving
the affected party notice in writing to that effect.
9.3 Either party may terminate this Agreement and the Service Contracts
immediately upon giving notice to the other party in the event that the
other party becomes bankrupt or insolvent; has sought protection from its
creditors under any statute or legal process; has suffered or permitted a
trustee, liquidator, receiver, receiver-manager or similar custodian to be
appointed or to take possession of its property or assets; has voluntarily
or involuntarily commenced proceedings for dissolution, liquidation or
winding up; or has ceased to carry on business in the ordinary course.
9.4 On termination of this Agreement and/or any Service Contract, HER may
require CUSTOMER, at one month's notice, to disconnect all or any customer
facilities from the Network. If the termination occurs as a result of
breach of this agreement by CUSTOMER, HER may carry out at CUSTOMER's own
expense all remedial work necessary to restore the Network and POPs to full
working order, to remove cables and apparatus from HER lands or premises
and to make good any damage caused by so doing.
9.5 HER reserves the right to suspend the provision of services, and/or to
disconnect customer facilities from the Network if, in HER's reasonable
judgement, CUSTOMER's use of the Network may damage or disrupt the Network.
9.6 If CUSTOMER is at any time in breach of Clauses 4.1(a) or 4.1(c) and has
failed to remedy such breach within 30 (thirty) days of written notice to
do so, HER may suspend the performance of its obligations under any
relevant Service Contract forthwith upon written notice to CUSTOMER without
prejudice to its rights under this agreement and the relevant Service
Contract, including its rights to payment. Notwithstanding any other
provision of this Agreement, HER shall have no liability to CUSTOMER for
any loss or damages it suffers as a consequence of such suspension.
9.7 If:
9.7.1 the commencement of the Transmission Services under a Service
Contract have been delayed beyond 6 weeks; or
9.7.2 the Transmission Services provided under a Service Contract are
subject to a Persistent Service Failure:
CUSTOMER shall have the right to terminate the relevant Service Contract
immediately, without incurring a cancellation charge or other penalty, by
giving HER notice in writing to that effect.
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FRAMEWORK AGREEMENT - FINAL VERSION
10. CONFIDENTIALITY
10.1 Each party shall promptly supply to the other such information and
assistance which the other may reasonably request to enable it to perform
its obligations under this Agreement. Each party shall ensure that
information provided to the other party in accordance or in connection with
this Agreement is correct to the best of its knowledge at the time it is
provided.
10.2 Each party shall keep in confidence all Confidential Information and will
not (and will use its reasonable endeavours to ensure that its directors,
employees, officers, servants, agents, Associates and professional advisers
will not) disclose such information to any third party other than in
accordance with this Agreement. Each party shall exercise no lesser degree
of care in relation to Confidential Information than it would apply to its
own confidential information.
10.3 The following disclosures shall not constitute a breach of Clause 10.2:
(a) a disclosure authorised in writing;
(b) a publication of Confidential Information in accordance with a
statutory or other regulatory requirement or pursuant to an order of
a competent court or tribunal;
(c) a disclosure made to any regulator or any expert or arbitrator
appointed in accordance with the provisions of this Agreement to the
extent that such disclosure is a legal requirement; or
(d) a disclosure made to professional advisors or persons bona fide
considering investing in either party whether by capital investment,
loans or other means provided that the recipient has agreed to be
bound by the restrictions contained in Clauses 10.2, 10.3 and 10.4 in
the same manner as if it were a party to this Agreement.
10.4 The provisions of Clause 10.2 do not apply to any Confidential Information
which:
(a) enters into the public domain other than by reason of a breach of
this Agreement;
(b) is known to the party to which it is disclosed at the time of its
disclosure;
(c) is independently generated, developed or discovered at any time by or
for the party to which it is disclosed;
(d) is disclosed by a third party without any restriction on further
disclosure; or
(e) is necessary for the purposes of permitting a party to perform its
obligations under this Agreement or a Service Contract provided that
any third party which receives Confidential Information pursuant to
this provision has agreed to be bound by the restrictions contained in
Clauses 10.2, 10.3 and 10.4 (a)-(e) in the same manner as if it were a
party to this Agreement.
(f) Is required to be disclosed to any stock exchange, regulator or
similar authority
10.5 Confidential Information shall only be used for the purposes for which it
was disclosed and/or for the purposes of performing the obligations of the
parties under this Agreement or a Service Contract.
10.6 The obligations of confidentiality in this Clause 10 shall continue for 5
years following the termination of this Agreement.
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FRAMEWORK AGREEMENT - FINAL VERSION
10.7 Neither party shall make any press announcements concerning this Agreement
or a Service Contract or publicise this Agreement or a Service Contract in
any way without the prior written consent of the other party.
11. INTELLECTUAL PROPERTY RIGHTS
11.1 Nothing in this Agreement or a Service Contract shall be construed as
conferring any licence to intellectual property or as an assignment of the
intellectual property rights of one party to the other party.
11.2 CUSTOMER shall indemnify and save HER harmless from any loss, damage,
liability or expense incurred by HER arising out of any infringement of the
intellectual property rights of third parties related to CUSTOMER's use of
the Network or of the services provided by HER pursuant to this Agreement.
11.3 HER shall indemnify and save CUSTOMER harmless from any loss, damage,
liability or expense incurred by CUSTOMER arising out of any infringement
of the intellectual property rights of third parties by HER related to
HER's operation of the Network or the provision of services to CUSTOMER
pursuant to this Agreement.
12. ASSIGNMENT
12.1 This Agreement and the Service Contracts are personal to the parties
hereto and neither party shall without the prior consent in writing of the
other assign, charge or otherwise deal with the whole or any part of this
Agreement or a Service Contract or its rights or obligations under this
Agreement or a Service Contract without the consent to the other party.
12.2 In the event of an assignment under Clause 12.1, the assignor shall
provide not less than fourteen days prior notice in writing of such
assignment to the other party and the assignee shall enter into an
agreement with the other party whereby the assignee shall agree to be bound
by the terms of this Agreement or the relevant Service Contract, as
appropriate, and if required by the other party the assignor shall
guarantee the performance of this Agreement or the relevant Service
Contract, as appropriate, by the assignee.
12.3 Notwithstanding Clause 12.1, either party may assign this Agreement or any
Service Contract to an Associate without the consent of the other, or to a
lender as security for the repayment of loans or an Associate, but in the
case of such an Assignment the original party shall remain liable for
performance of the terms of this Agreement and the relevant Service
Contract, unless otherwise agreed in writing.
13. DEFINITION AND INTERPRETATION
13.1 In this Agreement and Service Contracts, words and expressions shall have
the meanings ascribed to them in Appendix A.
13.2 All documentation exchanged between the parties pursuant to this Agreement
shall be in English.
13.3 The following documents form part of this Agreement, and any
inconsistencies between them shall be resolved by giving them the following
order of precedence, unless expressly stated to the contrary:
(a) the Service Contracts entered into pursuant to this Agreement,
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FRAMEWORK AGREEMENT - FINAL VERSION
(b) the main body of this Agreement and Appendix A but excluding the
Schedules,
(c) the Service Level Guarantees (Schedule 1), and
(d) other Schedules.
13.4 References in this Agreement to HER and CUSTOMER shall include their
respective employees, agents, successors (whether by operation of law or
otherwise) and permitted assigns.
13.5 Headings are included in this Agreement for ease of reference only and
shall not affect the interpretation or construction of this Agreement.
14. ENTIRE CONTRACT
This Agreement represents the entire understanding between the parties in
relation to the provision of the Services and supersedes all other
agreements and representations, whether oral or in writing.
15. VARIATION
No variation, modification or addition to or cancellation of any provision
of this Agreement or a Service Contract shall be effective unless agreed in
writing by a duly authorised representative of HER and CUSTOMER.
16. NO WAIVER
16.1 Failure by either party at any time to enforce any of the provisions of
this Agreement or a Service Contract shall neither be construed as a waiver
of any rights or remedies hereunder nor in any way affect the validity of
this Agreement or a Service Contract or any part of them, and no waiver of
a breach of this Agreement or a Service Contract shall constitute a waiver
of any subsequent breach.
16.2 Termination of this Agreement or a Service Contract shall not operate as a
waiver of any breach by a party of any of the provisions thereof and shall
be without prejudice to any rights or remedies of either party which may
arise as a consequence of such breach or which may have accrued hereunder
up to the date of such termination.
16.3 No waiver of a breach of this Agreement or a Service Contract shall be
effective unless given in writing.
17. NO PARTNERSHIP
Nothing in this Agreement or a Service Contract shall be deemed to
constitute a partnership or joint venture between the parties or to
constitute one party the agent of the other for any purpose whatsoever.
18. SURVIVAL
Notwithstanding anything in Clause 1.2, the provisions of this Clause and
Clauses 6.8, 7.8, 9.4, 9.6, 10.6, 19, 20 and 21 shall survive termination
of this Agreement.
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FRAMEWORK AGREEMENT - FINAL VERSION
19. SEVERABILITY
19.1 The invalidity of unenforceability for any reason of any part of this
Agreement or of any Service Contract shall not prejudice or affect the
validity or enforceability of the remainder of this Agreement.
19.2 If further lawful performance of this Agreement or any Service Contract
or any part of them shall be made impossible by the final judgement or
final order of any court of competent jurisdiction, commission or
government agency or similar authority having jurisdiction over either
party, the parties shall forthwith use their best endeavours to agree
amendments to this Agreement or the relevant Service Contract so as to
comply with such judgement or order or resume performance.
20. NOTICES
20.1 Except in cases where the Service Level Agreement makes express provision
otherwise, any notice given under this Agreement shall be in writing and
sent or delivered to the address of the recipient party given in this
Agreement (or as from time to time otherwise notified) by:
o facsimile transmission, in which case it will be deemed received when
sent;
o hand (including courier), in which case it will be deemed received
when delivered;
o air mail (where appropriate), in which case it will be deemed received
5 days after posting; or
o ordinary first class mail (where the recipient is within the same
jurisdiction as the sender) in which case it will be deemed received
2 days after posting.
20.2 Any notice or communication sent by post shall be deemed to have been
delivered on the second day following posting on which postal delivery is
available and in proving posting it shall be sufficient to show that the
envelope containing such notice or communication was properly addressed,
stamped and posted.
20.3 Either party may amend its address and facsimile number specified in
Clause 20.1 by written notice to the other party.
21. DISPUTE RESOLUTION AND GOVERNING LAW
21.1 Any dispute, controversy or claim arising under, out of or relating to
this Agreement or any Service Contract, including any questions regarding
its existence, or termination shall first be referred for resolution in
accordance with the escalation procedure set out in the Service Level
Agreement.
21.2 This Agreement and Service Contracts shall be governed by and construed
in accordance with English law.
21.3 The parties hereby submit to the exclusive jurisdiction of the English
Courts and waive any objection to proceedings in such courts on the
grounds of venue or on the grounds that proceedings have been brought in
an inconvenient forum.
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FRAMEWORK AGREEMENT - FINAL VERSION
AS WITNESS the hands of the duly authorised representatives of the parties
at on the date first above written.
-----------------------
/s/ PETER MAGNUS
--------------------------------) for and on behalf of
) HERMES EUROPE RAILTEL B.V.
)
PETER MAGNUS )
--------------------------------)
/s/ PAUL W. CHISHOLM
--------------------------------) for and on behalf of
) COLT TELECOM GROUP PLC
)
PAUL W. CHISHOLM )
--------------------------------)
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FRAMEWORK AGREEMENT - FINAL VERSION
APPENDIX A
In this Agreement, including the Schedules, words and expressions shall have
the meanings ascribed to them below:
"Actual Service Delivery
Date" as defined in Schedule 2, paragraph 3.
"Associate" in relation to any body corporate, any Holding
Company or Subsidiary of such body corporate or
other subsidiary of any such Holding Company.
"Charges" the Charges set out in each Service Contract.
"Committed Delivery Date" the dated provided by HER for the provision of
Transmission Services and set out in each Service
Contract.
"Confidential Information" all information of any nature, provided by one
party to the other in connection with this
Agreement save for information which the
originating party has expressly identified
as being non-confidential.
"Credits" the credits calculated in accordance with the
Service Level Guarantees.
"Force Majeure" any cause beyond a party's reasonable control
affecting its performance of its obligations
hereunder including but not limited to acts of
God, insurrection or civil disorder, war or
military operations, national or local emergency,
acts or omissions of Government or regulatory
authority, industrial disputes of any kind (not
involving that party's employees), fire, flood,
lightning, explosion, subsidence, inclement
weather, acts or omissions of persons or bodies
for whom the affected party is not responsible.
"HER Points of Presence
or POPs" nodes or cable terminating points on the Network
which are designated by HER.
"Holding Company" a holding company as defined in Sections 736 and
736A Companies Act 1985 (England).
"Initial Service Contract" the Service Contract entered into on the date of
this Agreement between HER and COLT
Telecommunications (a Subsidiary of CUSTOMER) and
attached at Schedule 3.
"Link" a transmission path between two termination
points identified in a Service Contract.
"Monthly Circuit Charges" the recurring charges set out in each Service
Contract.
"Network" the Hermes Europe Railtel TransEuropean SDH
Network.
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FRAMEWORK AGREEMENT - FINAL VERSION
"Persistent Service Failure" a failure to perform in accordance with the
guaranteed Service Level for three consecutive
months.
"Service Contract" a contract created by the acceptance of HER of
Service Order.
"Service Level Guarantees" quality of service levels for Transmission
Services as defined in Schedule 1.
"Service Order" an order placed by CUSTOMER in accordance with
the terms of this Agreement.
"Services Catalogue" the document describing the services available
from HER as published by HER from time to time.
"Subsidiary" a subsidiary as defined in section 736 and
736A Companies Act 1985 (England).
"Transmission Services" The services provided by HER in accordance
with each Service Contract, which at the time
of entering into this Agreement may include,
Ring Service, Basic, Standard, Premium or VIS
Services as those terms are defined in the
Services Catalogue.
"Value Date" the date upon which the transfer of the Charges
is completed: that is, the Charges appear as a
credit on HER's bank account.
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FRAMEWORK AGREEMENT - FINAL VERSION
APPENDIX B
CUSTOMER SUBSIDIARIES
1. COLT Telecommunications
2. COLT Telecom GmbH
3. COLT Telecommunications France SAS
4. COLT Telecom Espana S.A.
5. COLT Telecom A.G.
6. COLT Telecom S.A.
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FRAMEWORK AGREEMENT - FINAL VERSION
SCHEDULE 1
SERVICE LEVEL GUARANTEES
1. DELIVERY OF SERVICE
1.1 Service Delivery Guarantees
<TABLE>
<CAPTION>
Service Level Guarantee Credits Calculation if service level is
not met
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Service Delivery Date By Committed Delivery 5% of Non-Recurring Charge per
Date week delay
- ----------------------------------------------------------------------------------------
</TABLE>
The committed delivery date is stated in each Service Contract. HER is
considered to have met this date if on or before then HER has issued the "HER
BIS Test Report" to customer as part of the handover procedure (see schedule 2).
HER shall be entitled to revise the committed delivery date after it has
provided a signed service order to the customer if HER is unable to access
CUSTOMER POP in a timely manner during either installation or BIS testing
processes.
For the avoidance of doubt if BIS testing performed by CUSTOMER is
unsuccessful, and this is verified as a problem caused by HER, then the Actual
Delivery Date will be revised accordingly.
1.2 Cancellation rights
If HER has not delivered the Transmission Service within 6 weeks of the
Committed Delivery Date, CUSTOMER is entitled to cancel the Service Contract,
in lieu of Credits but without any cancellation charge applying.
2. SERVICE AVAILABILITY
HER offers guarantees on the availability of Ring Service as set out below.
<TABLE>
<CAPTION>
Service Level Guarantee Credits Calculation if service level is
not met
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Availability 99.9 - 99.5 10% of monthly Ring Charges
(monthly) Below 99.5 - 99.0 20% of monthly Ring Charges
Below 99.0 - 97.5 40% of monthly Ring Charges
Below 97.5 100% of monthly Ring Charges
- ----------------------------------------------------------------------------------------
</TABLE>
The Ring Service is considered unavailable if two or more VC4 paths on the Ring
are not available and availability is measured accordingly.
Availability is calculated on a monthly basis as follows:
(Total time - Sum of all events of unavailable
time as agreed during fault clearance) x 100
---------------------------------------------
Total time.
PAGE 16 of 25
<PAGE> 17
FRAMEWORK AGREEMENT - FINAL VERSION
Per event, unavailable time begins at time of CUSTOMER problem reporting, or
HER problem detection, whichever is earlier. Unavailable time ends as agreed
between HER and CUSTOMER during fault clearance; this is documented in the
"Fault Clearance Report". (see schedule 2) Unavailable time is measured between
HER demarcation of responsibility points as defined on HER Service Order.
Planned works and outages prolonged by inability to access CUSTOMER POP are
excluded.
Months are calendar months.
PAGE 17 OF 25
<PAGE> 18
FRAMEWORK AGREEMENT - FINAL VERSION
SCHEDULE 2
SERVICE LEVEL AGREEMENT
1. PURPOSE OF THE AGREEMENT
This document sets out agreed standards and procedures for the provisioning
(service delivery) and operations (fault and performance management) of
Transmission Services provided by HER to CUSTOMER.
This agreement also sets out measurable entities that allow periodic reviews
of the quality of provisioning and operations of HER transmission services.
2. DEFINITIONS & ABBREVIATIONS
Access Network Network between HER PoP and CUSTOMER PoP
ADM Add/Drop Multiplexer
Backbone HER network between two HER PoPs
BIS Bringing-Into-Service
CS Customer Services
CSC Customer Services Centre
ES Errored Seconds
SES Severely Errored Seconds
G.826 ITU-T Recommendation G.826
HER Hermes Europe Railtel
ITU International Telecommunications Union
M.2100 ITU-T Recommendation M.2100
M.2101 ITU-T Recommendation M.2101
M.2120 ITU-T Recommendation M.2120
NOC Network Operations Centre
OPS Operations
PDH Plesiochronous Digital Hierarchy
SDH Synchronous Digital Hierarchy
POP Point of Presence
SLA Service Level Agreement
Definitions contained in the Framework Agreement also apply.
3. SERVICE DELIVERY
3.1 General Principles
This section covers the period between receipt of HER Service Order Form and
handover of acceptance-tested operational service. This process will be managed
through single points of contact from both CUSTOMER and HER.
3.2 Specific Customer Design
A Customer Design will be prepared by HER in cooperation with CUSTOMER; this
will be coordinated through single points of contact. The agreed design will be
annexed to Schedule 3.
PAGE 18 OF 25
<PAGE> 19
FRAMEWORK AGREEMENT - FINAL VERSION
3.3 INSTALLATION
HER will co-ordinate with CUSTOMER-specified contact persons all installation
activities, and CUSTOMER is responsible to provide building access in a timely
manner to ensure on-time service delivery. Depending on the contracted service,
this may include:
o Equipment installation in HER POP
o Cabling to agreed demarcation point
3.4 ACCEPTANCE TESTING AND COMMISSIONING
HER acceptance tests are in accordance with ITU recommendations M.2100 and
M.2101.
Before handing over the circuit to the customer, a 24 hours Bringing-Into-
Service (BIS) test will be performed.
This BIS test is performed with a test equipment (TE) at each end. These TE are
connected at the demarcation points of the service (including all cabling).
For STM-1/VC4 services, the errors and alarms of the STM-1 interconnecting
sections are measured, as well as of the VC-4 path.
Following parameters are measured:
Errored Seconds(ES)
Severely Errored Seconds (SES)
Unavailable Seconds (US)
In addition the round trip delay is measured.
The following values are taken for the BIS performance limits of the VC4 path,
based on 2% allocation (Backbone service):
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
S1 S2
-------------------------------------------------------------------------
Allocation ES SES ES SES
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LON-PAR 2% 9 0 26 3
-------------------------------------------------------------------------
FRA-PAR 3% 16 0 36 4
-------------------------------------------------------------------------
FRA-LON 3% 16 0 36 4
-------------------------------------------------------------------------
</TABLE>
If the measurement indicates values below S1, the BIS is considered successful
and the path accepted.
If the measurement indicates values between S1 and S2, the test is extended to 7
days (thresholds x 7).
If the measurement indicates values above S2, the BIS is not successful and
corrective action is taken.
3.5 HANDOVER
Upon successful results from HER BIS testing, a certificate with detailed
measurements as per M.2100, M.2101, and M.2110 including the measured round-trip
network added delay will be provided to CUSTOMER (see Appendix 1 for format and
BIS target values).
PAGE 19 OF 25
<PAGE> 20
FRAMEWORK AGREEMENT - FINAL VERSION
CUSTOMER shall have 72 hours, measured from the "Actual Service Delivery Date"
to perform its internal testing. On customer acceptance or at end of this
period, (whichever is earlier), billing of the recurring charges shall commence
unless CUSTOMER notifies HER that CUSTOMER'S tests have failed, and this is due
to a problem with the Transmission Service. In this case HER will investigate
the problem and restart the Acceptance Testing and Commissioning procedure.
3.6 SERVICE DELIVERY ESCALATION
If the stated delivery standards in sections 3.1-3.8 of this document are not
met, the following escalation sequence should be used to find a satisfactory
solution:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
CONTACT NAME TEL. NO. FAX NUMBER TEL. NO. AFTER
LEVEL HOURS
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1st Level Bruno Mahieux 32-2-658-5219 32-2-658-5107 32-2-658-5252
CS Manager
- -------------------------------------------------------------------------------------------------------
2nd Level John Shearing 32-2-658-5260 32-2-658-5107 32-2-658-5252
Operations Director
- -------------------------------------------------------------------------------------------------------
3rd Level Jan Loeber 32-2-658-5205 32-2-658-5108 32-2-658-5252
Managing Director
- -------------------------------------------------------------------------------------------------------
</TABLE>
4. FAULT MANAGEMENT
4.1 24 Hrs/7 Days Fault Reporting Contact
HER will log all faults in its Problem Management System within 5 minutes of the
fault being detected by the HER Network Operations Centre or reported by
CUSTOMER.
All faults shall be reported by phone to the HER Customer Service Centre. When
the local access network is provided by HER, either through "Integrated" or
"One-Stop Shop" service, note that local access providers must not be contacted
directly. This to ensure a single point (the HER CSC) controls all activities.
Phone: 32-2-658-5252
Toll free from NL: 060-22-93-09
Toll free from BE: 0800-966-88
Toll free from UK: 0800-96-91-91
Fax: 32-2-658-5105
All faults detected by HER shall be reported to a single CUSTOMER point of
contact being:
Network Control Centre (NCC)
COLT Telecommunications
Bishopsgate Court
Norton Folgate
London E1 6DQ
United Kingdom
Tel. (UK freephone) - 0800 390 151
Tel. (Other) - 44/171 390 39 50
Fax. 44/171 390 13.
PAGE 20 OF 25
<PAGE> 21
FRAMEWORK AGREEMENT - FINAL VERSION
The fault management procedure will be discussed with the customer prior to
service activation and may be subject to fine tuning, depending also on the
specific technical network management capabilities of the CUSTOMER and Access
Networks.
4.2 Fault Reporting Procedure/Information
4.2.1 HER to CUSTOMER
HER will phone CUSTOMER within 15 minutes of problem detection and
provide:
o ID's of affected paths
o start time of problem
o nature of problem (degraded/down)
o HER trouble-ticket reference number
o estimated time to repair (if problem is still not solved)
4.2.2 CUSTOMER to HER
CUSTOMER will contact HER CSC; for expediency purposes, phone contact
is preferable. CUSTOMER should provide the following details:
o contact details
o CUSTOMER trouble-ticket reference
o nature of problem (degraded/down)
o ID's of affected paths
o start time of problem
o can service be taken down for testing?
HER will immediately log the report in a trouble-ticket, provide the
trouble-ticket reference number, and begin fault localisation. HER
will contact CUSTOMER within 15 minutes with a problem description,
and an estimated time to repair (if problem is still not solved).
4.3 Fault Repair
Fault repair will be done using the non-service degrading tests to diagnose and
correct the problem; service degrading tests will be done after consent from
CUSTOMER. These may include:
o service interruption
o intrusive tests to CUSTOMER equipment
HER will update CUSTOMER every 30 mins. or as otherwise agreed until problem is
repaired.
4.4 CUSTOMER Site Access for fault management
In case the demarcation point of the service (as specified in the Service
Contract and/or the Customer Design) is within the customer premises, the
customer must provide 24-hour access to its premises to HER and/or Local Access
Provider personnel in order to perform tests. They will follow the security
procedures specified by the Customer before service activation. HER will
provide the Customer with identification details of the person(s) arriving, and
tests to be performed.
PAGE 21 OF 25
<PAGE> 22
FRAMEWORK AGREEMENT - FINAL VERSION
4.5 Fault Clearance Procedure
After service is repaired, HER will monitor for 10 mins. If service is stable,
HER will report fault clearance to CUSTOMER within 5 minutes. Upon CUSTOMER
agreement, the trouble-ticket will be cleared, and HER will provide CUSTOMER
with a written Fault Clearance Notification within 24 hours (see Appendix 2).
This will contain:
o fault ticket number
o time of fault clearance
o cause of the fault
o agreed outage duration
o agreed performance degradation
o corrective action taken
Fault clearance details are included in the monthly performance report, and are
used to calculate the service availability. If the service is reported as
being degraded, and HER and CUSTOMER agreed to take the service down for
testing, the duration of the outage for testing shall not count as downtime in
the monthly availability calculation, unless otherwise agreed by HER.
4.6 Escalation
4.6.1 CUSTOMER Escalation
If the problem is not being addressed in a satisfactory manner, an escalation
procedure with 4 contact levels is available for the customers. The sequence
should be the one specified in the following table; the timing is left to the
Customer discretion; the Customer should however take into consideration the
timing of the HER internal escalation procedure as described in 4.6.2.
Out of office hours, the Customer may request escalation through the CSC.
<TABLE>
<CAPTION>
==============================================================================
CONTACT CONTACT FUNCTION TEL. NUMBER FAX NUMBER TEL. NO. AFTER
LEVEL & NAME(S) HOURS
- --------- ------------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
1st Level Shift Leader 32-2-658-5252 32-2-658-5107 32-2-658-5252
- --------- ------------------- ------------- ------------- -------------
2nd Level Bruno Mahieux 32-2-658-5219 32-2-658-5107 32-2-658-5252
CSC Manager
- --------- ------------------- ------------- ------------- -------------
3rd Level John Shearing 32-2-658-5260 32-2-658-5107 32-2-658-5252
Operations Director
- --------- ------------------- ------------- ------------- -------------
4th Level Jan Loeber 32-2-658-5205 32-2-658-5108 32-2-658-5252
Managing Director
==============================================================================
</TABLE>
4.6.2 HER internal
The following escalation/awareness sequence will be used by HER as governed by
duration of CUSTOMER service interruption.
PAGE 22 OF 25
<PAGE> 23
FRAMEWORK AGREEMENT - FINAL VERSION
<TABLE>
<CAPTION>
====================================================
CONTACT CONTACT FUNCTION TIME SINCE
LEVEL FAULT LOGGED
--------- ------------------- ------------
<S> <C> <C>
1st Level Shift Leader Immediate
--------- ------------------- ------------
2nd Level NOC/CSC Manager 2 hrs.
--------- ------------------- ------------
3rd Level Operations Director 4 hrs.
--------- ------------------- ------------
4th Level Managing Director 12 hrs.
====================================================
</TABLE>
5. PLANNED WORKS NOTIFICATION PROCEDURE
HER and Access Network providers will from time to time undertake scheduled
service-affecting works. HER will inform CUSTOMER by fax containing the
proposed time and date, duration, and description of any such works. If the
proposed time and date are not acceptable, CUSTOMER must reply within 1 working
day with a preferred alternative. If agreement cannot be reached, HER will
decide the time and date at its discretion, but with the objective to minimise
CUSTOMER inconvenience. CUSTOMER can choose to provide HER with preferred
downtime windows within which HER will use reasonable endeavours to schedule
service-affecting planned works (see Appendix 2).
Planned works scheduled with less than 15 days notice are considered as
unavailable time unless otherwise agreed by CUSTOMER, and are included in the
monthly service availability calculations. Planned works that exceed scheduled
time are (insofar as the excess time is concerned) also included in the monthly
service availability calculations.
CUSTOMER contact for planned works is:
Network Control Centre (NCC)
COLT Telecommunications
Bishopsgate Court
Norton Folgate
London E1 6DQ
United Kingdom
Tel. (UK freephone) - 0800 390 151
Tel. (Other) - 44/171 390 39 50
Fax. 44/171 390 30 13.
6. REPORTING
This section details which measurable items will be reported in the monthly
"Service Report." The individual items and their definitions are listed
below. And example is provided in Appendix 3.
6.1 Service Performance
6.1.1 Service Availability
6.1.2 Time To Repair (per event)
PAGE 23 OF 25
<PAGE> 24
FRAMEWORK AGREEMENT - FINAL VERSION
HER will also provide CUSTOMER from time to time with historical data on
time to repair. At the date of signing this Agreement the mean time to
repair a network fault (equipment failure or fibre cut) is 4 hours. Such
network faults should not be service affecting (unless no other path is
available), but HER offers no guarantees in this regard other than set out
in Schedule I.
6.2 Service Provisioning
6.2.1 Actual Service Delivery Date
The Actual Service Delivery Date is defined as after successful service
acceptance test by HER and initial 'handover' to the customer.
6.3 Planned works notification
Notice provided (actual days of notice provided in each case)
Duration (actual duration of planned works versus expected duration)
HER will report the notice provided per instance of planned works, and whether
the expected duration was exceeded. The targets for the provided notice is
specified in chapter 5.
6.4 Performance Reporting Procedure
Performance reports containing all measures in this section, including detailed
description of any faults, will be provided on a monthly basis to CUSTOMER
contacts as specified by CUSTOMER.
APPENDICES:
1. BIS Test Results
2. Planned Works Notification
3. Service Report
PAGE 24 OF 25
<PAGE> 25
[LOGO]
HERMES EUROPE RAILTEL SERVICES REPORT
Terhulpsesteenweg 6A
1560, Hoelaart, Belgium CUSTOMER
- --------------------------------------------------------------------------------
REPORTING MONTH MONTH/'97
1. SERVICE INFORMATION
1.1. REFERENCES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Circuit
Service Type of Demarcation Local Circuit Capacity Demarcation Local Capacity and Delivery
Order service HER Circuit ID Point A Access A ld and interface/A Point B Access B ld interface/B Date
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1.2. HER AND CUSTOMER LOCATIONS
<TABLE>
<CAPTION>
- ---------------------------------------------------
Company Site Code Address City
- ---------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------
- ---------------------------------------------------
- ---------------------------------------------------
- ---------------------------------------------------
- ---------------------------------------------------
</TABLE>
<PAGE> 26
[LOGO]
HERMES EUROPE RAILTEL SERVICES REPORT
Terhulpsesteenweg 6A
1560, Hoelaart, Belgium CUSTOMER
- --------------------------------------------------------------------------------
2. SERVICE LEVEL AGREEMENT PARAMETERS
2.1. END TO END AVAILABILITY
<TABLE>
<CAPTION>
- -----------------------------------------------------
End to End Availability
Service -----------------------
Order HER Circuit ID July '97 YTD
- -----------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------
- -----------------------------------------------------
</TABLE>
Availability is rounded to the 2nd decimal digit.
2.2. SERVICE DELIVERY PERFORMANCE: MILESTONES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Service Order Customer
Service HER Receipt Requested HER Commitment HER Committed Actual Delivery
Order HER Circuit ID Date Date Date Delivery Date Date Billing Start Date
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
3.
<PAGE> 27
[LOGO]
HERMES EUROPE RAILTEL SERVICES REPORT
Terhulpsesteenweg 6A
1560, Hoelaart, Belgium CUSTOMER
- --------------------------------------------------------------------------------
TICKET REPORTING
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Cust HER End to End
Ticket ticket HER Problem Date/Time Date/Time Unavailable Unavailable
nr nr Circuit ID Description Occurred Solved Time(1) Time(2) Cause
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) HER Unavailable time HER BackBone
(2) End-to-end Unavailable time Local Access A + HER BackBone Local Access b
HER Backbone fibre cut events
<TABLE>
<CAPTION>
- -----------------------------------------
Number of Within
HER Circuit ID events target (8b)
- -----------------------------------------
<S> <C> <C>
- -----------------------------------------
- -----------------------------------------
</TABLE>
<PAGE> 28
[LOGO]
HERMES EUROPE RAILTEL SERVICES REPORT
Terhulpsesteenweg 6A
1560, Hoelaart, Belgium CUSTOMER
- --------------------------------------------------------------------------------
4. PLANNED WORKS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
Performed Planned Works reported month
- ----------------------------------------------------------------
Expected Actual
HER Planned Works Downtime Downtime
Reference HER Circuit id (hh:mm) (hh:mm)
- ----------------------------------------------------------------
<S> <C> <C> <C>
- ----------------------------------------------------------------
- ----------------------------------------------------------------
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
Forthcoming Planned Works (Reminder)
- ----------------------------------------------------------------
Expected Expected
HER Planned Works Date/Time Downtime
Reference HER Circuit id (UTC) (hh:mm)
- ----------------------------------------------------------------
<S> <C> <C> <C>
- ----------------------------------------------------------------
- ----------------------------------------------------------------
- ----------------------------------------------------------------
</TABLE>
<PAGE> 29
FRAMEWORK AGREEMENT - FINAL VERSION CONFIDENTIAL
SCHEDULE 3
RING SERVICE CONTRACT
(SEE ATTACHED)
PAGE 25 OF 25
<PAGE> 30
CONFIDENTIAL TREATMENT
[HERMES EUROPE RAILTEL LOGO] SERVICE ORDER FORM
- --------------------------------------------------------------------------------
Service Order ID COL01
------
1. SERVICE TYPE
RING SERVICE SERVICE LEVEL
Integrated [X] Premium [ ]
One-Stop Shop [ ] Standard [ ]
2. SERVICE CONFIGURATION
<TABLE>
<CAPTION>
Bandwidth 'A' end configuration 'B' end configuration Framing
--------- --------------------- --------------------- -------
<S> <C> <C> <C>
2 [ ] Interface & Connector Interface & Connector Framed [ ]
--------------------- ----------------------
34 [ ] STM-1 - Electrical STM-1 - Electrical Unframed [X]
--------------------- ----------------------
45 [ ]
140 [X}
</TABLE>
Details of the Service Levels and Service type are documented in the "HER
Services catalogue". Additional details are annexed to this Service Order as
"Service Design".
3. SERVICE DELIVERY
<TABLE>
<S> <C> <C>
Requested Service Delivery Date 15/11/97
----------
Committed Service Delivery Date (to be filled by HER)
----------
</TABLE>
<TABLE>
<CAPTION>
Termination details 'A' end Termination details 'B' end
- ----------------------------- ----------------------------
<S> <C> <C>
COLT DDF Pt. of demarcation NTU - HER
------------------------------
COLT Telecom Address COLT Telecommunications France
- ----------------------------- ------------------------------
City Forum 24 rue de chazelles
- ----------------------------- ------------------------------
250 City Road
- ----------------------------- ------------------------------
Floor & room number 2nd basement
- ----------------------------- ------------------------------
London Postcode & City 75015 Paris
- ----------------------------- ------------------------------
United Kingdom Country France
- ----------------------------- ------------------------------
Des Cample Contact Person Sylvain Lambert
- ----------------------------- ------------------------------
+44 171 390 36 34 Phone number +33 1 44 29 55 96
- ----------------------------- ------------------------------
+44 171 390 36 34 Fax number +33 1 44 29 56 66
- ----------------------------- ------------------------------
[email protected] E-mail
- ----------------------------- ------------------------------
</TABLE>
4. PAYMENT TERMS
<TABLE>
<CAPTION>
Non-Recurring Charge Recurring Charge Billing period
- -------------------------------- -------------------------------- --------------------------------
<S> <C> <C>
## MATERIAL OMITTED AND ## MATERIAL OMITTED AND ## MATERIAL OMITTED AND
SEPARATELY FILED UNDER A REQUEST SEPARATELY FILED UNDER A REQUEST SEPARATELY FILED UNDER A REQUEST
FOR CONFIDENTIAL TREATMENT FOR CONFIDENTIAL TREATMENT FOR CONFIDENTIAL TREATMENT
- -------------------------------- -------------------------------- --------------------------------
<CAPTION>
Contract Term Currency VAT ra
- -------------------------------- -------- ------
<S> <C> <C>
## MATERIAL OMITTED AND XEU
SEPARATELY FILED UNDER A REQUEST
FOR CONFIDENTIAL TREATMENT
- -------------------------------- ------------------------------------------------------------------
</TABLE>
The charges quoted do not include VAT.
<PAGE> 31
[HERMES EUROPE RAITEL LOGO] SERVICE ORDER FORM
- -------------------------------------------------------------------------------
Service Order ID COL01
--------------
<TABLE>
<CAPTION>
5. CUSTOMER CONTACTS AND INFORMATION
Commercial Billing
---------- -------
<S> <C> <C>
COLT Telecommunications Company name COLT Telecommunications
- ----------------------------------- ------------------------------
Bishopsgate Court Address Bishopsgate Court
- ----------------------------------- ------------------------------
4 Norton Folgate 4 Norton Folgate
- ----------------------------------- ------------------------------
- ----------------------------------- ------------------------------
London E1 6DQ Postcode & City London E1 6DQ
- ----------------------------------- ------------------------------
United Kingdom Country United Kingdom
- ----------------------------------- ------------------------------
Hugh Wilson Contact Person
- ----------------------------------- ------------------------------
+44 171 390 39 00 Phone number
- ----------------------------------- ------------------------------
+44 171 390 39 01 Fax number
- ----------------------------------- ------------------------------
E-mail
- ----------------------------------- ------------------------------
VAT number
------------------------------
6. HER CONTACTS
Commercial Service Delivery
---------- ----------------
Arthur de Vries Contact Person David Halcro
- ----------------------------------- ------------------------------
+32 2 658 51 33 Phone number +44 171 531 60 74
- ----------------------------------- ------------------------------
+32 2 658 51 11 Fax number +44 171 531 60 73
- ----------------------------------- ------------------------------
+32 75 46 85 04 GSM number +32 75 97 43 56
- ----------------------------------- ------------------------------
[email protected] E-mail [email protected]
- ----------------------------------- ------------------------------
</TABLE>
7. SPECIAL CONDITIONS
This service contract and service contracts COL02 and COL03 form part of
the same agreement. A breach of any of these service contracts by a party
shall allow the other party to terminate all of these service contracts.
Payment under the service contract will vary upon implementation of
service contracts COL02 and COL03 respectively.
No credit under schedule 1 of the Framework Agreement (see below) is
applicable until the implementation of the full ring service i.e. delivery
under service contract COL03.
Up to 28 days prior to the implementation of this service contract, COLT
may propose an alternative ring configuration by written notice (provided
the minimum number of connection points is 3). HER will consider the
renewed configuration in good faith and notify COLT within 14 days of the
adjustment in timescales and pricing required to fulfil this request. If
COLT agrees to HER's response it shall confirm to HER within 7 days and
the Service Contract will be amended accordingly.
<PAGE> 32
[LOGO]
HERMES EUROPE RAILTEL SERVICE ORDER FORM
- --------------------------------------------------------------------------------
SERVICE ORDER ID COL01
---------
8. CUSTOMER DECLARATION & SIGNATURE
No contractual commitment under this Service Order will arise until the
Customer has provided written acceptance of the Committed Service Delivery
Date by signing below. The Customer accepts that the terms and conditions
of the Framework Agreement for the Provision of Transmission Services dated
24-11-97 between COLT Telecom Group plc and HER apply to this Service
Order.
<TABLE>
<S> <C>
Signed by a duly authorised representative Signed by a duly authorised representative
of the Customer of HER
Signature /s/ PAUL W. CHISHOLM Signature /s/ PETER MAGNUS
-------------------------------- --------------------------------
Name PAUL W. CHISHOLM Name Peter Magnus
-------------------------------- --------------------------------
Date 24-11-97 Date 24-11-97
-------------------------------- --------------------------------
</TABLE>
<PAGE> 33
CONFIDENTIAL TREATMENT
[HERMES EUROPE RAILTEL LOGO] SERVICE ORDER FORM
- --------------------------------------------------------------------------------
Service Order ID COL02
------
1. SERVICE TYPE
RING SERVICE SERVICE LEVEL
Integrated [X] Premium [ ]
One-Stop Shop [ ] Standard [ ]
2. SERVICE CONFIGURATION
<TABLE>
<CAPTION>
Bandwidth 'A' end configuration 'B' end configuration Framing
--------- --------------------- --------------------- -------
<S> <C> <C> <C>
2 [ ] Interface & Connector Interface & Connnector Framed [ ]
--------------------- ----------------------
34 [ ] STM-1 - Electrical STM-1 - Electrical Unframed [X]
--------------------- ----------------------
45 [ ]
140 [X}
</TABLE>
Details of the Service Levels and Service type are documented in the "HER
Services catalogue". Additional details are annexed to this Service Order as
"Service Design".
3. SERVICE DELIVERY
<TABLE>
<S> <C> <C>
Requested Service Delivery Date 1/3/98
----------
Committed Service Delivery Date (to be filled by HER)
----------
</TABLE>
<TABLE>
<CAPTION>
Termination details 'A' end Termination details 'B' end
- ----------------------------- ----------------------------
<S> <C> <C>
Pt. of demarcation NTU - HER
- ----------------------------- ------------------------------
Full details will be Address COLT Telecommunications France
provided before
- ----------------------------- ------------------------------
the implementation 25 rue de Chazelles
- ----------------------------- ------------------------------
- ----------------------------- ------------------------------
Floor & room number 2nd basement
- ----------------------------- ------------------------------
Frankfurt Postcode & City 75017 Paris
- ----------------------------- ------------------------------
Germany Country France
- ----------------------------- ------------------------------
Contact Person Sylvain Lambert
- ----------------------------- ------------------------------
Phone number +33 1 44 29 55 96
- ----------------------------- ------------------------------
Fax number +33 1 44 29 56 66
- ----------------------------- ------------------------------
E-mail
- ----------------------------- ------------------------------
</TABLE>
4. PAYMENT TERMS
<TABLE>
<CAPTION>
Non-Recurring Charge Recurring Charge Billing period
- -------------------------------- -------------------------------- --------------------------------
<S> <C> <C>
## MATERIAL OMITTED AND ## MATERIAL OMITTED AND ## MATERIAL OMITTED AND
SEPARATELY FILED UNDER A REQUEST SEPARATELY FILED UNDER A REQUEST SEPARATELY FILED UNDER A REQUEST
FOR CONFIDENTIAL TREATMENT FOR CONFIDENTIAL TREATMENT FOR CONFIDENTIAL TREATMENT
- -------------------------------------------------------------------------------------------------------
<CAPTION>
Contract Term Currency VAT [ILLEGIBLE]
- -------------------------------- -------- ------
<S> <C> <C>
## MATERIAL OMITTED AND XEU
SEPARATELY FILED UNDER A REQUEST
FOR CONFIDENTIAL TREATMENT
- -------------------------------------------------------------------------------------------------------
</TABLE>
The charges quoted do not include VAT.
*The recurring charges incorporate the recurring charges under service contract
COL01.
<PAGE> 34
[HERMES EUROPE RAITEL LOGO] SERVICE ORDER FORM
- -------------------------------------------------------------------------------
Service Order ID COL02
--------------
5. CUSTOMER CONTACTS AND INFORMATION
<TABLE>
<CAPTION>
Commercial Billing
---------- -------
<S> <C> <C>
COLT Telecommunications Company name COLT Telecommunications
- ----------------------------------- ------------------------------
Bishopsgate Court Address Bishopsgate Court
- ----------------------------------- ------------------------------
4 Norton Folgate 4 Norton Folgate
- ----------------------------------- ------------------------------
- ----------------------------------- ------------------------------
London E1 6DQ Postcode & City London E1 6DQ
- ----------------------------------- ------------------------------
United Kingdom Country United Kingdom
- ----------------------------------- ------------------------------
Hugh Wilson Contact Person
- ----------------------------------- ------------------------------
+44 171 390 39 00 Phone number
- ----------------------------------- ------------------------------
+44 171 390 39 01 Fax number
- ----------------------------------- ------------------------------
E-mail
- ----------------------------------- ------------------------------
VAT number
------------------------------
6. HER CONTACTS
Commercial Service Delivery
---------- ----------------
Arthur de Vries Contact Person David Halcro
- ----------------------------------- ------------------------------
+32 2 658 51 33 Phone number +44 171 531 60 74
- ----------------------------------- ------------------------------
+32 2 658 51 11 Fax number +44 171 531 60 73
- ----------------------------------- ------------------------------
+32 75 46 85 04 GSM number +32 75 97 43 56
- ----------------------------------- ------------------------------
[email protected] E-mail [email protected]
- ----------------------------------- ------------------------------
</TABLE>
7. SPECIAL CONDITIONS
This service contract and service contracts COL01 and COL03 form part of
the same agreement. A breach of any of these service contracts by a party
shall allow the other party to terminate all of these service contracts.
Payment under the service contract will vary upon implementation of
service contracts COL01 and COL03 respectively.
No credit under schedule 1 of the Framework Agreement (see below) is
applicable until the implementation of the full ring service i.e. delivery
under service contract COL03.
Up to 28 days prior to the implementation of this service contract, COLT
may propose an alternative ring configuration by written notice (provided
the minimum number of connection points is 3). HER will consider the
renewed configuration in good faith and notify COLT within 14 days of the
adjustment in timescales and pricing required to fulfil this request. If
COLT agrees to HER's response it shall confirm to HER within 7 days and
the Service Contract will be amended accordingly.
<PAGE> 35
[LOGO]
HERMES EUROPE RAILTEL SERVICE ORDER FORM
- --------------------------------------------------------------------------------
SERVICE ORDER ID COL02
---------
8. CUSTOMER DECLARATION & SIGNATURE
No contractual commitment under this Service Order will arise until the
Customer has provided written acceptance of the Committed Service Delivery
Date by signing below. The Customer accepts that the terms and conditions
of the Framework Agreement for the Provision of Transmission Services dated
24-11-97 between COLT Telecom Group plc and HER apply to this Service
Order.
<TABLE>
<S> <C>
Signed by a duly authorised representative Signed by a duly authorised representative
of the Customer of HER
Signature /s/ PAUL W. CHISHOLM Signature /s/ PETER MAGNUS
-------------------------------- --------------------------------
Name PAUL W. CHISHOLM Name Peter Magnus
-------------------------------- --------------------------------
Date 24-11-97 Date 24-11-97
-------------------------------- --------------------------------
</TABLE>
<PAGE> 36
CONFIDENTIAL TREATMENT
[HERMES EUROPE RAILTEL LOGO] SERVICE ORDER FORM
- --------------------------------------------------------------------------------
Service Order ID COL03
------
1. SERVICE TYPE
RING SERVICE SERVICE LEVEL
Integrated [X] Premium [ ]
One-Stop Shop [ ] Standard [ ]
2. SERVICE CONFIGURATION
<TABLE>
<CAPTION>
Bandwidth 'A' end configuration 'B' end configuration Framing
--------- --------------------- --------------------- -------
<S> <C> <C> <C>
2 [ ] Interface & Connector Interface & Connnector Framed [ ]
--------------------- ----------------------
34 [ ] STM-1 - Electrical STM-1 - Electrical Unframed [X]
--------------------- ----------------------
45 [ ]
140 [X}
</TABLE>
Details of the Service Levels and Service type are documented in the "HER
Services catalogue". Additional details are annexed to this Service Order as
"Service Design".
3. SERVICE DELIVERY
<TABLE>
<S> <C> <C>
Requested Service Delivery Date 1/6/98
----------
Committed Service Delivery Date (to be filled by HER)
----------
</TABLE>
<TABLE>
<CAPTION>
Termination details 'A' end Termination details 'B' end
- ----------------------------- ----------------------------
<S> <C> <C>
Pt. of demarcation COLT DDF
------------------------------
Full details will be Address COLT Telecom
provided before
- ----------------------------- ------------------------------
the implementation City Forum
- ----------------------------- ------------------------------
250 City Road
- ----------------------------- ------------------------------
Floor & room number
- ----------------------------- ------------------------------
Frankfurt Postcode & City London
- ----------------------------- ------------------------------
Germany Country United Kingdom
- ----------------------------- ------------------------------
Contact Person Des Cample
- ----------------------------- ------------------------------
Phone number +44 171 390 36 34
- ----------------------------- ------------------------------
Fax number +44 171 390 36 34
- ----------------------------- ------------------------------
E-mail [email protected]
- ----------------------------- ------------------------------
</TABLE>
4. PAYMENT TERMS
<TABLE>
<CAPTION>
Non-Recurring Charge Recurring Charge Billing period
- -------------------------------- -------------------------------- --------------------------------
<S> <C> <C>
## MATERIAL OMITTED AND ## MATERIAL OMITTED AND ## MATERIAL OMITTED AND
SEPARATELY FILED UNDER A REQUEST SEPARATELY FILED UNDER A REQUEST SEPARATELY FILED UNDER A REQUEST
FOR CONFIDENTIAL TREATMENT FOR CONFIDENTIAL TREATMENT FOR CONFIDENTIAL TREATMENT
- -------------------------------------------------------------------------------------------------------
<CAPTION>
Contract Term Currency VAT ra
- -------------------------------- -------- ------
<S> <C> <C>
## MATERIAL OMITTED AND XEU
SEPARATELY FILED UNDER A REQUEST
FOR CONFIDENTIAL TREATMENT
- -------------------------------------------------------------------------------------------------------
</TABLE>
The charges quoted do not include VAT.
*The recurring charges incorporate the recurring charges under service contracts
COL01 and COL02
<PAGE> 37
[LOGO]
HERMES EUROPE RAITEL SERVICE ORDER FORM
- -------------------------------------------------------------------------------
Service Order ID COL03
--------------
5. CUSTOMER CONTACTS AND INFORMATION
<TABLE>
<CAPTION>
Commercial Billing
---------- -------
<S> <C> <C>
COLT Telecommunications Company name COLT Telecommunications
- ----------------------------------- ------------------------------
Bishopsgate Court Address Bishopsgate Court
- ----------------------------------- ------------------------------
4 Norton Folgate 4 Norton Folgate
- ----------------------------------- ------------------------------
- ----------------------------------- ------------------------------
London E1 6DQ Postcode & City London E1 6DQ
- ----------------------------------- ------------------------------
United Kingdom Country United Kingdom
- ----------------------------------- ------------------------------
Hugh Wilson Contact Person
- ----------------------------------- ------------------------------
+44 171 390 39 00 Phone number
- ----------------------------------- ------------------------------
+44 171 390 39 01 Fax number
- ----------------------------------- ------------------------------
E-mail
- ----------------------------------- ------------------------------
VAT number
------------------------------
</TABLE>
6. HER CONTACTS
<TABLE>
<CAPTION>
Commercial Service Delivery
---------- ----------------
<S> <C> <C>
Arthur de Vries Contact Person David Halcro
- ----------------------------------- ------------------------------
+32 2 658 51 33 Phone number +44 171 531 60 74
- ----------------------------------- ------------------------------
+32 2 658 51 11 Fax number +44 171 531 60 73
- ----------------------------------- ------------------------------
+32 75 46 85 04 GSM number +32 75 97 43 56
- ----------------------------------- ------------------------------
[email protected] E-mail [email protected]
- ----------------------------------- ------------------------------
</TABLE>
7. SPECIAL CONDITIONS
This service contract and service contracts COL01 and COL02 form part of
the same agreement. A breach of any of these service contracts by a party
shall allow the other party to terminate all of these service contracts.
Payment under the service contract will vary upon implementation of
service contracts COL01 and COL02 respectively.
No credit under schedule 1 of the Framework Agreement (see below) are
applicable until the implementation of the full ring service.
Up to 28 days prior the implementation of this service contract, COLT may
propose an alternative ring configuration by written notice (provided the
minimum number of connection points is 3). HER will consider the renewed
configuration in good faith and notify COLT within 14 days of the
adjustment in timescales and pricing required to fulfil this request. If
COLT agrees to HER's response it shall confirm to HER within 7 days and
the Service Contract will be amended accordingly.
<PAGE> 38
[LOGO]
HERMES EUROPE RAILTEL SERVICE ORDER FORM
- --------------------------------------------------------------------------------
SERVICE ORDER ID COL03
---------
8. CUSTOMER DECLARATION & SIGNATURE
No contractual commitment under this Service Order will arise until the
Customer has provided written acceptance of the Committed Service Delivery
Date by signing below. The Customer accepts that the terms and conditions
of the Framework Agreement for the Provision of Transmission Services dated
24-11-97 between COLT Telecom Group plc and HER apply to this Service
Order.
<TABLE>
<S> <C>
Signed by a duly authorised representative Signed by a duly authorised representative
of the Customer of HER
Signature /s/ PAUL W. CHISHOLM Signature /s/ PETER MAGNUS
-------------------------------- --------------------------------
Name PAUL W. CHISHOLM Name Peter Magnus
-------------------------------- --------------------------------
Date 24-11-97 Date 24-11-97
-------------------------------- --------------------------------
</TABLE>
<PAGE> 39
CONFIDENTIAL TREATMENT
Schedule 3-1: SERVICE DESIGN FOR COLT RING SERVICE
LONDON-PARIS-FRANKFURT VERSION 1.0
- ---------------------------------------------------------------------------
1. TOPOLOGY
[MAP]
##MATERIAL OMITTED AND SEPARATELY FILED UNDER A REQUEST
FOR CONFIDENTIAL TREATMENT ##
2. CABLE ROUTING
Following characteristics are valid for the cable routing:
##MATERIAL OMITTED AND SEPARATELY FILED UNDER A REQUEST
FOR CONFIDENTIAL TREATMENT ##
Routes to Frankfurt: Complete cable diversity and diverse building
entry.
-1-
Limited distribution
<PAGE> 40
CONFIDENTIAL TREATMENT
Schedule 3-1: SERVICE DESIGN FOR COLT RING SERVICE
LONDON-PARIS-FRANKFURT VERSION 1.0
- ---------------------------------------------------------------------------
3. ARCHITECTURE
3.1 PHASE 1: STM-1/VC4 LONDON - PARIS
[MAP]
##MATERIAL OMITTED AND SEPARATELY FILED UNDER A REQUEST
FOR CONFIDENTIAL TREATMENT ##
3.2 PHASE IB AND 2: ADD STM-1/VC4 FRANKFURT - PARIS
[MAP]
##MATERIAL OMITTED AND SEPARATELY FILED UNDER A REQUEST
FOR CONFIDENTIAL TREATMENT ##
-2-
Limited distribution
<PAGE> 41
CONFIDENTIAL TREATMENT
SCHEDULE 3-1: SERVICE DESIGN FOR COLT RING SERVICE LONDON-PARIS-FRANKFURT
VERSION 1.0
- --------------------------------------------------------------------------------
3.3 PHASE 3: ADD STM-1/VC4 FRANKFURT-LONDON
>CREATE "RING" SERVICE LON-PAR-FRA
[MAP]
##MATERIAL OMITTED AND SEPARATELY FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT##
4. INTERFACES
All interfaces will be G.703 STM-1 electrical.
5. EPS
The HER ADMs will have 1:4 EPS protection of the STM-1 electrical
tributary cards.
6. DEMARCATION POINTS
The demarcation points (including connectors), are the commonly
agreed demarcation points in the HER POPs:
LON2: COLT DDF
PAR2: HER DDF
FRA2: Tbd
7. REMARKS
A more detailed design will be provided during the implementation
phase.
Optionally a full diversity could be created by using the two HER POPs
I each city. In this case care should be given to the choice of the
initial POPs to guarantee end-to-end diversity without having to
reconfigure the circuits.
-3-
--------------------------
Limited distribution
--------------------------
<PAGE> 42
SCHEDULE 3-1: SERVICE DESIGN FOR COLT RING SERVICE LONDON-PARIS-FRANKFURT
VERSION 1.0
- --------------------------------------------------------------------------------
-4-
---------------------------
Limited distribution
---------------------------
<PAGE> 1
EXHIBIT 10.17
Dated 3 April, 1998
(1) HERMES EUROPE RAILTEL (IRELAND) LIMITED
(2) AT&T-UNISOURCE COMMUNICATIONS
SERVICES v.o.f.
TRANSMISSION CAPACITY AGREEMENT
Final Version
DC200107
<PAGE> 2
CONTENTS
--------
<TABLE>
<S> <C> <C>
1. Scope and Term of the Agreement...........................................1
2. Transmission Capacity.....................................................2
3. Provision of Transmission Capacity........................................2
4. Obligations...............................................................2
5. Charges and Billing.......................................................3
6. Service Quality...........................................................4
7. Liability.................................................................5
8. Force Majeure.............................................................5
9. Suspension and Early Termination..........................................6
10. Information and Confidentiality...........................................7
11. Intellectual Property Rights..............................................8
12. Assignment................................................................9
13. Definition and Interpretation.............................................9
14. Entire Contract..........................................................10
15. Variation................................................................10
16. No Waiver................................................................10
17. No Partnership...........................................................10
18. Survival.................................................................10
19. Severability.............................................................10
20. Notices..................................................................11
21. Dispute Resolution and Governing Law.....................................12
SCHEDULE 1: SERVICE LEVEL GUARANTEES..........................................15
1. Delivery.................................................................15
2. Availability Guarantees..................................................16
SCHEDULE 2: SERVICE MANAGEMENT PROCESSES......................................17
SCHEDULE 3: CAPACITY ORDER FORMS (SAMPLE).....................................18
SCHEDULE 4: PRICING...........................................................19
PART I: INITIAL COMMITMENT....................................................19
PART II: PRICE REVIEW AND FURTHER ORDERING....................................20
</TABLE>
<PAGE> 3
CONFIDENTIAL TREATMENT
TRANSMISSION CAPACITY AGREEMENT
This Agreement made this 3rd day of April 1998
BETWEEN:
HERMES EUROPE RAILTEL (IRELAND) LIMITED, a company incorporated with limited
liability under the laws of the Republic of Ireland with company number 276431
and whose registered office is 2 Harbourmaster Place, Custom House Dock,
Dublin 1, Ireland,
(hereinafter referred to as "HER");
and
AT&T-UNISOURCE COMMUNICATIONS SERVICES V.O.F., a general partnership,
incorporated under the laws of the Netherlands and having its registered office
at Spicalaan 1-59, 2123 JG Hoofddorp, the Netherlands,
(hereinafter referred to as "AT&T-Unisource"),
WHEREAS
A. HER leases Transmission Capacity to telecommunications operators and other
service providers as a "carriers' carrier";
B. AT&T-Unisource is a telecommunications operator desiring to procure such
capacity from HER;
NOW THEREFORE the parties hereto HAVE AGREED AS FOLLOWS:
1. SCOPE AND TERM OF THE AGREEMENT
1.1 HER agrees to lease Transmission Capacity to AT&T-Unisource, subject to
the terms and conditions set out below.
1.2 This Agreement shall enter into effect on execution by the Parties and
shall continue for a term of ##MATERIAL OMITTED AND SEPARATELY FILED UNDER
A REQUEST FOR CONFIDENTIAL TREATMENT## except to the extent that it is
extended in accordance with Clause 1.3 for specific Capacity Orders, and
provided that it has not been terminated earlier in accordance with
Clause 9.
1.3 Transmission Capacity shall be provided pursuant to Capacity Orders agreed
between the Parties. Such Capacity Orders shall state the initial term for
which any Transmission Capacity shall be provided. On expiry of such
initial term in respect of any Transmission Capacity, such Transmission
Capacity shall continue to be provided in accordance with the terms of this
Agreement until terminated by either party giving to the other, thirty (30)
days prior written notice. If the term for which any Transmission Capacity
is to be provided, extends beyond that stated in Clause 1.2, the terms and
conditions of this Agreement shall continue in effect in relation to the
provision of such Transmission Capacity until the expiry of that term.
PAGE 1 of 23
<PAGE> 4
CONFIDENTIAL TREATMENT
TRANSMISSION CAPACITY AGREEMENT
2. TRANSMISSION CAPACITY
2.1 Transmission Capacity shall be available from HER in any of the service
formats described in the Services Catalogue, as published by HER from time
to time. A copy of the current Services Catalogue is attached hereto for
reference purposes only.
2.2 Transmission Capacity shall include, if mutually agreed between the
parties, Connections provided between HER PoPs and AT&T-Unisource PoPs if
specified in the relevant Capacity Orders.
3. PROVISION OF TRANSMISSION CAPACITY
3.1 Transmission Capacity shall be ordered in accordance with the provisioning
process described in Schedule 2. Customer will purchase at lease ##MATERIAL
OMITTED AND SEPARATELY FILED UNDER A REQUEST FOR CONFIDENTIAL TREATMENT##
Transmission Capacity under this Agreement in accordance with Schedule 4
(the "Initial Commitment") unless it is entitled to prematurely terminate
this Agreement under the conditions set out in Clause 9. Capacity Order
Forms must be used in the format as attached as Schedule 3 (the "Capacity
Order Form Sample") or such other format as HER shall provide to AT&T
Unisource from time to time provided that any new format does not
materially modify the terms of this Agreement.
3.2 For additional requirements beyond those set out in Schedule 4,
AT&T-Unisource and HER shall agree the Transmission Capacity to be provided
pursuant to a Capacity Order. Except to the extent expressly agreed
otherwise in the relevant Capacity Order, such Transmission Capacity shall
be provided on the terms and conditions of this Agreement.
3.3 HER is entitled to route AT&T-Unisource traffic through facilities
provided by a third party only in any of the following cases:
3.3.1 to connect AT&T-Unisource PoPs to HER, in which case HER shall
consult AT&T-Unisource prior to finalising its choice of local
access provider, as detailed in Schedule 2; or
3.3.2 in cases of emergency to maintain the agreed Service Level
Guarantees set out in Schedule 1. In the event that the exercise
of HER's rights in this Clause 3.3.2 result in a material adverse
change to the 'customer design' of a Circuit, HER shall restore
the original design as soon as the reason for the exercise of the
right has been resolved, unless the parties agree otherwise.
3.4 Nothing in this Agreement or any Capacity Order gives AT&T-Unisource any
right to exclusive possession of any part of the Network.
4. OBLIGATIONS
4.1 AT&T-Unisource agrees:
(a) to pay the agreed Charges set out in each relevant Capacity Order in
accordance with the provisions of Clause 5;
PAGE 2 of 23
<PAGE> 5
(b) to provide HER and, its sub-contractors with access to its PoPs and
any other premises, required to enable HER to carry out its
obligations under this Agreement.
(c) to comply with all relevant local, national and supranational laws in
each jurisdiction in which HER provides Transmission Capacity to
AT&T-Unisource.
4.2 HER AGREES
(a) to provide Transmission Capacity in accordance with this Agreement and
the Schedules forming part thereof;
(b) that HER will comply with all safety and security requirements
notified to HER when accessing AT&T-Unisource PoPs or other premises
in order to fulfill its obligations hereunder;
(c) to comply with all relevant local, national and supranational laws in
each jurisdiction in which it provides, either directly or through
sub-contractors, Transmission Capacity to AT&T-Unisource.
(d) not withstanding the other provisions of this Agreement that, the HER
backbone network will be designed to be used during and after the
calendar year 2000 A.D.
(e) not withstanding the other provisions of this Agreement that, prior to
31 December 1999, HER will use best endeavours to procure that the
access networks under this Agreement will be designed to be used
during and after the calendar year 2000 A.D.
5. CHARGES AND BILLING
5.1 Charges may include both a non-recurring element and a recurring element.
The Charges for the Initial Commitment are set out in Schedule 4. Charges
for Capacity Orders made after the Initial Commitment shall be agreed and
set out in the applicable Capacity Order.
5.2 Non-recurring Charges (where applicable) are due and payable within twenty
(20) working days of the Actual Delivery Date;
5.3 Recurring Charges shall be payable monthly in advance; the first payment of
recurring Charges is due and payable on date of acceptance of the relevant
circuit(s) as set out in Schedule 2; Subsequent payments of recurring
Charges are due and payable at calendar monthly intervals, on the first day
of the relevant month. Where in any calendar month the Transmission
Capacity is to be provided for a period less than a full calendar month,
the monthly recurring charges shall be pro-rated accordingly;
5.4 Charges are exclusive of VAT and other consumption taxes, unless otherwise
stated.
5.5 All payments are to be made net of charges and in the currency specified in
the Capacity Order and are to be made to Bank of Ireland or any bank of
similar standing, specified by
PAGE 3 OF 23
<PAGE> 6
HER. Any change in the specified bank will be communicated to
AT&T-Unisource no later than ten working days prior to the due date of the
next payment.
5.6 Where any payment is due and payable on a particular date, payment shall be
credited to HER's bank account by that date. Payment shall only be deemed
to have been made on the Value Date in respect of such payment.
5.7 If AT&T-Unisource fails to pay any Charges due within seven (7) working
days of the due date for payment, HER shall, without prejudice to any other
rights or remedies it might have, be entitled to charge AT&T-Unisource
interest on all sums due at the rate of 1.5% per month. Such interest shall
be charged from the date payment becomes due until the Value Date (both
before and after judgment) and shall accrue on a daily basis.
5.8 In the event that any Charges have not been paid in full to HER within 20
working days of their due date, AT&T-Unisource shall accrue no Credits
under Clause 6.3 in any month in which such charges remain outstanding. For
the avoidance of doubt, subsequent payment of overdue Charges shall not
entitle AT&T-Unisource to Credits which would otherwise have been due to
it.
5.9 If AT&T-Unisource should terminate a Capacity Order prior to the end of the
initial term specified therein for reasons other than set out in Clause 9,
AT&T-Unisource shall pay HER in addition to any outstanding Charges, a
cancellation charge equal to twenty five per cent (25%) of the Charges
which would have been payable on that Capacity Order had it run its full
term.
5.10 HER and AT&T-Unisource shall review the Charges in accordance with the
principles set out in Schedule 4.
6. SERVICE QUALITY
6.1 Transmission Capacity shall be provided in accordance with Schedule 1 (the
"Service Level Guarantees"). Both parties shall use best endeavours to
comply with the provisions of Schedule 2.
6.2 HER may from time to time vary the technical parameters applicable to the
provision of Transmission Capacity (or any service format), whether
specified in Schedule 2 or otherwise, so long as quality of service as set
out in Schedule 1 and the charges therefor are not adversely affected.
6.3 If a Circuit fails to meet the Service Level Guarantees set out in Schedule
1, during any billing month, subject to Clause 6.4, AT&T-Unisource shall be
eligible for Credits against the Charges otherwise payable in respect of
the relevant Circuit, as set out in Schedule 1.
6.4 In accordance with Clause 6.3, AT&T-Unisource is entitled to Credits for
late delivery of Transmission Capacity, as set out in Schedule 1, provided
that, in the event that AT&T-Unisource cancels a Capacity Order under
Clause 9.7.1, no Credits shall be payable in respect of that Capacity
Order.
PAGE 4 OF 23
<PAGE> 7
CONFIDENTIAL TREATMENT
TRANSMISSION CAPACITY AGREEMENT
6.5 In no event shall the total Credits payable under Clause 6.3 in respect of
any Circuit exceed, in any given month, the monthly Charges payable in
respect of that Circuit.
6.6 HER shall issue a Credit note for any Credits to which AT&T-Unisource is
eligible within 20 working days following the month in which the Credit
arose. Except as stated in Clause 6.4, any Credits outstanding at the
expiry or earlier termination of the Term of a Capacity Order shall be
paid to AT&T-Unisource within 20 working days of demand.
6.7 The Credits provided for in this Clause shall not apply to the extent that
deviation from the Service Levels Guarantees is due to:
(a) an event of Force Majeure
(b) for reasons attributable to AT&T-Unisource, an act or omission of
AT&T-Unisource, whether or not such act or omission constitutes a
breach of this Agreement, including, in the case of failure to comply
with a delivery date, AT&T-Unisource's failure to cooperate in the
timely completion of Acceptance Tests, or AT&T-Unisource's inability to
accept service.
6.8 Except in the case of Persistent Service Failures, AT&T-Unisource's only
remedies for deviation from the service levels as set out in Schedule 1 by
HER or for failure by HER to meet a delivery date are the Credits provided
for in this Clause.
6.9 HER shall have the right from time to time to modify, extend, repair or
replace any part of the Network, provided that, after completion of the
work such modification or replacement does not materially impair the
provision of Transmission Capacity to AT&T-Unisource. The process for
carrying out service affecting works is set out in the Schedule 2.
7. LIABILITY
7.1 In the event of 'direct damages' (that is, damages other than those
excluded by Clause 7.3 below), death and personal injury HER shall not be
liable for an amount greater than ##MATERIAL OMITTED AND SEPARATELY FILED
UNDER A REQUEST FOR CONFIDENTIAL TREATMENT## per Circuit affected in
respect of any single incident or series of related incidents, subject to a
maximum of ##MATERIAL OMITTED AND SEPARATELY FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT## for all incidents in any twelve month period.
7.2 Notwithstanding Clause 7.1, HER's liability to the extent that it results
from the gross negligence or wilful misconduct of HER's managerial
personnel, shall be limited to a maximum amount of ##MATERIAL OMITTED AND
SEPARATELY FILED UNDER A REQUEST FOR CONFIDENTIAL TREATMENT## for all
incidents in any twelve month period.
7.3 Neither party shall be liable to the other for any indirect or
consequential loss or damage. For these purposes, "indirect or
consequential loss or damage" includes, but is not limited to, loss of
revenue, profit, anticipated savings, business or goodwill, loss or
corruption or destruction of data.
8. FORCE MAJEURE
PAGE 5 OF 23
<PAGE> 8
8.1 Subject to Clauses 8.2 and 8.3, neither party shall be held liable by the
other for failure in performing any of its obligations under this Agreement
or a Capacity Order is such failure is caused by or arises as a result of
an event of Force Majeure.
8.2 The affected party shall promptly notify the other party in writing of the
occurrence of an event of Force Majeure and the estimated extent and
duration of its inability to perform its obligations.
8.3 Upon the cessation of the event of Force Majeure, the affected party shall
promptly notify the other party in writing of such cessation and shall
resume performance of its obligations.
8.4 Both parties shall use reasonable endeavours to minimise the effects of an
event of Force Majeure.
9. SUSPENSION AND EARLY TERMINATION
9.1 If a party (referred to herein as the "defaulting party") commits any
material breach of this Agreement which, in the case of a breach capable of
remedy, shall not have been remedied within ten (10) days of a written
request to do so being received from the other party, then the other party
may terminate this Agreement and any relevant Capacity Orders immediately
be giving the defaulting party notice in writing to that effect.
9.2 If a party (referred to herein as the "affected party") has ceased to
perform its obligations under a Capacity Order as a result of an event of
Force Majeure for a period longer than thirty (30) days, the other party
may terminate the relevant Capacity Order immediately by giving the
affected party notice in writing to that effect.
9.3 Either party may terminate this Agreement and any Capacity Orders placed
hereunder immediately upon giving notice in writing to the other party in
the event that the other party becomes bankrupt or insolvent; has sought
protection from its creditors under any statue or legal process; has
suffered or permitted a trustee, liquidator, receiver, receiver-manager or
similar custodian to be appointed or to take possession of its property or
assets; has voluntarily or involuntarily commenced proceedings for
dissolution, liquidation or winding up; or has ceased to carry on business
in the ordinary course.
9.4 On termination of this Agreement and/or any Capacity Order under this
Clause 9, HER may require AT&T-Unisource to disconnect all or any customer
facilities from the Network. If the termination occurs as a result of an
act or omission of AT&T-Unisource, HER may carry out at AT&T-Unisource's
own expense all remedial work necessary to restore the Network and PoPs to
full working order, to remove cables and apparatus from HER lands or
premises and to make good any damage caused by so doing.
9.5 HER shall notify AT&T-Unisource if, in HER's reasonable judgement,
AT&T-Unisource is damaging or disrupting the Network and require
AT&T-Unisource to immediately rectify the situation. If AT&T-Unisource
does not immediately rectify the situation, HER reserves the right to
suspend the provision of those services affected, and/or to disconnect the
relevant AT&T-Unisource facilities from the Network. HER shall reconnect
the AT&T-Unisource facilities as soon as AT&T-Unisource has established to
HER's reasonable satisfaction that the cause or potential cause of the
damage or disruption has been rectified
PAGE 6 OF 23
<PAGE> 9
TRANSMISSION CAPACITY AGREEMENT
and the risk removed.
9.6 If either party is at any time in violation of its obligations set out in
Clauses 4.1(a), 4.1(c), and/or 4.2(c), respectively, the other party may
suspend the performance of its obligations hereunder forthwith upon
written notice to the party in violation of its obligations without
prejudice to its rights under this Agreement and any relevant Capacity
Orders, including its rights to payment. Notwithstanding any other
provision of this Agreement, neither party shall have liability towards
the other for any loss or damages the party in violation suffers as a
consequence of such suspension.
9.7 If the provision of Transmission Capacity in respect of any Circuit is:
9.7.1 delayed beyond the Committed Delivery Time excess period set
out in Schedule 1, paragraph 1,2; or
9.7.2 subject to Persistent Service Failure;
AT&T-Unisource shall have the right to terminate the relevant Capacity
Order immediately, without incurring a cancellation charge or other
penalty, by giving HER notice in writing to that effect.
10. INFORMATION AND CONFIDENTIALITY
10.1 Each party shall promptly supply to the other such information and
assistance which the other may reasonably request to enable it to perform
its obligations under this Agreement. Each party shall ensure that
information provided to the other party in accordance or in connection with
this Agreement is correct to the best of its knowledge at the time it is
provided.
10.2 Each party shall keep in confidence all Confidential Information and will
not (and will use its reasonable endeavours to ensure that its directors,
employees, officers, servants, agents, Associates, sub-contractors and
professional advisers will not) disclose such information to any third
party other than in accordance with this Agreement. Each party shall
exercise no lesser degree of care in relation to Confidential Information
than it would apply to its own confidential information.
10.3 The following disclosures shall not constitute a breach of Clause 10.2:
(a) a disclosure authorised in writing;
(b) publication of Confidential Information in accordance with a statutory
or other regulatory requirement or pursuant to an order of a court
having jurisdiction or tribunal;
(c) a disclosure made to any regulator or any expert or arbitrator
appointed in accordance with the provisions of this Agreement to the
extent that such disclosure is a legal requirement; or
(d) a disclosure made to a financial institutions, a lender of funds or a
financial advisor where such disclosure is required as part of an
arrangement for the financing or refinancing of such party; or
PAGE 7 OF 23
<PAGE> 10
TRANSMISSION CAPACITY AGREEMENT
(e) a disclosure to Associates of the party provided that any third party
which receives Confidential Information pursuant to this provision has
agreed to be bound by the restrictions contained in Clauses 10.2,
10.3 (a)-(e) and 10.4 (a)-(e) in the same manner as if it were a party
to this Agreement.
10.4 The provisions of Clause 10.2 do not apply to any Confidential Information
which:
(a) enters into the public domain other than by a breach of this
Agreement;
(b) is known to the party to which it is disclosed prior to its
disclosure;
(c) is independently generated, developed or discovered at any time by or
for the party to which it is disclosed;
(d) is disclosed by a third a party without any restriction on further
disclosure; or
(e) is necessary for the purposes of permitting a party to perform its
obligations under this Agreement or a Capacity Order provided that
any third party which receives Confidential Information pursuant to
this provision has agreed to be bound by the restrictions contained
in Clauses 10.2, 10.3 and 10.4 (a)-(e) in the same manner as if it
were a party to this Agreement.
10.5 Confidential Information shall only be used for the purposes for which it
was disclosed and/or for the purposes of performing the obligations of the
parties under this Agreement or a Capacity Order.
10.6 The obligations of confidentiality in this Clause 11 shall continue for
five (5) years following the termination of this Agreement.
10.7 Should HER wish to publicise the existence of this Agreement for the
purpose of its marketing activities, it shall seek AT&T-Unisource's prior
written approval for the content and format of such publicity, which
consent shall not unreasonably be withheld. Subject to the foregoing,
neither party shall make any press announcements concerning this Agreement
or Capacity Order or publicise this Agreement or Capacity Order in any way
without the prior written consent of the other party.
11. INTELLECTUAL PROPERTY RIGHTS
11.1 Nothing in this Agreement or a Capacity Order shall be construed as
conferring any license to intellectual property or as an assignment of the
intellectual property rights of one party to the other party.
11.2 AT&T Unisource shall indemnify and save HER harmless from any loss,
damage, liability or expense incurred by HER arising out of any
infringement of the intellectual property rights of third parties related
to AT&T-Unisource's use of the Network or of the services provided by HER
pursuant to this Agreement.
11.3 HER shall indemnify and save AT&T-Unisource harmless from any loss,
damage, liability or expense incurred by AT&T-Unisource arising out of any
infringement of the intellectual property rights of third parties by HER
related to HER's operation of the Network or the provision of services to
AT&T-Unisource pursuant to this Agreement.
PAGE 8 OF 23
<PAGE> 11
12. ASSIGNMENT
12.1 This Agreement is personal to the parties hereto and neither party shall
without the prior written consent of the other assign, charge or otherwise
deal with the whole or any part of this Agreement or any Transmission
Capacity provided hereunder or its rights or obligations under this
Agreement, provided that such consent shall not be unreasonably withheld or
delayed in the case of an assignment to a Group Company.
12.2 In the event of an assignment under Clause 12.1, the assignor shall provide
at least fourteen (14) days prior written notice of such assignment to the
other party and the assignee shall enter into an agreement with the other
party whereby the assignee shall agree to be bound by the terms of this
Agreement or the relevant Capacity Order, as appropriate, and if required
by the other party the assignor shall guarantee the performance of this
Agreement or the relevant Capacity Order, as appropriate, by the assignee.
12.3 Notwithstanding Clause 12.1, HER may assign this Agreement to a Group
Company without the consent of AT&T-Unisource, or to a lender as security
for the repayment of loans by HER or a Group Company of HER, but in the
case of such an Assignment HER shall remain liable for performance of the
terms of this Agreement and the relevant Capacity Order.
13. DEFINITION AND INTERPRETATION
13.1 In this Agreement, words and expressions shall have the meanings ascribed
to them in Appendix A.
13.2 All documentation exchanged between the parties pursuant to this Agreement
shall be in English.
13.3 The following documents form part of this Agreement, and any
inconsistencies between them shall be resolved in the following,
decreasing, order of precedence,:
(a) the express terms of any Capacity Orders agreed under this Agreement;
(b) the main body of this Agreement and Appendix A;
(c) Schedule 1;
(d) Schedules 2, 3 and 4.
13.4 References in this Agreement to HER and AT&T-Unisource shall include their
respective employees, agents, successors (whether by operation of law or
otherwise) and permitted assigns.
13.5 Headings are included in this Agreement for ease of reference only and
shall not affect the interpretation or construction of this Agreement.
PAGE 9 OF 23
<PAGE> 12
TRANSMISSION CAPACITY AGREEMENT
14. ENTIRE CONTRACT
This Agreement and the Capacity Orders pursuant hereto represent the entire
understanding between the parties in relation to the leasing of
Transmission Capacity and supersedes all prior agreements and
representations, whether oral or in writing.
15. VARIATION
No variation, modification or addition to or cancellation of any provision
of this Agreement or any Capacity Order shall be effective unless agreed
in writing by a duly authorised representative of HER and AT&T-Unisource.
16. NO WAIVER
16.1 Failure by either party at any time to enforce any of the provisions of
this Agreement or any Capacity order shall neither be construed as a
waiver of any rights or remedies hereunder nor in any way affect the
validity of this Agreement or the Capacity Order or any part of them, and
no waiver of a breach of this Agreement or the Capacity Order shall
constitute a waiver of any subsequent breach.
16.2 Termination of this Agreement or a Capacity Order shall not operate as a
waiver of any breach by a party of any of the provisions thereof and shall
be without prejudice to any rights or remedies of either party which may
arise as a consequence of such breach or which may have accrued hereunder
up to the date of such termination.
16.3 No waiver of a breach of this Agreement or a Capacity Order shall be
effective unless given in writing.
17. NO PARTNERSHIP
Nothing in this Agreement or any Capacity Order shall be deemed to
constitute a partnership or joint venture between the parties or to
constitute one party the agent of the other for any purpose whatsoever.
18. SURVIVAL
Notwithstanding anything in Clause 1.2, the provisions of this Clause and
Clauses 6.5, 7, 8, 9.4, 9.6, 10.6, 19, 20 and 21 shall survive termination
of this Agreement.
19. SEVERABILITY
19.1 The invalidity or unenforceability for any reason of any part of this
Agreement shall not prejudice or affect the validity or enforceability of
the remainder of this Agreement.
PAGE 10 OF 23
<PAGE> 13
TRANSMISSION CAPACITY AGREEMENT
19.2 If further lawful performance of this Agreement or any Capacity Order or
any part of them shall be made impossible by the final judgement or final
order of any court having jurisdiction, commission or government agency or
similar authority having jurisdiction over either party, the parties shall
forthwith use their best endeavours to agree amendments to this Agreement
or the relevant Capacity Order so as to comply with such judgement or order
and resume performance.
20. NOTICES
20.1 Except in cases where Schedule 2 makes express provision otherwise, any
notice given under this Agreement shall be in writing and sent or
delivered:
in the case of AT&T-Unisource, to:
Spicalaan 1-59,
2123 JG Hoofddorp
the Netherlands,
Attn: Director, Network Transmission and Supplier Management
With a courtesy copy to General Counsel at the same address
or, in the case of HER, to:
Hermes Europe Railtel (Ireland) Limited
2 Harbourmaster Place
Custom House Dock
Dublin 1
Ireland
Attn: Managing Director
WITH A COPY TO:
Hermes Europe Railtel
Terhulpsesteenweg 6A
1560 Hoeilaart
Belgium
Attn: Managing Director
20.2 Any notice or communication shall be deemed to have been received:
o if sent by facsimile transmission, when sent;
o if delivered by hand (including courier) when delivered;
o if sent by air mail (where appropriate), five (5) working days after
posting; or
o if sent by ordinary first class mail (where the recipient is within
the same jurisdiction as the sender), two (2) working days after
posting.
PAGE 11 OF 23
<PAGE> 14
TRANSMISSION CAPACITY AGREEMENT
In proving posting it shall be sufficient to show that the envelope
containing such notice or communication was properly addressed, stamped and
posted.
20.3 Either party may amend its address and facsimile number specified in Clause
20.1 by written notice to the other party.
21. DISPUTE RESOLUTION AND GOVERNING LAW
21.1 Any dispute, controversy or claim arising under, out of or relating to this
Agreement, including any questions regarding its existence, or termination
shall first be referred for resolution in accordance with the escalation
procedure set out in the Schedule 2.
21.2 This Agreement shall be governed by and construed in accordance with Dutch
law.
21.3 The parties hereby submit to the non-exclusive jurisdiction of the Dutch
Courts and waive any objection to proceedings in such courts on the
grounds of venue or on the grounds that proceedings have been brought in an
inconvenient forum.
SIGNED in twofold by a duly authorised representative:
/s/ [ILLEGIBLE] for and on behalf of
--------------------------------- HERMES EUROPE RAILTEL
) (IRELAND) LIMITED
)
)
)
---------------------------------
/s/ [ILLEGIBLE] for and on behalf of
--------------------------------- AT&T-UNISOURCE
COMMUNICATIONS
SERVICES V.O.F.
)
)
)
)
)
---------------------------------
Chief Operations Officer
/s/ [ILLEGIBLE] for and on behalf of
--------------------------------- AT&T-UNISOURCE
) COMMUNICATIONS
) SERVICES V.O.F.
)
)
Chief Financial Officer
PAGE 12 OF 23
<PAGE> 15
APPENDIX A
In this Agreement, including the Schedules, words and expressions shall have the
meanings ascribed to them below;
"Actual Delivery Date" as defined in Schedule 2.
"AT&T-Unisource Points nodes on AT&T-Unisource's network which
of Presence or PoPs are designated as Termination Points.
"Capacity Order" the terms for the leasing of Transmission
Capacity as agreed between the parties
and recorded in a Capacity Order Form
signed by both Parties.
"Charges" the Charges set out in each Capacity Order.
"Circuit" a transmission path between two Termination
Points.
"Confidential Information" all information, of any nature, provided by
one party to the other in connection with
this Agreement save for information which
the originating party has expressly
identified as being non-confidential.
"Connections" the connections between AT&T-Unisource
PoPs and the Network which AT&T-Unisource
asks HER to provide pursuant to this
Agreement.
"Credits" the credits against Charges calculate in
accordance with Schedule 1.
"Force Majeure" any cause beyond a party's reasonable
control affecting its performance of its
obligations hereunder either affecting the
party itself or a subcontractor used for
the performance of its obligations
including but not limited to acts of God,
insurrection or civil disorder, war or
military operations, national or local
emergency, acts or omissions of Government
or regulatory authority, industrial
disputes of any kind (not involving that
party's employees), fire, flood, lightning,
explosion, subsidence, inclement weather,
interruptions to the provision of
electricity, acts or omissions of persons
or bodies for whom the affected party is
not responsible
"Group" an economic unit in which legal persons are
partnerships are united in one
organisation, as defined in section 2:24b
of the Dutch Civil Code (1992).
"Group Company" a legal person or partnership which is
united with one or more other legal persons
or partnerships in a group as defined in
section 2:24b of the Dutch Civil Code
(1992).
"HER Points of Presence"
or "PoPs" nodes on the Network which are so
designated by HER.
PAGE 13 OF 23
<PAGE> 16
"Network" the Hermes Europe Railtel TransEuropean SDH
Network operated by Hermes Europe Railtel
B.V.
"Persistent Service Failure" a failure to perform in accordance with the
Service Level Guarantees for three months
in any Calendar year.
"Service Level Guarantees" quality of service levels for the provision
of Transmission Capacity as defined in
Schedule 1.
"Services Catalogue" the document describing the service formats
in which Transmission Capacity is
available from HER as published by HER from
time to time.
"Termination Points" termination points, being either HER or
AT&T-Unisource PoPs, identified in a
Capacity Order.
"Transmission Capacity" bandwidth in the formats described in the
Service Catalogue provided by HER between
Termination Points.
"Value Date" the date upon which the transfer of the
Charges is completed; that is, the Charges
appear as a credit on HER's bank account.
PAGE 14 OF 23
<PAGE> 17
TRANSMISSION CAPACITY AGREEMENT
SCHEDULE I
SERVICE LEVEL GUARANTEES
HER offers guarantees on the delivery and availability of Transmission Capacity
as set out below. Please refer to the "HER Services Catalogue" for a description
of the service formats in which HER provides Transmission Capacity.
1. DELIVERY
1.1 Delivery Guarantees
<TABLE>
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Service Level Guarantee Credits Calculation if service level is
not met
- ---------------------------------------------------------------------------------------------
Delivery Date By Committed Delivery 5% of Monthly Circuit Charge per
- Integrated Service Date week or part of week delayed
- ---------------------------------------------------------------------------------------------
</TABLE>
The Committed Delivery Date is stated in each Capacity Order. HER is considered
to have met this date if on or before then HER has issued the "HER BIS Test
Report" to Customer as part of the hand over procedure (see Schedule 2). HER
shall be entitled to revise the Committed Delivery Date after it has provided a
signed Capacity Order to the Customer if:
1. AT&T-Unisource does not sign and return the Capacity Order within 3 days;
2. HER is unable to access AT&T-Unisource PoP in a timely manner during either
installation or BIS testing processes.
If HER has problems accessing AT&T-Unisource PoPs HER will notify AT&T-Unisource
in accordance with the procedure set out in Schedule 2.
For the avoidance of doubt if BIS testing performed by AT&T-Unisource is
unsuccessful, and this is verified as a problem caused by HER, then the Actual
Delivery Date will be revised accordingly.
1.2 Cancellation rights
If HER is excessively late in providing the Transmission Capacity,
AT&T-Unisource is entitled to cancel the Capacity Order, in lieu of Credits but
without any cancellation charge applying. The timescales are:
1. Integrated Service - 4 weeks from Committed Delivery Date;
PAGE 15 OF 23
<PAGE> 18
TRANSMISSION CAPACITY AGREEMENT
2. AVAILABILITY GUARANTEES
2.1 Standard
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Service Level Guarantee Credits Calculation if service level is
not met
- --------------------------------------------------------------------------------
<S> <C> <C>
Availability 99.9-99.5 10% of monthly circuit Charges
(monthly) Below 99.5 - 99.0 20% of monthly circuit Charges
Below 99.0 - 97.5 40% of monthly circuit Charges
Below 97.5 100% of monthly circuit Charges
- --------------------------------------------------------------------------------
</TABLE>
Availability is calculated on a monthly basis as follows:
<TABLE>
<S> <C>
(Total time - Sum of all events of unavailable time as agreed during fault clearance) = 100
- --------------------------------------------------------------------------------------------
Total time.
</TABLE>
Per event, unavailable time begins at time of AT&T-Unisource problem reporting,
or HER problem detection, whichever is earlier. Unavailable time ends as agreed
between HER and AT&T-Unisource during fault clearance; this is documented in the
"Fault Clearance Report". (see Schedule 2) Unavailable time is measured between
HER demarcation of responsibility points as defined on Capacity Order. Outages
prolonged by inability to access AT&T-Unisource PoP are excluded.
Months are calendar months. Therefore, for the avoidance of doubt, the amount of
unavailable time, during a 30-day calendar month, before Credits are due is 43.2
minutes.
Where a circuit is partially unavailable (e.g. one VC-12 path is affected on a
34 Mb/s service), the credit calculation is pro-rated according to the
percentage bandwidth affected.
Effect of planned works on unavailability measurements
Planned works within the following criteria are excluded from availability
calculations:
Up to 2 instances of planned works per month each with a maximum duration of 2
hours. Planned works must be scheduled with at least 15 days notice to qualify
under these criteria. Subject to its other customer commitments HER will use
reasonable endeavours to carry out planned works within the preferred down-time
windows notified to HER by AT&T-Unisource. If agreement cannot be reached, HER
will decide the time and date at its discretion, but with the objective to
minimise AT&T-Unisource inconvenience.
Unless otherwise agreed by AT&T-Unisource, failure to meet the above criteria
will be included in the monthly service availability calculations. That is,
where planned works exceed their scheduled time or maximum time, the excess time
is considered as unavailable time. Where planned works are scheduled with less
than 15 days notice, or if there have been 2 prior planned works in the same
month, the actual planned works duration is considered as unavailable time.
PAGE 16 OF 23
<PAGE> 19
TRANSMISSION CAPACITY AGREEMENT
SCHEDULE 2
SERVICE MANAGEMENT PROCESSES
At the time of signature of the Agreement, the Service Management Process is
being finalised between the parties. Both parties undertake to negotiate the
Service Management Process in good faith and intend to incorporate it into this
Agreement within one month of the date hereof.
PAGE 17 OF 23
<PAGE> 20
TRANSMISSION CAPACITY AGREEMENT
SCHEDULE 3
CAPACITY ORDER FORMS (SAMPLE)
PAGE 18 OF 23
<PAGE> 21
CONFIDENTIAL TREATMENT
[HERMES EUROPE RAILTEL LOGO] CAPACITY ORDER FORM
- --------------------------------------------------------------------------------
Capacity Order ID
------
1. SERVICE TYPE
Point-to-point service SERVICE LEVEL
Integrated [ ] Premium [ ]
Backbone [ ] Standard [ ]
2. CAPACITY CONFIGURATION
<TABLE>
<CAPTION>
Bandwidth 'A' end configuration 'B' end configuration Framing
--------- --------------------- --------------------- -------
<S> <C> <C> <C>
2 [ ] Interface & Connector Interface & Connnector Framed [ ]
--------------------- ----------------------
34 [ ] Unframed [ ]
--------------------- ----------------------
45 [ ]
140 [ }
</TABLE>
Details of the service formats under which Transmission Capacity is provided are
documented in the "HER Services catalogue". If required, additional detail will
be annexed to this Capacity Order as "Customer Design".
3. CUSTOMER DELIVERY
Requested Delivery Date
----------
HER Committed Delivery Date
----------
<TABLE>
<CAPTION>
Termination details 'A' end Termination details 'B' end
- ----------------------------- ----------------------------
<S> <C> <C>
Pt. of demarcation
- ----------------------------- ------------------------------
Address
- ----------------------------- ------------------------------
- ----------------------------- ------------------------------
- ----------------------------- ------------------------------
Floor & room number
- ----------------------------- ------------------------------
Postcode & City
- ----------------------------- ------------------------------
Country
- ----------------------------- ------------------------------
Contact Person
- ----------------------------- ------------------------------
Phone number
- ----------------------------- ------------------------------
Fax number
- ----------------------------- ------------------------------
E-mail
- ----------------------------- ------------------------------
</TABLE>
4. PAYMENT TERMS
<TABLE>
<CAPTION>
Non-Recurring Charge Recurring Charge Billing period Initial Term Currency VAT rate
-------------------- ---------------- -------------- ------------ -------- --------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
</TABLE>
The charges quoted do not include VAT.
- -------------------
<PAGE> 22
[HERMES EUROPE RAILTEL LOGO] CAPACITY ORDER FORM
- --------------------------------------------------------------------------------
Capacity Order ID
--------------
<TABLE>
<CAPTION>
5. CUSTOMER CONTACTS AND INFORMATION
Commercial Billing
---------- -------
<S> <C> <C>
Company name
- ----------------------------------- ------------------------------
Address
- ----------------------------------- ------------------------------
- ----------------------------------- ------------------------------
- ----------------------------------- ------------------------------
Postcode & City
- ----------------------------------- ------------------------------
Country
- ----------------------------------- ------------------------------
Contact Person
- ----------------------------------- ------------------------------
Phone number
- ----------------------------------- ------------------------------
Fax number
- ----------------------------------- ------------------------------
E-mail
- ----------------------------------- ------------------------------
VAT number
------------------------------
6. HER CONTACTS
Commercial Delivery of Capacity
---------- --------------------
Contact Person
- ----------------------------------- ------------------------------
Phone number
- ----------------------------------- ------------------------------
Fax number
- ----------------------------------- ------------------------------
GSM
- ----------------------------------- ------------------------------
E-mail
- ----------------------------------- ------------------------------
7. SPECIAL CONDITIONS
8. CUSTOMER DECLARATION & SIGNATURE
No contractual commitment under this Capacity Order will arise until the Customer has provided written acceptance of the
Committed Delivery Date by signing below. The Customer accepts the terms and conditions attached to this Capacity Order.
Signed by a duly authorised representative of * Signed by a duly authorised representative of
Hermes Europe Railtel (Ireland) Ltd.
Signature Signature
----------------------------------- --------------------------------------
Name Name Gerard Caccappolo
----------------------------------- --------------------------------------
Position Position General Manager
----------------------------------- --------------------------------------
Date Date
----------------------------------- --------------------------------------
</TABLE>
- ----------------------------
* please insert full legal name of company
<PAGE> 23
CONFIDENTIAL TREATMENT
TRANSMISSION CAPACITY AGREEMENT
SCHEDULE 4
PART I: INITIAL COMMITMENT
AT&T-Unisource agrees to lease ##MATERIAL OMITTED AND SEPARATELY FILED UNDER A
REQUEST FOR CONFIDENTIAL TREATMENT## of Transmission Capacity on the following
terms:
1. The Transmission Capacity will be leased between the AT&T-Unisource
Points of Presence between any of the following cities: London, Amsterdam,
Frankfurt (From 20 April, 1998 only) Brussels and Paris. AT&T-Unisource and
HER are developing a detailed migration list for the ordering of the
##MATERIAL OMITTED AND SEPARATELY FILED UNDER A REQUEST FOR CONFIDENTIAL
TREATMENT##. Notwithstanding this, AT&T-Unisource undertakes to order the
E1's from HER as follows:
o ##MATERIAL OMITTED AND SEPARATELY FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT## will be ordered no later than June 1998 for
requested delivery no later than 1 September 1998
o ##MATERIAL OMITTED AND SEPARATELY FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT## will be ordered no later than October 1998
for requested delivery no later than 1 December 1998
2. Each E1 will be leased for a term of ##MATERIAL OMITTED AND SEPARATELY
FILED UNDER A REQUEST FOR CONFIDENTIAL TREATMENT## from its Actual
Delivery Date.
3. A price of ##MATERIAL OMITTED AND SEPARATELY FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT## per E1 (or E1 equivalent i.e. an E3 may be
purchased at ##MATERIAL OMITTED AND SEPARATELY FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT## price) subject to review under paragraph 4 below.
4. The prices will be reviewed on 1 October 1999, and annually thereafter, in
accordance with Schedule 4 Part II. E1s forming part of this initial
commitment that have a requested delivery date falling after 1 September
1998 will not be reviewed on 1 October 1999 but will form part of the
future reviews.
5. Non-recurring installation charges for the ##MATERIAL OMITTED AND
SEPARATELY FILED UNDER A REQUEST FOR CONFIDENTIAL TREATMENT## of
Transmission Capacity will be ##MATERIAL OMITTED AND SEPARATELY FILED UNDER
A REQUEST FOR CONFIDENTIAL TREATMENT## in total, payable on 1 April 1998
regardless of when these E1 circuits are to be installed by HER
6. A 1 month free of charge test period will be granted to AT&T-Unisource
after delivery of each of the ##MATERIAL OMITTED AND SEPARATELY FILED UNDER
A REQUEST FOR CONFIDENTIAL TREATMENT## equivalents forming part of this
initial commitment;
7. Notwithstanding Clause 5 of the main body of this Agreement, this first
year's Charges will be payable as follows:
##MATERIAL OMITTED AND SEPARATELY FILED UNDER A REQUEST FOR CONFIDENTIAL
TREATMENT##
Irrespective of when the Capacity Orders are placed.
For each E1 equivalent, charging on a monthly basis, in accordance with
Clause 5 of the main body of the Agreement shall commence, thirteen months
from the Actual Delivery Date of that E1 equivalent.
8. For tracking/administrative purposes, notwithstanding that the ##MATERIAL
OMITTED AND SEPARATELY FILED UNDER A REQUEST FOR CONFIDENTIAL TREATMENT##
initial commitment is ordered by AT&T-Unisource under the terms hereof,
AT&T-Unisource undertakes to issue Capacity Orders for each of the E1s
forming part of the initial commitment. The Capacity Orders will be issued
by AT&T-Unisource as soon as possible but in any case, prior to the
Committed Delivery Dates.
PAGE 19 OF 23
<PAGE> 24
CONFIDENTIAL TREATMENT
PART II - PRICE REVIEW AND FURTHER ORDERING
1. Definitions of this Part
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
"Annual Value" The total Annual Value of Transmission Capacity leased by
Customer under Capacity Orders measured in kECUs of annual
expenditure.
- --------------------------------------------------------------------------------
"Competitor's An individual competitor's average prices for similar
Applicable services on the same routes as those which CUSTOMER has
Charges" under contract with HER at the time of review.
- --------------------------------------------------------------------------------
"HER Applicable The cost of Transmission Capacity between defined
Charges" Termination Points based on the average Charges for the
Capacity determined in accordance with the Table of Charges.
The average Charges are the Charges due when dividing the
Annual Value by 2.
- --------------------------------------------------------------------------------
"Table of The Table of Charges in section 1.2 below.
Charges"
- --------------------------------------------------------------------------------
"Thresholds" The applicable amount of the Annual Value of Capacity
Orders from time to time as calculated by HER.
- --------------------------------------------------------------------------------
</TABLE>
2. Table of Charges
2.1 Non-recurring Charges:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Presentation at Non-recurring
Customer POP Charge (kECU)
<S> <C>
G.703 @ 2 Mb/s ##MATERIAL OMITTED AND SEPARATELY FILED
G.703 @ 34 Mb/s UNDER A REQUEST FOR CONFIDENTIAL TREATMENT ##
G.703 @45 Mb/s
STM-1
- -------------------------------------------------------------------------------
</TABLE>
If there is available capacity from a previously implemented connection (ie.
STM-1 with only 1 VC-3 in use), then no non-recurring Charge will apply to
Capacity Orders that use this available capacity.
PAGE 20 OF 23
<PAGE> 25
CONFIDENTIAL TREATMENT
TRANSMISSION CAPACITY AGREEMENT
2.2 RECURRING CHARGES
The recurring Charge for Standard service level for Point-to-point transmission
capacity (Integrated Service) for ##MATERIAL OMITTED AND SEPARATELY FILED UNDER
A REQUEST FOR CONFIDENTIAL TREATMENT## is calculated using the following table
(all prices are in kECU/yr., excluding VAT):
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Annual Value E1 E1 E1 E3 E3 E3 VC3 VC3 VC3 VC4 VC4 VC4
(kECU/yr.) Zone 1 Zone 2 Zone 3 Zone 1 Zone 2 Zone 3 Zone 1 Zone 2 Zone 3 Zone 1 Zone 1 Zone 3
- ------------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
</TABLE>
##MATERIAL OMITTED AND SEPARATELY FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT##
The following conditions apply when using this table:
a) To calculate the Charges for a new Capacity Order, HER shall establish the
Annual Value under contract at the time of Capacity ordering and apply the
Charges according to the relevant threshold.
b) If the Annual Value is on the cusp of Thresholds (e.g. exactly 10000) the
higher threshold is deemed to apply.
c) The Charges shown apply to incremental Transmission Capacity contracted
for once the Thresholds indicated have been reached; they are not overall
average prices.
d) In the event that multiple orders are placed at the same time HER
undertakes to calculate the Annual Value decreases, HER shall be entitled
to adjust the Charges of the remaining Capacity Orders in accordance with
the Table of Charges.
f) The Table of Charges applies to AUCS POPs within cities on the HER Rollout
Schedule. Other locations will be quoted separately.
3. Term Discount
Term discounts can be applied to each Capacity Order as per the following table:
<TABLE>
<S> <C>
Contract Discount
term percentage
(yrs)
##MATERIAL OMITTED AND ##MATERIAL OMITTED AND
SEPARATELY FILED UNDER SEPARATELY FILED UNDER
A REQUEST FOR A REQUEST FOR
CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT##
</TABLE>
PAGE 21 OF 23
<PAGE> 26
CONFIDENTIAL TREATMENT
TRANSMISSION CAPACITY AGREEMENT
4. Capacity Definitions:
The Table of Charges is based on the following definitions:
<TABLE>
<CAPTION>
Capacity Bandwidth Presentation
(Mb/s)
<S> <C> <C>
El 2.048 G.703 @ 2 Mb/s
STM-1 / VC-12
E3 34 G.703 @ 34 Mb/s
VC-3 45 G.703 @ 45 Mb/s
STM-1 / VC-3
VC-4 140 STM-1 / VC-4
</TABLE>
5. Zoning Overview
Ring configurations will be provided upon request.
<TABLE>
<S><C>
AMS ANT BAR BER BRU COP DUS FRA GEN HAM LON LUX MAD MIL MUN PAR ROT STO STU ZUR
AMS
ANT
BAR ##MATERIAL OMITTED AND SEPARATELY
BER FILED UNDER A REQUEST FOR
BRU CONFIDENTIAL TREATMENT##
COP
DUS
FRA
GEN
HAM
LON
LUX
MAD
MIL
MUN
PAR
ROT
STO
STU
ZUR
</TABLE>
PAGE 22 OF 23
<PAGE> 27
CONFIDENTIAL TREATMENT
TRANSMISSION CAPACITY AGREEMENT
6. Review Of The Table Of Charges
a) HER undertakes to review the Charges set out in the Table of Charges, on
the date set out in Part 1 of this Schedule, and ##MATERIAL OMITTED AND
SEPARATELY FILED UNDER A REQUEST FOR CONFIDENTIAL TREATMENT## thereafter,
at Customer request. After concluding the review the Table of Charges
shall be amended and applied to existing Capacity Orders with original
contract terms of 3 years or more, in accordance with the principles set
out in section 2.2 above.
b) If, after the review in a) above, AT&T-Unisource can demonstrate that the
HER Applicable Charges are more than ##MATERIAL OMITTED AND SEPARATELY
FILED UNDER A REQUEST FOR CONFIDENTIAL TREATMENT## than a Competitor's
Applicable Charges then AT&T-Unisource shall be entitled to terminate the
applicable Capacity Order(s) with 30 days notice without penalty or
liability with respect to the Capacity Order(s) affected. If such
cancellation occurs, HER shall be entitled to adjust the Charges for
remaining Capacity Orders in accordance with section 2.2 above.
c) In the event of a dispute as to whether AT&T-Unisource has established
valid Competitor's Applicable Charges, either party may refer the matter to
an expert for resolution, in accordance with the following procedure:
i) The independent expert shall be agreed by the parties or, if the
parties do not find an agreement within 14 days, by the President of
the Rotterdam Chamber of Commerce;
ii) The expert shall accept written representations in English from both
parties;
iii) The expert shall render his opinion in English within two months of
being appointed, stating his reasons;
iv) The costs of the expert shall be borne equally between the parties;
v) The parties agree to be bound by the expert's opinion.
d) During the dispute resolution process, the Capacity Orders and the
obligations thereunder shall continue to exist and AT&T-Unisource shall
continue to pay the Charges established prior to the price review, Provided
That, if Charges are reduced as a result of the price review the reduction
shall apply retrospectively from the date of the price review and HER shall
issue a credit note accordingly.
PAGE 23 OF 23
<PAGE> 28
[LOGO]
HERMES EUROPE RAILTEL SERVICE CATALOGUE
Terhulpsesteenweg 6A
1560 Hoeilaart, Belgium
- --------------------------------------------------------------------------------
HERMES EUROPE RAILTEL (HER) IS THE PAN-EUROPEAN CARRIERS' CARRIER
HER is constructing and operating a fibre-optic network connecting major cities
in Europe. HER's objective is to become the leading pan-European provider of
high quality Trans-border managed capacity to telecommunications carriers. As
a single source for carriers requiring international transport services, our
promise is "Complexity Made Simple".
SERVICES TO WHERE YOU NEED THEM
We provide Trans-border clear bandwidth transmission services between any
customer-designated locations in all countries where HER operates. We achieve
this through the use of Access network providers who extend our service
offering to your location. Our services coverage is increasing as our network
is deployed (shaded areas indicate HER services availability):
1st Half '98
[MAP] The cities with HER node locations as
shown on the left are:
Amsterdam
Antwerp
Brussels
Dusseldorf
Frankfurt
Geneva
London
Munich
Paris
Rotterdam
Stuttgart
Zurich
End 1998
[MAP] The following cities will be added by
end 1998:
Barcelona
Berlin
Copenhagen
Gothenburg
Hamburg
Madrid
Milan
Stockholm
<PAGE> 29
[LOGO]
HERMES EUROPE RAILTEL SERVICE CATALOGUE
- --------------------------------------------------------------------------------
POINT-TO-POINT TRANSMISSION SERVICES
HER provides "Integrated" service as a superior alternative to International
Private Leased Circuits (IPLCs). IPLCs are formed by combining two or more
circuits generally without anyone being responsible for the end-to-end service
quality. There is also a limited range of bandwidths available, and
provisioning times are often very long.
"Integrated" service is an end-to-end service where HER is your sole contact
for all aspects of the service, and HER guarantees the end-to-end performance
of this circuit as shown in the diagram below:
Integrated Service
[CHART]
One-Stop Shop service is where HER customers prefer to contract with Access
providers directly. However, HER will again manage the service end-to-end,
providing customers with a single point of contact.
Bandwidth and interfacing combinations available to the Customer locations are:
<TABLE>
<CAPTION>
----------- ---------------------
Bandwidth Customer interfacing
----------- ---------------------
<S> <C>
1.984 Mb/s G.703 @ 2.048 Mb/s
2.048 Mb/s G.703 @ 2.048 Mb/s
V.35 @ 2.048 Mb/s
34 Mb/s G.703 @ 34 Mb/s
16*G.703 @ 2.048 Mb/s
45 Mb/s G.703(T3) @ 45 Mb/s
STM-1 / VC-3
140 Mb/s G.703 @ 140 Mb/s
STM-1 / VC-4
----------- ---------------------
</TABLE>
HER's services are offered under a tailored commercial arrangement that will be
price competitive no matter how large or small our customer requirement is. We
also offer a full range of options on contract term, payment plans, and
significant volume discounts. As a single supplier, customers can achieve
volume discounts not available in the current distributed IPLC market.
<PAGE> 30
[HERMES EUROPE RAILTEL LOGO] SERVICE CATALOGUE
- --------------------------------------------------------------------------------
VIRTUAL INFRASTRUCTURE SERVICE (VIS)
VIS is targeted at customers that require an international backbone network,
but are concerned about entering into long-term, inflexible commitments in
today's rapidly changing marketplace. It is a new network solution where
today's options are either a multitude of IPLCs or building one's own
infrastructure. VIS is a strategic supplier agreement offering commercial and
operational terms not available elsewhere.
VIS connect a set of customer locations with diversified, high capacity SDH
connections, but charges customers only for the actual bandwidth required.
[CHART]
This gives tremendous flexibility:
o rapid provisioning in that additional bandwidth can be provisioned in 24
hours. Capacity planning can be done with a "just-in-time" philosophy
thereby avoiding over and under-utilised channels.
o rearrangements at no cost can be effected remotely. Circuits can be moved
in the event that capacity requirements are reduced on a given route.
VIS implementation is co-ordinated by HER working with customers' operations
responsible, where VIS Access (connection of Customer location to the service)
and the initial set of VIS Bandwidth (actual bandwidth configured between
Customer locations) is agreed.
Standard design criteria for VIS Access include:
o diverse fibre entry at Customer location
o STM-1 interface to Customer equipment
o fully diverse routing
This is done separately for each Customer location. HER will then project manage
the delivery of VIS Access to each location to an agreed date.
Upon completion, customer is ready to order VIS Bandwidth between any Customer
locations connected to VIS. The combinations of VIS Access and VIS Bandwidth
that can be ordered and configured include:
[CHART]
<TABLE>
<CAPTION>
VIS Access VIS Bandwidth
- --------------- -------------
<S> <C>
STM-1 or higher n = VC-12
n = VC-3
VC-4
PDH combination
n*45 Mb/s n*45 Mb/s
n*34 Mb/s n*34 Mb/s
n*2 Mb/s n*2 Mb/s
</TABLE>
The commercial terms are simple: VIS Access comes with a non-recurring Charge,
and VIS Bandwidth has a fixed price per 2 Mb/s of bandwidth regardless of
routing, with a progressive volume discount scheme.
<PAGE> 31
[LOGO]
HERMES EUROPE RAILTEL SERVICE CATALOGUE
- --------------------------------------------------------------------------------
RING SERVICE
Customer leases one or multiple VC-4 rings of HER bandwidth, and a number of
Customer Access Points (CAP) from where the ring can be accessed.
[CHART]
Customer directly controls and manages the establishment of paths (VC-3, VC-12)
within a ring, and between rings. Any protection switching required must be
performed by the customer termination equipment, or at the application layer.
HER configures VC-4 point-to-point paths between CAPs. Each point-to-point VC-4
path is end-to-end physically diverse from other paths on the ring, but is not
configured with standby protection bandwidth. Additional Rings can be layered
on top of existing Rings, or new Rings can be created with different CAPs
connected.
The customer benefits from:
"VPN" functionality. Customer has direct control over the "SDH subnet" (i.e.
configuration of VC-3 and VC-12 paths) within the ring. Configuration changes
can be made directly, at any time, with no HER involvement.
Cost reduction. As HER is not required to configure "idle" protection
bandwidth, nor to manage lower order circuits, lower unit cost can be achieved.
Customer can optimise Ring usage depending on the volume and protection
requirements of individual applications.
Bandwidth and interfacing combinations available to Customer Access Points are:
<TABLE>
<CAPTION>
- ------------------------------------
Bandwidth Customer interfacing
- ------------------------------------
<S> <C>
n*VC-4 Mb/s n*STM-1
(electrical/optical)
- ------------------------------------
</TABLE>
Commercially, Ring Service can be a more attractive option for medium to large
capacity carrier backbones compared to leasing multiple point-to-point circuits.
An incremental discount scheme ensures that customers receive significant
volume benefits.
<PAGE> 32
[LOGO]
HERMES EUROPE RAILTEL SERVICE CATALOGUE
- --------------------------------------------------------------------------------
SERVICE QUALITY
HER clearly understands that international capacity is mission-critical to its
customers, and will demonstrate that this trust is well placed.
Availability is first priority
Service availability is guaranteed backed by credits in two ways:
o on-time service delivery
o monthly service availability of 99.9%
HER is confident that these parameters will be met due to a number of
preventive measures:
o a meshed network topology design where multiple routes exist between
endpoints
o standard service design that each individual circuit is configured with a
diversely routed standby protection circuit (except Ring Service)
o tight integration between the HER backbone network and those of its Access
network suppliers
o 24/7 NOC centrally monitoring and controlling a uniform SDH network
platform
o extensive security measures
An end-to-end managed service offering
HER will function as a true Single Point of Contact for all services aspects.
This can significantly reduce your international telecoms administration costs,
as HER will do the work for you. This also allows us to be more responsive to
your particular needs.
o a service design that is customisable is agreed prior to service contract
o a dedicated person is your single point of contact assigned to manage the
implementation of your service
o the results of an acceptance test according to M.2000 standards are
included at service "hand over"
o a monthly "Services Report" tracks how well your services and HER are doing
o billing and payment is fully customisable to fit in with your requirements
We are specialised in serving the carrier marketplace: come talk to us!
<PAGE> 1
EXHIBIT 10.18
CONFIDENTIAL TREATMENT
26 Red Lion Square
London
WC1R 4HQ
[LOGO]
Switchboard: 0171-528-2000
CABLE & WIRELESS E-Mail: @cwcom.co.uk
Website: http://www.cwcom.co.uk
Direct Tel: ++ 44 171 528 2112
Direct Fax: ++ 44 171 945 4190
Hermes Europe Railtel (Network) Limited
2 Custom House Plaza
Harbourmaster Place
Dublin 1
Ireland
29th October 1998
Dear Sir
The purpose of this letter is to confirm your order for ##MATERIAL OMITTED AND
SEPARATELY FILED UNDER A REQUEST FOR CONFIDENTIAL TREATMENT## STM-1s on the
Gemini Submarine Cable System in accordance with the terms and conditions set
out herein and in the form of the Indefeasible Right of [ILLEGIBLE] Agreement
attached hereto as Appendix A (the "Agreement"). Save for the finalisation of
the selling entity to comprise the seller, the Agreement is in a form ready to
be signed by the parties. This letter shall be superseded by the completion
and execution of the Agreement, which the parties shall execute as soon as is
feasible. Pending execution, we and you agree to be bound by the agreement as
if Cable & Wireless Communications Services Limited were the selling entity.
We shall also invoice you and you agree to pay ##MATERIAL OMITTED AND
SEPARATELY FILED UNDER A REQUEST FOR CONFIDENTIAL TREATMENT## in full
consideration for the first STM-1's purchase price, and following receipt of
such sum by us, in consideration of your accepting these terms, we agree to
indemnify you against any claim by such entity for that purchase price.
Please acknowledge your acceptance of this interim agreement by signing where
indicated below.
Yours faithfully
/s/ [ILLEGIBLE]
- ----------------------------------------
For Cable & Wireless Communications Services Limited
/s/ [ILLEGIBLE]
- ----------------------------------------
Agreed on behalf of Hermes Europe Railtel (Network) Limited
<PAGE> 2
APPENDIX A
DATED 1998
- --------------------------------------------------------------------------------
(1) CABLE & WIRELESS COMMUNICATIONS SERVICES LIMITED
(2) HERMES EUROPE RAILTEL (NETWORK) LIMITED
-------------------------------------------
INDEFEASIBLE RIGHT OF USE AGREEMENT
relating to the Gemini Cable System
-------------------------------------------
<PAGE> 3
CONTENTS
<TABLE>
<CAPTION>
PARA. NO. TITLE
<S> <C>
1 Definitions
2 Grant and Duration of IRU, Activation of Capacity
3 Purchase Price
4 Operation and Maintenance Charges
5 Conditions of Use and the Provision of Capacity
6 Operation of Equipment
7 Intellectual Property
8 Restoration
9 Reduction in System Capacity and Increase in
Communication Capability
10 Termination of Agreement
11 Liabilities
12 Force Majeure
13 Nature of Rights and Relationship
14 Assignment of Rights
15 Amendments, Waiver and Entire Agreement
16 Execution of Multiple Copies
17 Successors
18 Law and Jurisdiction
19 Notices
20 Confidentiality
21 Taxes and Late Payment Fees
SCHEDULE
1 The Cable System
2 Purchase Price, Operation and Maintenance Costs, and
Restoration Charges
APPENDIX
1 Technical Specification
</TABLE>
<PAGE> 4
CONFIDENTIAL TREATMENT
THIS AGREEMENT is made this day of 1998
PARTIES:
(1) CABLE & WIRELESS COMMUNICATIONS SERVICES LIMITED (registered number
3288998) whose registered office is at 26 Red Lion Square, London WC1R 4HQ
and
(2) HERMES EUROPE RAILTEL (NETWORK) LIMITED whose registered office is 2 Custom
House Plaza, Harbourmaster Place, Dublin 1, Ireland ("the Purchaser").
BACKGROUND:
(A) It is acknowledged that Gemini Submarine Cable System Limited, a company
(registered number EC22408) incorporated under the laws of Bermuda
("Gemini"), which expression shall include its successors or assigns, is to
provide, construct, operate and maintain an integrated submarine and
terrestrial optical fibre cable system, (the "Cable System") between the
Terminal Points (among several terminal points) as set out in Schedule 1.
(B) Gemini is allocating capacity in the Cable System in whole circuits
interconnecting the Terminal Points at the ##MATERIAL OMITTED AND
SEPARATELY FILED UNDER A REQUEST FOR CONFIDENTIAL TREATMENT## level.
(C) C&W (as defined below) has acquired rights with respect to certain
capacity in the Cable System and Extension Links until the Retirement Date
(as defined below), and C&W is entitled to grant IRUs over such capacity
to authorised carriers.
(D) The Purchaser (or an Associated Company of the Purchaser) is or will be the
holder of valid Licences (as defined below) granted by the relevant
authorities in the United States and the United Kingdom prior to the first
activation date.
(E) The Purchaser wishes to acquire from C&W and C&W is willing to grant the
Purchaser an IRU over certain of its capacity in the Cable System subject
to the following terms and conditions.
1
<PAGE> 5
NOW IT IS AGREED AS FOLLOWS:
1 DEFINITIONS
1.1 In this Agreement, the following words and phrases shall have the
following meanings ascribed to them unless the context otherwise requires:
"ASSOCIATED COMPANY" means an entity that is, in respect of any one entity,
any other entity that controls, is controlled by, or is under common
control with that entity, control being defined as direct or indirect
ownership of more than 50% in value of the outstanding voting stock, or
other form of interest in the capital of, or of a partnership or other
interest in, an entity;
"CAPACITY" means the capacity in the Cable System and Extension Links to be
acquired by the Purchaser as detailed in Schedule 1;
"C&W" means Cable & Wireless Communications Services Limited or one of its
Associated Companies holding the licence to provide international
telecommunications services;
"COMMENCEMENT DATE" means the date defined as such in Schedule 1 for each
element of the Capacity;
"EXTENSION LINKS" mean the extension links specified in Section 2 of
Schedule 1;
"LICENCES" mean those consents, licenses, permits and other approvals
referred to in Clause 5.1(d);
"OPERATION AND MAINTENANCE CHARGES" OR "O&M Charges" mean the charges in
relation to the operation and maintenance of the Cable System and the
Extension Links to be paid by the Purchaser as set out in Schedule 2;
"OUT-OF-SYSTEM RESTORATION" means the provision of restoration on a cable
other than the Cable System as set forth in Clause 8;
"PURCHASER PARTY" means (i) the Purchaser, (ii) any permitted assignee of
the Purchaser using Capacity, or (iii) any customer of the Purchaser or of
any such permitted assignee using Capacity;
2
<PAGE> 6
"RETIREMENT DATE" means the date the Cable System is retired with
respect to the Capacity;
"STM-1" means a 155.220 Mbit/sec bi-directional digital line section
passing between two system interface points, (i.e., the Terminal Points
set out in Schedule 1), together with the interconnection interfaces
pertaining thereto (this supports end to end transport of a VC4), in
accordance with ITU-TS recommendations.
1.2 The index and headings are included for convenience only and shall not
affect the interpretation or construction of this Agreement.
1.3 In this Agreement, unless the context requires otherwise, any reference to:
(a) a "party" or "the parties" is to a party or the parties (as the case
may be) to this Agreement;
(b) a Recital, Clause or Schedule is to a recital of, clause of or a
schedule to this Agreement (as the case may be);
(c) "this Agreement" includes the Schedules, which form part of this
Agreement for all purposes.
2 GRANT AND DURATION OF IRU, ACTIVATION OF CAPACITY
2.1 C&W hereby grants to the Purchaser an IRU (indefeasible right of use) in
the Capacity over the length of the Cable System between the Terminal
Points with effect from the Commencement Date and continuing until the
Retirement Date, unless this Agreement is terminated earlier in accordance
with the provisions of Clause 10 hereof, whereupon such IRU shall
terminate automatically.
C&W will request Gemini to activate the Capacity within approximately
thirty (30) days after C&W receiving a written activation request from the
Purchaser. C&W warrants that the Capacity in the Cable System will be
provided and maintained in accordance with the C&MA and the Capacity in the
Extension Link will be provided and maintained in accordance with ITU-T
G.826.
This Agreement and the grant of the IRU in the Capacity herein does not
include any provision of or connection to any equipment or facilities that
may be required for signal conversion. In the event that C&W and the
Purchaser enter into a separate agreement for the provision of all or a
portion of such
3
<PAGE> 7
CONFIDENTIAL TREATMENT
equipment and/or facilities, only the terms of that separate agreement
shall govern the relevant equipment and/or facilities, and nothing therein
or with respect thereto shall affect this Agreement.
2.2 C&W hereby grants to the Purchaser capacity in the Extension Links detailed
in Schedule 1 from the date of activation until the Retirement Date. C&W
shall endeavour to activate the capacity by the dates proposed as set out
in Schedule 1, but the parties recognise that these dates are estimates
only. In the case of the first Extension Link, the agreed delivery date is
6th November 1998. If C&W fails to meet an agreed delivery date, the
Purchaser will be entitled to the service provision guarantees set out in
the service level agreement. The Purchaser has the option within six months
of the date of activation of the first STM-1 of Capacity to increase the
capacity of the Extension Links to create an ##MATERIAL OMITTED AND
SEPARATELY FILED UNDER A REQUEST FOR CONFIDENTIAL TREATMENT## ring at a
cost of ##MATERIAL OMITTED AND SEPARATELY FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT## million and an O&M Charge of ##MATERIAL OMITTED
AND SEPARATELY FILED UNDER A REQUEST FOR CONFIDENTIAL TREATMENT## per
annum.
2.3 C&W shall notify the Purchaser promptly of the date on which its Capacity
is activated.
2.4 The technical specification prepared by the Purchaser and forming Appendix
1 to this Agreement outlines the proposed service parameters. C&W shall use
all reasonable endeavours to meet this technical specification when agreed
in writing by the parties but neither Gemini nor C&W warrants that the
Cable System shall comply with this technical specification. Both parties
will use reasonable efforts and apply appropriate human resources to agree
the further detail in the technical specification within 28 days of the
date of this Agreement.
2.5 The Purchaser is entitled to instigate dual node access as defined in the
technical specification at the US Terminal Points by prior notice in
writing to C&W. The Purchaser is responsible for any interconnect and
extension link charges that may be incurred at the US end. Subject to board
approval, C&W intends to provide dual node access to the Purchaser in the
UK by using its exchange at Thameside, at no additional cost to the
Purchaser so long as ##MATERIAL OMITTED AND SEPARATELY FILED UNDER A
REQUEST FOR CONFIDENTIAL TREATMENT##
3 PURCHASE PRICE
The Purchaser will pay to C&W the Purchase Price set out in Schedule 2 for
each STM-1 of Capacity in accordance with Schedule 2.
4
<PAGE> 8
4 OPERATION AND MAINTENANCE CHARGES
The Purchaser shall pay to C&W the O&M Charges set forth in Schedule 2
within thirty (30) days of the receipt of the relevant invoices.
5 CONDITIONS OF USE AND THE PROVISION OF CAPACITY
5.1 The Purchaser represents to and covenants with C&W as follows:
(a) The Purchaser is an entity, duly organised and validly existing under
the laws of its state or jurisdiction of organisation, is qualified to
do business in all jurisdictions (domestic and foreign) in which such
qualification is required by applicable law, and has the requisite
authority to execute this Agreement and to perform its obligations
hereunder;
(b) This Agreement constitutes a valid and binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with its
terms;
(c) There are no pending, or, to the Purchaser's knowledge, threatened
claims, actions, suits, audits, investigations or proceedings by or
against the Purchaser which could have a material adverse effect on
the Purchaser's ability to perform its obligations under this
Agreement;
(d) The Purchaser shall use all reasonable endeavours to obtain and
maintain in good standing, all necessary consents, licenses, permits
and other approvals, both governmental and private, as may be
necessary to permit the Purchaser to perform its obligations under
this Agreement and to acquire and use the Capacity;
(e) The Purchaser shall perform its obligations under this Agreement and
use the Capacity in a manner consistent with applicable law, and shall
not use, or knowingly permit the Capacity to be used, for any illegal
purpose or in any other unlawful manner;
5
<PAGE> 9
(f) The Purchaser shall not create or permit to exist, any liens,
encumbrances or charges to be placed upon the Capacity or the
Purchaser's rights under this Agreement;
(g) The Purchaser shall use the Capacity and cause each other Purchaser
Party using the Capacity to use such Capacity in such a manner so as
not to cause any interruption of, or interference to the Cable System
or the use of any other capacity on the Cable System.
5.2 C&W represents to and covenants with the "Purchaser" as follows:
(a) C&W is an entity, duly organised and validly existing under the laws
of its state or jurisdiction of organisation, is qualified to do
business in all jurisdictions (domestic and foreign) in which such
qualification is required by applicable law, and has the requisite
rights and authority to execute this Agreement and to grant the
rights and perform its obligations hereunder;
(b) This Agreement constitutes a valid and binding obligation of C&W,
enforceable against C&W in accordance with its terms;
(c) There are no pending, or, to C&W's knowledge, threatened claims,
actions, suits, audits, investigations or proceedings by or against
C&W which could have a material adverse effect on C&W's ability to
perform its obligations under this Agreement;
C&W confirms that:-
5.2 (d) Gemini is contractually obliged to use commercially reasonable efforts
to maintain in good standing, all necessary consents, approvals,
licences and permits, both governmental and private, as may be
necessary for the placement of the Cable System on the seabed, its
landing and placement on the shore, the crossing of existing pipelines
and cable, and the installation of ducts and manholes;
C&W covenants with the Purchaser that:-
5.2 (e) it shall pay charges due from it relating to the Capacity and comply
with other obligations placed upon it in relation to the Capacity and,
where
6
<PAGE> 10
required to ensure the Purchaser's quiet use and enjoyment of the
Capacity, shall take whatever steps are reasonable to enforce
obligations against the supplier of the Capacity;
5.2(f) C&W is not aware of any breaches of or departures from the C&MA
by Gemini, or any plans to make departures therefrom, that would
materially adversely affect the grant or use of the Capacity by the
Purchaser.
5.3 C&W's performance of this Agreement is contingent upon the provision and
continuing operation of the Cable System
5.4 The Capacity shall be made available to C&W, at such times as may be
required by Gemini and at such other times as are agreeable to both C&W and
the Purchaser, or to any duly authorised agent of C&W to make such tests
and adjustments as may be necessary for the maintenance of such Capacity.
C&W shall give the Purchaser as much notice as is reasonably practicable of
the proposed tests and adjustments (not less than 4 working days' notice
where reasonably practicable) and shall procure that they are performed at
such times and in such manner as shall minimise any interruption in or
interference with the Capacity.
6 OPERATION OF EQUIPMENT
6.1 The use and operation by the Purchaser or any other Purchaser Party of the
Capacity and any equipment associated with it shall be such as not to (i)
interrupt, interfere with or impair service over any of the facilities
comprising the Cable System or any other rights of use with respect to any
other capacity on the Cable System, (ii) impair privacy of any
communications over such facilities, (iii) cause damage to plant, (iv) be
hazardous to any person, or (v) prevent the use of similar or other
equipment by the other users of the Cable System. The Purchaser shall hold
harmless C&W and bear the cost of any additional protective apparatus
reasonably required to be installed because of the use and/or operation of
such Capacity and/or equipment by any Purchaser Party, and the cost of any
damages relating thereto. C&W has and will procure a similar obligation to
that contained in this Clause 6.1 from other C&W customers for IRUs on the
Cable System.
7
<PAGE> 11
6.2 C&W consents to the Purchaser using, Alcatel 1664 SM equipment and any
equipment which confirms to the G703 or G709/8/9 standards to interface
with the Cable System. For any other equipment, the Purchaser shall obtain
the prior written consent of C&W before installing or using or permitting
any other Purchaser Party to install or use that equipment to interface
with the Cable System. C&W shall notify the Purchaser if, in C&W's
reasonable judgement, the Purchaser's use of the Cable System is damaging
or disrupting the Cable System and require the Purchaser to immediately
rectify the situation. If the Purchaser does not immediately rectify the
situation, C&W reserves the right to suspend the use of the Capacity.
C&W shall allow the Purchaser to reconnect the Capacity as soon as the
Purchaser has established to C&W's reasonable satisfaction that the cause
or potential cause of the damage or disruption has been rectified and the
risk removed.
7 INTELLECTUAL PROPERTY
No licence under patent or any other intellectual property right whatsoever
shall be granted by C&W to the Purchaser or other Purchaser Party pursuant
to this Agreement including without limit in connection with any Purchaser
Party's use of the Cable System.
8 RESTORATION
In the event of failure of one of the two transmission paths within the
Cable System, restoration of the Capacity will be provided initially using
Out-of-System Restoration until redundancy is provided in-system by use
of all or portion(s) of the other transmission path within the Cable
System automatically (less than 50 millisecs) at no charge to the
Purchaser.
9 REDUCTION IN SYSTEM CAPACITY AND INCREASE IN COMMUNICATION CAPABILITY
9.1 If the capacity of the Cable System is reduced as a result of physical
deterioration or for other reasons in connection with the operation of the
Cable System during the term of this Agreement and the capacity allocated
to C&W is reduced as a result thereof, then (i) upon notice to the
Purchaser, the Capacity shall also be reduced, with such reduction being in
the same proportion as the capacity of the Cable System is reduced in so
far as this is feasible as
8
<PAGE> 12
determined by C&W, and (ii) if the costs to C&W with respect to the O&M
Charges are reduced as a result thereof, the O&M Charges shall be equitably
reduced.
9.2 Subject to Clause 6, the Purchaser shall at its own expense have the right
to increase the communication capability of the Capacity by the use of
equipment which will increase the amount, or make more efficient use, of
the Capacity, or both, or by other means as it may from time to time
determine.
10 TERMINATION OF AGREEMENT
10.1 This Agreement shall terminate forthwith on the Retirement Date (including
circumstances in which Gemini decides to retire the Cable System from
service in accordance with appropriate national and international
regulations in accordance therewith) unless earlier terminated in
accordance with Clause 10.2 or 10.3 below.
10.2 This Agreement may be terminated by C&W if the Purchaser fails to make
payment when due or is in breach of any other material provision of this
Agreement, which, if remediable, has not been remedied within thirty (30)
days of notice thereof being given to the Purchaser. In this event, C&W
shall (i) be entitled to reclaim the Capacity, (ii) be relieved of any
liability arising to any Purchaser Party out of such termination and
reclamation, and (iii) be entitled to pursue any and all rights and legal
and equitable remedies (including its rights and remedies to enforce the
Purchaser's obligations under this Agreement).
10.3 This Agreement shall terminate forthwith in the event of any action by the
FCC or other applicable regulatory or governmental authority directing
either party to terminate this Agreement or declaring that this Agreement
is in any way inconsistent with FCC rules or other applicable laws, rules
and regulations.
In the event of such termination, all sums due and payable hereunder shall
immediately accrue and become due and payable and the Capacity shall be
immediately reclaimed by C&W without it being liable to the Purchaser or
any other Purchaser Party as a result thereof. The Purchaser shall have
no further liability to C&W in these circumstances.
10.4 This Agreement may be terminated by the Purchaser if C&W is in breach of
any
9
<PAGE> 13
material provision of this Agreement, which, if remediable, has not been
remedied within thirty (30) days of notice thereof be given to C&W.
10.5 The Purchaser may give C&W notice to terminate this Agreement (and, where
it has made a pre-payment of the Purchase Price, shall be entitled to
immediate repayment of that pre-payment) in the event that C&W has not
activated the first STM-1 of Capacity by 31st March 1999. Any such notice
shall be given within 10 days thereafter.
10.6 In the event that an STM-1 of Capacity (other than the first STM-1) is
not activated within 60 days of the end of the month in which it is due to
be activated and the Purchaser has given C&W sufficient notice to activate
that Capacity when due, then the Purchaser shall have the right to cancel
that STM-1 on giving C&W notice to that effect.
11 LIABILITIES
11.1 Except as expressly set forth in this Agreement, neither C&W nor any
company granting it capacity in the Cable System shall be liable to the
Purchaser or other Purchaser Party or any person or entity claiming through
or under any Purchaser Party, directly or indirectly, for any loss or
damage (whether direct, indirect, general, special or consequential)
sustained for any cause or reason whatsoever relating to or arising out of
the construction, operation, repair, maintenance or decommissioning of the
Cable System, or any facilities associated with the Cable System,
including, but not limited to, any damage sustained by reason of any delay
in, commencing or failure to commence operation of, or any failure in or
breakdown of the Cable System, or any facilities associated with the Cable
System, or for any interruption, and however long it shall last. In no
event shall C&W or any company granting it capacity in the Cable System be
liable to the Purchaser or any other Purchaser Party, or any person or
entity claiming through or under them,
(i) for any loss of business, anticipated savings or profits, or any loss
of value of equipment, including software, or
(ii) any indirect, incidental, special or consequential loss or damage,
however arising.
10
<PAGE> 14
11.2 The Purchaser shall indemnify, hold harmless and defend C&W and its
directors, employees, representatives and agents from and against all
claims, demands, actions, suits, proceedings, writs, judgements, orders
and decrees brought, made or rendered against them or any of them and
all damages, losses and expenses suffered or incurred by them or any of
them howsoever arising out of or related to any Purchaser Party's use of
the Capacity or any equipment used in connection therewith, or ownership of
the IRU interest in the Capacity, except where such claim arises directly
as a result of the negligence or wilful misconduct of C&W.
12 FORCE MAJEURE
Neither party shall be liable for the failure to perform any obligation
hereunder, or any loss or damage which may be suffered by the other party,
due to any cause beyond the first party's reasonable control, including
without limitation, any acts of God, inclement weather, failure or
shortage or power supplies, unavailability of materials, flood, drought,
lightning fire, strike, lockout, trade dispute or labour disturbance, the
act or omission of government, other telecommunications operators,
administrations or other competent authority, military operations, riot, or
difficulty, or delay or failure in manufacture, production or supply by
third parties.
13 NATURE OF RIGHTS AND RELATIONSHIP
13.1 All rights granted hereby and obligations entered into hereunder are purely
contractual. Other than the IRU interests in the Capacity as set out in
this Agreement, nothing herein contained shall have effect to grant any
ownership, proprietary or possessory rights in any of the subject-matter
hereof to the Purchaser or any other Purchaser Party.
13.2 The relationship between C&W and the Purchaser shall not be that of
partners and nothing contained herein shall be deemed to constitute a
partnership between them.
14 ASSIGNMENT OF RIGHTS
14.1 Neither party shall be entitled to assign, transfer, or otherwise dispose
of any of its rights or obligations hereunder to any third party without
the consent of the
11
<PAGE> 15
other party, such consent not to be unreasonably withheld except either
party shall be entitled to assign transfer or otherwise dispose of all of
its rights and obligations hereunder to an Associated Company on giving
prior notice to the other party.
14.2 The Purchaser may resell all or parts of its Capacity provided that the
buyer is contractually bound to comply with similar obligation in relation
to use of the capacity as set out in this Agreement.
15 AMENDMENTS, WAIVER AND ENTIRE AGREEMENT
15.1 This Agreement may only be amended with written consent(s) signed by duly
authorised signatories of both parties.
15.2 No failure or delay, by either party to exercise any of its rights
hereunder shall constitute a waiver of all or part of same, unless and to
the extent that such party gives written confirmation that it expressly
waives its rights. No waiver of rights in respect of any act or default
shall affect any other rights, or any future rights in respect of a similar
or other act or default.
15.3 This Agreement represents the entire agreement and understanding between
the parties in respect of the grant of the IRU by C&W to the Purchaser and
supersedes any previous agreement between the parties in relation to that
subject matter and each party confirms that it has not entered into this
Agreement in reliance upon any representation or promise other than those
expressly set out herein.
16 EXECUTION OF MULTIPLE COPIES
This Agreement may be executed by duly authorised signatories on behalf of
both parties in two (2) counterparts and in such event each such
counterpart when so executed and delivered shall be an original, and such
counterparts shall together (as well as separately) constitute one and the
same instrument.
17 SUCCESSORS
This Agreement shall be binding on the parties, their lawful successors and
their permitted assigns.
12
<PAGE> 16
18 LAW AND JURISDICTION
This Agreement shall be construed in accordance with English law and the
Parties irrevocably submit to the exclusive jurisdiction of the English
courts.
19 NOTICES
19.1 All notices to be given hereunder shall, if given to:
C&W, be sent or transmitted to:
Cable & Wireless Communications
26 Red Lion Square
London WC1R 4HQ
Facsimile No: +44 71 528 2073
For the attention of: Managing Director, International & Partner Services
Copies to: Company Secretary
The Purchaser, be sent or transmitted to the address detailed in Schedule
1.
Or shall be sent or transmitted to such other addresses as may be notified
in writing by either party to the other from time to time in accordance
with the provisions of this Clause.
19.2 Any notice given pursuant to this Agreement shall be in writing signed by
(or by some person duly authorised by) the person giving it and may be
served by leaving it or sending it by facsimile, by hand delivery or
prepaid recorded delivery to the address of the relevant party set out in
Clause 19.1 (or as otherwise notified from time to time hereunder). Any
notice so served by facsimile or post shall be deemed to have been
received:
(a) in the case of facsimile, twelve hours after time of receipt of the
appropriate electronic confirmation:
(b) in the case of recorded delivery the time of delivery recorded by the
postal service;
(c) in the case of by hand delivery, the actual time of delivery.
13
<PAGE> 17
20. CONFIDENTIALITY
The terms and provisions of this Agreement including details of the
charges shall not be disclosed by either party to another person or entity
without the other party's prior written consent in each instance except
that either party may disclose this information to professional advisers
and other Associated Companies which have a need to know this
information.
C&W may disclose to Gemini and any C&W affiliate with a need to know the
name, address, telephone number, facsimile number and e-mail address of the
Purchaser and the IRU interest in the Capacity granted herein for the
purpose of administering the Cable System.
21. TAXES AND LATE PAYMENT FEES.
The Purchase Price, O&M Charges, Restoration Charges and other amounts due
hereunder do not include any applicable sales taxes which the Purchaser
shall pay upon receipt of an itemised invoice therefor.
If the Purchaser fails to pay an invoice when due, then C&W may, in
addition to any other remedy available, assess a late payment fee. The
late payment fee shall be interest accruing daily on the unpaid invoice
from the due date at four per cent per annum above the rate for US dollar
LIBOR (London Interbank Offered Rate) for one month as quoted in the Wall
Street Journal on the first business day after payment is due until such
payment is received by C&W, and such amount of accrued interest will be
included in a subsequent invoice to the Purchaser.
EXECUTION
The parties have shown their acceptance of the terms of this Agreement by
executing it at the end of the Schedules.
14
<PAGE> 18
CONFIDENTIAL TREATMENT
SCHEDULE 1
1. THE CABLE SYSTEM
Anticipated Retirement Date ##MATERIAL OMITTED AND SEPARATELY FILED
UNDER A REQUEST FOR CONFIDENTIAL TREATMENT##
This date is based on the statement from
Gemini that it intends to operate and
maintain the Cable System for ##MATERIAL
OMITTED AND SEPARATELY FILED UNDER A REQUEST
FOR CONFIDENTIAL TREATMENT## from the date
that the first transmission path was
activated, unless it is extended or reduced
for particular reasons.
Terminal Points
15
<PAGE> 19
US End Cable System ADM at:
c/o Worldcom Inc
12th floor
76/9th Avenue
New York
NY 10011
c/o Worldcom Inc
4th floor
60 Hudson Street
New York
NY 10013
(C&W will have their own
terminal point at 60 Hudson
Street on activation of the
northern transmission path of
the Cable System)
UK End
Cable System ADM
c/o Cable & Wireless
Communications
Waterside House
Waterside Park
Longshot Lane
Bracknell
Berkshire RG12 1XL
The Purchaser may access their Capacity at any of the Terminal Points, however
at the Terminal Points in the United States, there are additional
interconnection charges.
16
<PAGE> 20
"CONFIDENTIAL TREATMENT"
Notices to Purchaser (per Clause 19.1) Hermes Europe Railtel (Network)
Limited
2 Custom House Plaza
Harbourmaster Place
Dublin 1
Ireland
For the attention of the
Managing Director
With a copy to
Hermes Europe Railtel
Terhulpsesteenweg 6A
1560 Hoeilaart
Capacity (between Terminal Points) Belgium
Quantity of STM-1s Proposed date for activation
##MATERIAL OMITTED AND SEPARATELY FILED ##MATERIAL OMITTED AND SEPARATELY FILED
UNDER A REQUEST FOR CONFIDENTIAL UNDER A REQUEST FOR CONFIDENTIAL
TREATMENT## TREATMENT##
The Commencement Date for each STM-1 shall be the date of activation of the
STM-1 except that if the Purchaser fails to give C&W prior notice sufficient
to allow activation by the end of the month stated above, the Commencement Date
shall be deemed to be the last day of the relevant month (giving C&W the right
to invoice for this Capacity). As a holder of capacity of a whole STM-1 or
greater, the Purchaser will be entitled to nominate one representative to
participate in the Gemini Users Consultative Committee.
Notes
*The Purchaser gave a written activation request for the first STM-1 to C&W on
4th September 1998. The first activation is dependent on Gemini making capacity
available on the northern transmission path of the Cable System.
For operational matters, the Purchaser shall contact the Gemini Network Control
Center.
17
<PAGE> 21
CONFIDENTIAL TREATMENT
2. EXTENSION LINKS
C&W shall provide the following Extension Links:-
Quantity Link Proposed date for activation
##MATERIAL OMITTED Bracknell - Telehouse ##MATERIAL OMITTED AND SEPARATELY
AND SEPARATELY FILED FILED UNDER A REQUEST FOR
UNDER A REQUEST FOR CONFIDENTIAL TREATMENT##
CONFIDENTIAL
TREATMENT## Bracknell - City Forum ##MATERIAL OMITTED AND SEPARATELY
FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT##
*This only applies to the ##MATERIAL OMITTED AND SEPARATELY FILED UNDER A
REQUEST FOR CONFIDENTIAL TREATMENT## STM-1. (See Clause 2.2 in relation to the
first STM-1).
Notes:-
1. The Purchaser may cancel the Extension Links on giving C&W at least 30 days'
notice in writing. Where the Purchaser cancels all ##MATERIAL OMITTED AND
SEPARATELY FILED UNDER A REQUEST FOR CONFIDENTIAL TREATMENT## STM-1s there shall
be no cancellation charge. Any O&M Charges paid in advance for the period after
the date of cancellation shall be credited by C&W to the Purchaser.
2. If the Purchaser uses a third party to provide its extension link, C&W shall
charge the Purchaser for interconnection charges per node.
3. The proposed date for activation of the link to City Forum is dependent on
the Purchaser providing C&W with access to City Forum.
4. The links shall be protected, subject to the Purchaser providing a second
access route for C&W at City Forum.
Addresses for the terminal points for the Extension Links:
Bracknell:- Waterside House
Waterside Park
Longshot Lane
Bracknell
Berkshire RG12 1XL
Telehouse:- Floor 3
Coriander Avenue
London E14 2AA
City Forum:- Unit 2
250 City Road
London EC1V 2PU
18
<PAGE> 22
CONFIDENTIAL TREATMENT
SCHEDULE 2
PURCHASE PRICE, O&M CHARGES, RESTORATION CHARGES,
AND INTERIM RESTORATION ARRANGEMENT
PURCHASE PRICE:
The Purchase Price per STM-1 for the capacity is ##MATERIAL OMITTED AND
SEPARATELY FILED UNDER A REQUEST FOR CONFIDENTIAL TREATMENT##
The Purchase Price for each STM-1 is due on the Commencement Date.
Where the activation date requested is after 31st March 1999, payment will be
made by the Purchaser on or before 31st March 1, 1999 of the following:-
##MATERIAL OMITTED AND SEPARATELY FILED UNDER A REQUEST FOR CONFIDENTIAL
TREATMENT##
ANNUAL O&M CHARGES
The O&M Charge payable by the Purchaser shall be an annual charge, being in any
calendar year, the lesser of:-
(i) The total operational and maintenance costs in the Cable System as
determined in accordance with the C&MA pro-rated by the proportion that the
Purchasers' Capacity represents of the total activated capacity in the
Cable System in the relevant year together with a 10% administrative
charge; and
(ii) ##MATERIAL OMITTED AND SEPARATELY FILED UNDER A REQUEST FOR CONFIDENTIAL
TREATMENT## per STM-1 increased by ##MATERIAL OMITTED AND SEPARATELY FILED
UNDER A REQUEST FOR CONFIDENTIAL TREATMENT## each calendar year commencing
on 1st January, 1999.
In the first year, the annual O&M Charge as calculated in (i) above shall be
calculated on the basis of the period from the activation date to the end of
that calendar year.
An estimate of the O&M Charge shall be payable in advance following receipt of
invoice on or about 1st January of each year except that the first payment
shall be due on the activation of the Capacity for the remainder of that
calendar year.
In the event that Gemini reduces the maximum operation and maintenance charge
payable by C&W, then C&W agrees to make a proportionate reduction in the figure
stated in (ii) above.
In addition, there is an annual O&M Charge of ##MATERIAL OMITTED AND SEPARATELY
FILED UNDER A REQUEST FOR CONFIDENTIAL TREATMENT## for all the Extension Links.
19
<PAGE> 23
SIGNED by
[ ]
---------------------------
(Signature)
duly authorised signatory,
for and on behalf of
CABLE & WIRELESS
COMMUNICATIONS SERVICES
LIMITED
SIGNED by
---------------------------
(Signature)
duly authorised signatory,
for and on behalf of
HERMES EUROPE RAILTEL (NETWORK)
LIMITED
20
<PAGE> 24
INDEFEASIBLE RIGHT OF USE AGREEMENT
APPENDIX 1
TECHNICAL SPECIFICATION
<TABLE>
<CAPTION>
SECTION INDEX
<S> <C> <C>
1 DEFINITIONS
2A SERVICE DEFINITION - Gemini Network Capacity
2B SERVICE DEFINITION - UK Local Network Capacity
3A IMPLEMENTATION - Gemini Network Capacity
3B IMPLEMENTATION - UK Local Network Capacity
4A SERVICE LEVEL AGREEMENT - Gemini Network Capacity
4B SERVICE LEVEL AGREEMENT - UK Local Network Capacity
5A ACCEPTANCE PROCEDURES - Gemini Network Capacity
5B ACCEPTANCE PROCEDURES - UK Local Network Capacity
6A OPERATIONS AND MAINTENANCE - Gemini Network Capacity
6B OPERATIONS AND MAINTENANCE - UK Local Network Capacity
</TABLE>
<PAGE> 25
SECTION 1
DEFINITIONS
- --------------------------------------------------------------------------------
APS Automatic Protection Switching
- --------------------------------------------------------------------------------
DDF Digital Distribution Frame
- --------------------------------------------------------------------------------
Drop and Continue SDH interconnection method as
described in recommendation G842
ITU-T (04/97), 3.1
- --------------------------------------------------------------------------------
Dual Node Interconnection SDH interconnection method as
described in recommendation G842
ITU-T (04/97), 3.3
- --------------------------------------------------------------------------------
Gemini Network Capacity Means the Capacity connecting USA
1 & USA 2 to UK 1 and UK 2
- --------------------------------------------------------------------------------
Network Demarcation Point (NDP) - Means the point or points where the
Purchaser connects into the Network
Capacity
- --------------------------------------------------------------------------------
SSMB Synchronisation Status Message Bit
(ITU-T G.704, 2.3.4 Table 5C refers)
- --------------------------------------------------------------------------------
Termination Node SDH interconnection method as
described in recommendation G842
ITU-T (04/97), 3.15
- --------------------------------------------------------------------------------
UK Local Network Capacity Means the Capacity connecting UK1
with the Purchasers 'Telehouse'
location and UK 1 with the
Purchasers 'Colt' Location.
- --------------------------------------------------------------------------------
TBA To Be Advised
- --------------------------------------------------------------------------------
<PAGE> 26
SECTION 2A
SERVICE DEFINITION
GEMINI NETWORK CAPACITY
1 INTRODUCTION
This Section defines the Gemini Network Capacity being provided by C&W to the
Purchaser.
1.1 Both single & dual node interconnection are described in this section,
noting that provision of dual node interconnection is subject to clause 2.5
of the main agreement.
1.2 Electrical interfaces will be provided with the first STM-1 as described in
this section. Optical Interfaces are described in this section and may be
selected by the purchaser for subsequent STM-1's if available from C&W at
time of activation for no extra cost.
2 SCOPE
2.1 The Gemini Network Capacity includes all the fibre, hardware, software
provided to support STM-1 level connections between, initially a single NDP
in New York (USA 1) and a single NDP in the UK (UK 1) and ultimately dual
NDP's in New York and dual NDP's in the UK.
2.2 The provision of second NDP's in New York and the UK is subject to the
approval of the C&W board. A decision on this issue is expected by early
October 1998.
2.3 Reference should also be made to Section 2B - SERVICE DEFINITION - UK
Local Network Capacity, which describes the UK Local Network Capacity,
which will be interconnected to the Gemini Network Capacity to form the
London - New York Network Capacity.
<PAGE> 27
3 NETWORK DEMARCATION POINT (NDP) LOCATIONS
The NDP's for the Gemini Network Capacity are, subject to Clause 2.2, located as
follows:-
USA 1
- --------------------------------------------------------------------------------
Name C&W - USA
- --------------------------------------------------------------------------------
Street 60 Hudson Street
- --------------------------------------------------------------------------------
ZIP NY 10013
- --------------------------------------------------------------------------------
City New York City
- --------------------------------------------------------------------------------
County New York
- --------------------------------------------------------------------------------
Room TBA
- --------------------------------------------------------------------------------
Floor 16th Floor
- --------------------------------------------------------------------------------
Suite
- --------------------------------------------------------------------------------
Rack
- --------------------------------------------------------------------------------
DDF Position
- --------------------------------------------------------------------------------
NOTE FOR INFORMATION ONLY: The Worldcomm Gemini Cable System ADM will be
located in a facility on the 4th floor of 60 Hudson Street & the C&W Gemini
Cable System ADM will be located on the 16th floor as described above
USA 2
- --------------------------------------------------------------------------------
Name C&W - USA
- --------------------------------------------------------------------------------
Street 76/9th Avenue
- --------------------------------------------------------------------------------
ZIP NY 10011
- --------------------------------------------------------------------------------
City New York City
- --------------------------------------------------------------------------------
County New York
- --------------------------------------------------------------------------------
Room TBA
- --------------------------------------------------------------------------------
Floor 12
- --------------------------------------------------------------------------------
Suite
- --------------------------------------------------------------------------------
Rack
- --------------------------------------------------------------------------------
DDF Position
- --------------------------------------------------------------------------------
NOTE FOR INFORMATION ONLY: This location is more generally known as 111 Street
and 8 Avenue. The Gemini Cable System ADM will be located on the 12th floor of
this building.
<PAGE> 28
UK 1
- --------------------------------------------------------------------------------
Name C&W - UK
- --------------------------------------------------------------------------------
Street Waterside Park, Longshot Lane
- --------------------------------------------------------------------------------
ZIP RG12 1XL
- --------------------------------------------------------------------------------
City Bracknell
- --------------------------------------------------------------------------------
County Berkshire
- --------------------------------------------------------------------------------
Room Comms
- --------------------------------------------------------------------------------
Floor Ground
- --------------------------------------------------------------------------------
Suite
- --------------------------------------------------------------------------------
Rack
- --------------------------------------------------------------------------------
DDF Position
- --------------------------------------------------------------------------------
UK 2
- --------------------------------------------------------------------------------
Name C&W - UK
- --------------------------------------------------------------------------------
Street 100 Prestons Road
- --------------------------------------------------------------------------------
ZIP E14 9QL
- --------------------------------------------------------------------------------
City Thamesside
- --------------------------------------------------------------------------------
County London
- --------------------------------------------------------------------------------
Room Comms
- --------------------------------------------------------------------------------
Floor Ground
- --------------------------------------------------------------------------------
Suite
- --------------------------------------------------------------------------------
Rack
- --------------------------------------------------------------------------------
DDF Position
- --------------------------------------------------------------------------------
NOTE, ACCESS TO THIS NODE IS CONDITIONED BY CLAUSE 2.5 OF THE MAIN AGREEMENT
<PAGE> 29
4 GEMINI DESCRIPTION
A technical description of the Gemini Network Capacity is given in Annex 1 to
this Section. A network schematic drawing of the Gemini Network Capacity is
given Annex 2 to this Section.
5 INTERFACE DEFINITIONS
5.1 PHYSICAL CONNECTIONS
The NDP for the Gemini Network Capacity, will be the designated DDF at the
locations identified in Clause 3.
5.2 INTERFACE SPECIFICATIONS
Electrical STM-1 interfaces only will be available at the NDP, DDF.
ELECTRICAL TRIBUTARY INTERFACE SPECIFICATION
The STM-1 electrical interface shall be compliant with ITU-T G 703 and G.825.
5.3 STM-1 FRAME STRUCTURE
The STM-1 frame structure shall be compliant with ITU-T G.707, 708, 709.
6 PROTECTION
6.1 PROTECTION SCHEME
The protection scheme shall be SNC-P.
SWITCHING TIME
The switch time shall be compliant with G.783 (within 50 msec.)
6.2 SINGLE NODE ACCESS - INTRA-NODE INTERCONNECTION PROTECTION
The protection on the intra-node connection will be as follows:
6.2.1 OPTICAL INTERFACES
The linear multiplex section between STM-1 tributaries shall be protected with a
1+1 single ended APS.
6.2.2 ELECTRICAL INTERFACES
The linear multiplex section between STM-1 tributaries shall be protected with a
1+1 single ended APS.
6.2.3 SWITCHING TIME
The switch time shall be compliant with G.783 (within 50 msec.)
<PAGE> 30
6.3 DUAL NODE ACCESS - INTRA-NODE INTERCONNECTION PROTECTION
The protection on the intra-node connection will include Ring Interconnection
and Tributary Interconnection will be as follows:
6.3.1 RING INTERCONNECTION
The ring interconnection between the Gemini Network Capacity and the Purchasers
UK Local Network Capacity shall be based on Dual Node Interconnection by Drop
and Continue (ITU-T G.842).
6.3.2 TRIBUTARY PROTECTION
The STM-1 electrical tributaries shall be protected N:1 in the case of no
interconnection protection.
6.3.3 SWITCHING TIME
The switching time shall be within 100 msec.
7 SYNCHRONISATION DISTRIBUTION
The synchronization of the signal at the STM-1 interface at Gemini Network
Capacity side of the interface shall be G.811 traceable.
The SSMB output is desirable but not mandatory.
<PAGE> 31
SECTION 2A
ANNEX 1
GEMINI NETWORK CAPACITY - TECHNICAL DESCRIPTION
1 INTRODUCTION
The Gemini submarine cable system comprising 3 interconnected SDH rings
interconnected using WDM with no single point of electrical or physical failure
to provide a highly resilient telecommunications service between New York and
London Gemini is owned within a 50/50 joint venture between WorldCom Inc. and
Cable & Wireless plc and is being constructed during 1997/98 with a 25 year
design life.
Gemini's standards are designed to exceed the basic ITU SDH and WDM standards.
2 INSTALLATION
The ring system of 30 Gbs is being constructed in a number of phases. The first
leg of the circuit, operating at 5 GBit/s, was completed in January, and
connected Porthcurno landing station in Land' End UK with Manasquan landing
station in New Jersey USA. From here, bandwidth is connected to two nodes in and
around London, namely Bracknell and Aylesbury Street. In New York the two nodes
are at 60 Hudson Street and 111/8th. C&W is currently only be able to provide
direct access to the Gemini system, in the UK, from the Bracknell node.
Phase 2
Planned for completion by the end of October 1998 will see the ring gain full
resilience when the "northern leg" of the system is completed. This will see the
second submarine 30 GBit link completing the loop, with connections between the
Oxwich Bay landing station in Wales. UK and the Charlestown landing station in
Rhode Island USA. As with phase 1, links will be established between the two
existing nodes. C&W will only be able to provide HER with access in the UK from
the Bracknell node during this phase
Phase 3
Upgrades the ring to 20 GBit/s and introduces C&W USA accesses at 60 Hudson. It
will be available from October 98.
<PAGE> 32
Phase 4
Which is currently under review inside C&W and is targeted for completion around
June 1999 will see further nodes connected in London and possibly New York.
These nodes are not yet confirmed but they will add extra resilience to the
system, particularly for access points for customer's local tails. This is still
subject to board approval on a presentation from C&W USA Inc. and C&W in the UK.
Should phase 4 be approved, the likely new C&W nodes would be Thameside (London
Docklands) in the UK and another floor of the 111/8th Ave. or 60 Hudson Street
building in New York.
3 NETWORK TOPOLOGY
3.1 INTRODUCTION
To achieve the required resilience and availability performance objective
guaranteed of 99.9999 % (excluding failures due to external aggression), the
Gemini system has no single point of failure, and comprises three dual
interlinked SDH rings.
a) A 'terrestrial' UK ring linking London with the two UK cable landing
sites (Lands End and Oxwich Bay)
b) A 'wet' ring linking two UK cable stations with the two US cable
stations.
c) A 'terrestrial' USA ring linking New York with the 2 USA cable
stations (Mannesquan and Charlestown).
Each of the SDH rings has an equipped capacity of 20 Gbit/s made up of 8
individual 2.5 Gbit/s optical paths using WDM techniques. The 'wet' ring has a
design capacity of 30 Gbit/s and the 'dry' rings are expandable to a similar
level. The provision of 2 cable stations in both USA and UK has enabled a
geographic separation of typically 500 kms between the two transatlantic cables.
This is a particular significance in the shallow water approaches, where it is
not unknown for a vessel to damage several cables in a small area (e.g. by
dragging its anchor in a storm).
Gemini differs from all other known existing and planned transatlantic cable
systems in that it employs SDH loop technology to interlink the three rings
using Drop and Continue, Add Drop Multiplexers (ADM). The ADM's broadcast the
signal from the entry point both ways round the ring, At both exit points, the
best of two received signals is transferred across onto the next ring. As a
result, the network is resilient and could be subjected to multiple cable and
node failures without loss to service to customer traffic. At the same time, the
simplicity of the protection arrangement affords very fast switching (under 50
mSec) without the need for complex path monitoring.
<PAGE> 33
As a result of this high level of resilience, the Gemini engineers calculate
that the downtime (owing to electrical failure) of the network, totalled over
the 25 years of its design life, will be less than 15 minutes, an availability
of better than 99.9999%.
The overall system is managed on an end to end basis by Gemini Network
Operations Centre (GNOC) which is located at Manasquan, New Jersey.
3.2 LAND BASED RINGS IN THE USA & UK.
The terrestrial infrastructure is provided by Cable & Wireless Communications in
the UK and Worldcom Inc. in the USA. Both parties use WDM technology to provide
multiple 2.5GB/s optical paths, some of which are dedicated to Gemini. The
performance of the 2.5GB/s optical pipes is specified to enable the Gemini
end-to-end performance objectives to be achieved.
The 2.5 Gbit/s optical pipes terminate on Alcatel 1664 SM ADM's at the cable
stations and City Offices. The ADM's enable network access at VC4 level, and
also provide network resilience through Drop and Continue capability at each
network node.
The USA & UK Backhaul transmission paths are geographically diverse and totally
independent in order to minimise the risk of simultaneous failure of multiple
transmission paths, and shall be at a minimum.
- - use commercially reasonable efforts to maintain horizontal separation
between transmission paths of not less than 100 metres (except to the
extent necessary to enter a Backhaul Interface Point facility or Cable
Station;
- - not cross any other backhaul transmission path;
- - maintain route diverse entrance facilities to Backhaul interface point
facilities and Cable stations, including risers and interior cable /
conduit routing to terminal equipment.
3.3 THE WET RING
The two transatlantic links (Gemini South and Gemini North) use submarine cable
technology supplied by Alcatel Submarine Networks.
Gemini South runs from Porthcurno, Cornwall in the UK to Manasquan, New Jersey
in the USA, and is approximately 6,250 kms in length.
Gemini North runs from Oxwich Bay, South Wales in the UK to Charlestown, Rhode
Island in the USA, and is approximately 5,850 kms in length.
<PAGE> 34
Linking the cable stations to complete the rings are two terrestrial links
between Porthcurno and Oxwich Bay in the UK, and similarly between Charlestown
and Mannesquan in the USA.
The submarine cable is Alcatel OAL 21.5mm slotted core cable comprising of a
central copper core enclosing 4 non-dispersion shifted optical fibres operating
in the 1560 km window. (attenuation typically around 0.2 Db/KM). The fibres are
loosely held in a slotted core former, with slack to provide protection in the
event of strain. The slotted core is encased in a special compound which
prevents significant water penetration up to the copper tube in the unlikely
event of a cable break. The central copper tube provides several functions:
a) electrical conductor to feed power from the terminal stations to the
submerged amplifiers.
b) resistance to the hydrostatic pressure (up to 4 tonnes/square inch)
c) prevention of the ingress of hydrogen.
Also within the copper tube are torsionally balanced high tensile steel wires,
which provide the cables tensile strength, which is critical during laying and
recovery. The copper tube is surrounded by a polythene screen that acts as an
electrical insulator. The overall diameter is just over 2cms.
In shallow waters (less than 2000 meters) armouring wires are applied to
provide greater protection against external damage (e.g. trawlers). The amount
of armouring used reflects the risk of damage. Too much armour leads to
excessive cost and weight. Too little armour could lead to excessive downtime
due to external hits.
To compensate for the optical attenuation of the fibres, it is necessary to
incorporate optical amplifiers periodically along the route. The spacing of the
optical amplifiers is determined by the signal to noise requirements of the
system, and hence the ultimate bandwidth. Gemini south uses Alcatel R1 submerged
repeaters, spaced approximately 60 kms apart and Gemini north uses Alcatel R3
submerged repeaters, spaced approximately 70 k.s apart. This will enable a
capacity of at least 30 Gbit/s, comprising 6 x 2.5 Gbit/s paths (line rate 2.7
Gbit/s including FEC) assembled using WDM techniques. The amplifiers are
assembled in ultra clean conditions, using specially screened components, to
achieve the system specification of no more than 3 electronic failures in 25
years. Electrical power is fed into the amplifiers using approx. 1.2 Amps
constant current generators in the terminal stations. End to end system voltage
is just under 1OKv.
The terminal equipment uses Alcatel Wave Division Multiplex (WDM) Submarine Line
Terminal Equipment (SLTE) (N."B"- South is initially installed as a 1+1 5GB/s
system, but will be upgraded to WDM late 1998/early 1999)
<PAGE> 35
Alcatel Power Feed Equipment (PFE) is used to provide constant current to the
submerged repeaters. PFE is used to power the submerged section of the system
which includes the optical amplifiers.
5 NETWORK MANAGEMENT
The Gemini network is managed from the Gemini Network Operations Centre (GNOC)
in Manasquan. The GNOC is staffed 7 x 24 and also provides the fault reporting
point (FRP) and restoration control office (RCO).
Network Management is achieved using an Alcatel platform and integrates:
i) 1353 SN to monitor the submarine link
ii) 1353 SH to monitor the network elements SDH paths
iii) 1354 RM to provide traffic management
The network management system is based on a UNIX platform using HP Open View
products. Amongst its end to end management functions are:
- - configuration management
- - fault management
- - city office to city office performance management
- - security management
6 OPERATIONS AND MAINTENANCE
The Gemini submerged plant will be maintained within the Atlantic Cable
Maintenance Agreement (ACMA). This agreement currently provides access for cable
owners to 6 cableships equipped for cable repairs. The cable ships are based in
the UK, France, Spain, Bermuda, USA and Caribbean to provide maximum geographic
spread. The ships can be equipped with remote submersibles that assist with
recovery and reburial should failures occur in plough buried sections. We have a
target burial depth of 60cms and have endeavored to bury down to water depths of
1500 metres on European shelf and 1000 metres on USA shelf (the difference is
due to the softness and gradients of the two shelves).
<PAGE> 36
RESTORATION
Since Gemini has a self-healing ring architecture, the first choice restoration
path is in-system.
Prior to loop completion (late 1998) Gemini has negotiated external restoration
capacity with the owners of TAT 12/13 and CANTAT-3/CANUS cable systems. C&W will
provide the funding for this out-of system restoration until internal
restoration of Gemini is fully up and running.
Gemini is investigating possible emergency restoration arrangements in the
unlikely event of simultaneous failure of both submarine links.
7 GEMINI CAPACITY SPECIFIC TO THE PURCHASER
The Purchaser has access rights to the 1st STM-1 capacity as defined in
Section 2A, 3.
<PAGE> 37
SECTION 2A
ANNEX 2
NETWORK SCHEMATIC FOR THE GEMINI NETWORK CAPACITY
[MAP]
<PAGE> 38
SECTION 2B
SERVICE DEFINITION
UK LOCAL NETWORK CAPACITY
1 INTRODUCTION
This Section defines the UK Local Network Capacity being provided by C&W to the
Purchaser
1.1 Electrical interfaces will be provided with the first STM-1 as described in
this section. Optical Interfaces are described in this section and may be
selected by the purchaser for subsequent STM-1's at time of activation for
no extra cost.
1.2 1+1 protection is not available at time of activation of the first STM-1,
however it will be provided by C&W at no extra cost by:-
o 30-Nov-98 for ccts activated as optical interfaces
o 28-Feb-98 for ccts activated as electrical interfaces
2 SCOPE
2.1 The UK Local Network Capacity includes all the fibre, hardware, software
provided to support STM1 level connections between a single NDP in
Bracknell (UK 1) and a single NDP in the Purchasers London "Telehouse"
location and a single NDP in Bracknell (UK 1) and a single NDP location in
the Purchasers London "COLT" location.
2.2 The provision of a second NDP at the UK end of the Gemini Network Capacity
is subject to the approval of the C&W board. A decision on this issue is
expected by early October 1998.
2.3 Reference should also be made to Section 2A - SERVICE DEFINITION - Gemini
Network Capacity, which describes the Gemini Network Capacity, which will
be interconnected to the UK Local Network Capacity to form the London - New
York Network Capacity.
<PAGE> 39
3 NETWORK DEMARCATION POINT (NDP) LOCATIONS
The NDP's for the UK Local Network Capacity are, subject to Clause 2.2, located
as follows:-
UK 1
- --------------------------------------------------------------------------------
Name C&W - UK
- --------------------------------------------------------------------------------
Street Waterside Park, Longshot Lane
- --------------------------------------------------------------------------------
ZIP RG12 1XL
- --------------------------------------------------------------------------------
City Bracknell
- --------------------------------------------------------------------------------
County Berkshire
- --------------------------------------------------------------------------------
Room Comms
- --------------------------------------------------------------------------------
Floor Ground
- --------------------------------------------------------------------------------
Suite
- --------------------------------------------------------------------------------
Rack
- --------------------------------------------------------------------------------
DDF Position
- --------------------------------------------------------------------------------
LON 1 - TELEHOUSE
- --------------------------------------------------------------------------------
Name Telehouse
- --------------------------------------------------------------------------------
Street Coriander Avenue
- --------------------------------------------------------------------------------
ZIP E14 2AA
- --------------------------------------------------------------------------------
City London
- --------------------------------------------------------------------------------
County -
- --------------------------------------------------------------------------------
Room TFM 10
- --------------------------------------------------------------------------------
Floor 3rd
- --------------------------------------------------------------------------------
Row 10F
- --------------------------------------------------------------------------------
Rack A4
- --------------------------------------------------------------------------------
Subrack 1
- --------------------------------------------------------------------------------
DDF Position (Working) 9 (Please leave enough spare cable
within rack to reach all positions)
- --------------------------------------------------------------------------------
DDF Position (Protection) 11 (Please leave enough spare cable
within rack to reach all positions)
- --------------------------------------------------------------------------------
Connector Type (Provided by C&W) 1.6/5.6 Female Connectors
- --------------------------------------------------------------------------------
<PAGE> 40
LON 2 - COLT
- --------------------------------------------------------------------------------
Name Colt - City Forum
- --------------------------------------------------------------------------------
Street 250 City Road
- --------------------------------------------------------------------------------
ZIP EC1V 2PU
- --------------------------------------------------------------------------------
City London
- --------------------------------------------------------------------------------
County -
- --------------------------------------------------------------------------------
Room City Forum Unit 2
- --------------------------------------------------------------------------------
Floor Ground
- --------------------------------------------------------------------------------
Suite TBA
- --------------------------------------------------------------------------------
Rack TBA
- --------------------------------------------------------------------------------
DDF Position TBA
- --------------------------------------------------------------------------------
<PAGE> 41
4 UK LOCAL NETWORK DESCRIPTION
A technical description of the UK Local Network Capacity is given in Annex 1 to
this Section. A network schematic drawing of the UK Local Network Capacity is
given Annex 2 to this Section-
NOTE:
o UNDER PHASE 1,
THE FIRST STM-1 BETWEEN UK1 AND TELEHOUSE IS PROVIDED IN ACCORDANCE WITH THE
TECHNICAL DESCRIPTION PROVIDED IN ANNEX 1 OF THIS SECTION. UNDER PHASE 2, THE
INFRASTRUCTURE FOR FUTURE STM-1'S BETWEEN UK1 AND COLT IS PROVIDED IN
ACCORDANCE WITH THE TECHNICAL IN ANNEX 1 OF THIS SECTION.
5 INTERFACE DEFINITIONS
5.1 PHYSICAL CONNECTIONS
The NDP for the UK Local Network Capacity will be the designated DDF at the
locations identified in Clause 3.
5.2 INTERFACE SPECIFICATIONS
Both Optical and Electrical STM-1 interfaces will be available at the NDP, DDF.
OPTICAL TRIBUTARY INTERFACE SPECIFICATION
The STM-1 optical interface shall be compliant with ITU-T G 957 and G.825. The
following types shall be available upon request:
--------------
TYPES
--------------
STM-1 S-1.1
--------------
STM-1 L-1.1
--------------
STM-1 L-1.2
--------------
ELECTRICAL TRIBUTARY INTERFACE SPECIFICATION
The STM-1 electrical interface shall be compliant with ITU-T G 703 and G.825.
5.3 STM-1 FRAME STRUCTURE
The STM-1 frame structure shall be compliant with ITU-T G.707, 708, 709 and
ETSI.
<PAGE> 42
6 PROTECTION
6.1 PROTECTION SCHEME
The protection scheme shall be SNC-P.
SWITCHING TIME
The switch time shall be compliant with G.783 (within 50 msec.)
6.2 SINGLE NODE ACCESS - INTRA-NODE INTERCONNECTION PROTECTION
The protection on the intra-node connection will be as follows:
6.2.1 OPTICAL INTERFACES
The linear multiplex section between STM-1 tributaries shall be protected with a
1+1 single ended APS.
6.2.2 ELECTRICAL INTERFACES
The linear multiplex section between STM-1 tributaries shall be protected with a
1+1 single ended APS.
6.2.3 SWITCHING TIME
The switch time shall be compliant with G.783 (within 50 msec.)
6.3 DUAL NODE ACCESS - INTRA-NODE INTERCONNECTION PROTECTION
The protection on the intra-node connection will include Ring Interconnection
and Tributary Interconnection will be as follows:
6.3.1 RING INTERCONNECTION
The ring interconnection between the Gemini Network Capacity and the Purchasers
UK Local Network Capacity shall be based on Dual Node Interconnection by Drop
and Continue (ITU-T G.842).
6.3.2 TRIBUTARY PROTECTION
The STM-1 electrical tributaries shall be protected N:1 in the case of no
interconnection protection.
6.3.3 SWITCHING TIME
The switching time shall be within 100 msec.
7 SYNCHRONISATION DISTRIBUTION
The synchronization delivered at the STM-1 interface at UK Local Network
Capacity side of the interface shall be G.811 traceable.
The SSMB output is desirable but not mandatory.
<PAGE> 43
CONFIDENTIAL TREATMENT
SECTION 2B
ANNEX I
NETWORK SCHEMATIC FOR THE UK LOCAL NETWORK CAPACITY
INTRODUCTION
The UK Local Capacity is a 1 + 1 diversely protected STM-1 connecting the Gemini
Capacity at Bracknell to the Purchasers DDF at Telehouse. FOR CLARITY, 1 + 1
DIVERSELY PROTECTED CIRCUIT INDICATES THAT TWO CIRCUITS WILL BE ALLOCATED ON
COMPLETELY SEPARATE AND PHYSICALLY DIVERSE CABLE ROUTES WITH NO CROSSINGS. THE
PRACTICAL MEANS OF ACHIEVING THIS IS DESCRIBED BELOW:-
NETWORK TOPOLOGY
The hardware used across the local Network Capacity will be a combination of
Nortel & Alcatel equipment.
Nortel TN4X will be used to close the protection loop between Telehouse and
Bracknell, and it will pass through Nortel TN16X equipment at the two SDN nodes
being used, (likely to be Thamesside and Chart Street). All Nortel equipment is
remotely managed out of our National Transmissions Operations Centre at
Birmingham (NTOC).
At Bracknell, the traffic will be routed through our 4/3/1 Cross-Connect
(Marconi MSH-84). The reason for this is to provide a testing and flexibility
point and is the natural interface between CWC network and the Gemini network.
The Marconi MSH84 is also managed indirectly by the NTOC - who have visibility
via the International Transmission Operations Centre (ITOC) systems at
Bracknell, giving them full management capability and flexibility of all the
international backhaul traffic.
SYNCLINK PREMIER
The ##MATERIAL OMITTED AND SEPARATELY FILED UNDER A REQUEST FOR CONFIDENTIAL
TREATMENT## STM-1's will be provided under the standard "Synclink Premier"
product banner. Synclink is a synchronous digital hierarchy (SDH) private
circuit service, offering a significant improvement in capacity, reliability,
flexibility and manageability compared to standard PDH circuits.
Circuit availability is guaranteed at 99.99% per annum. Data streams can be
added or dropped without demultiplexing and remultiplexing all the streams on
the bearer, making reconfiguration rapid and free from disruption. Synclink also
has sophisticated end-to-end management and advanced performance monitoring
facilities.
<PAGE> 44
A Synclink private circuit is a dedicated, permanently open digital transmission
channel of defined capacity between two points in the UK. Cable & Wireless
provides a permanently open channel through the SDH network, and local loop
connections from the nearest distribution node to each of the two connected
sites.
Access is dual diverse (i.e. with two fibre pairs in separate ducts joining the
network at separate nodes). Synclink circuits are open-port presented conforming
to ETSI standards, equivalent to G.703.
The C&W SDH network is self-healing, and this is provided either on the trunk or
end-to-end. In addition the C&W SDH network is designed in an interconnecting
ring configuration.
No single point of failure exists, up to the ADM in your premises. FOR CLARITY
1 + 1 MEANS THAT EACH CIRCUIT WILL BE ALLOCATED ON COMPLETELY SEPARATE AND
PHYSICALLY DIVERSE CABLE ROUTES WITH NO CROSSINGS.
<PAGE> 45
SECTION 2B
ANNEX 2
NETWORK SCHEMATIC FOR THE UK LOCAL NETWORK CAPACITY
[MAP]
<PAGE> 46
CONFIDENTIAL TREATMENT
SECTION 3A
IMPLEMENTATION
GEMINI NETWORK CAPACITY
1 INTRODUCTION
This Section sets out the implementation phases and time-scales for the Gemini
Network Capacity being provided by C&W to the Purchaser.
2 PHASES
The Phases relate to the basic network design, Phase 1 having only a single NDP
in the USA and UK and Phase 2 having dual NDP's in both the USA and UK.
2.1 PHASE 1
Phase 1 provides for a single NDP in the UK (UK 1) and a single NDP in the USA
(USA1 or USA2, to be confirmed within 14 days of contract signature).
KEY MILESTONES
- --------------------------------------------------------------------------------
ACTIVITY DATE
- --------------------------------------------------------------------------------
##MATERIAL OMITTED AND SEPARATELY On contract signature
FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT##
- --------------------------------------------------------------------------------
##MATERIAL OMITTED AND SEPARATELY ##MATERIAL OMITTED AND SEPARATELY
FILED UNDER A REQUEST FOR FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT##
- --------------------------------------------------------------------------------
##MATERIAL OMITTED AND SEPARATELY ##MATERIAL OMITTED AND SEPARATELY
FILED UNDER A REQUEST FOR FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT##
- --------------------------------------------------------------------------------
2.2 PHASE 2
Phase 2 is not applicable for the Gemini Network Capacity, only the UK Local
Network Capacity.
2.3 PHASE 3
Phase 3 provides for second NDP's in the UK (UK 1 & UK2) and second NDP's in the
US (US1 and US2).
- --------------------------------------------------------------------------------
ACTIVITY DATE
- --------------------------------------------------------------------------------
##MATERIAL OMITTED AND SEPARATELY ##MATERIAL OMITTED AND SEPARATELY
FILED UNDER A REQUEST FOR FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT##
- --------------------------------------------------------------------------------
##MATERIAL OMITTED AND SEPARATELY ##MATERIAL OMITTED AND SEPARATELY
FILED UNDER A REQUEST FOR FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT##
- --------------------------------------------------------------------------------
<PAGE> 47
CONFIDENTIAL TREATMENT
3 CALL OFF OF CAPACITY
(APPLICABLE ONLY IF THE ##MATERIAL OMITTED AND SEPARATELY
FILED UNDER A REQUEST FOR CONFIDENTIAL TREATMENT## STM-1 CONTRACT IS,
ENTERED INTO)
3.1 GENERAL
Following the Acceptance of the first STM1 connection, further STM-1s, up to a
total of ##MATERIAL OMITTED AND SEPARATELY FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT## can be called-off irrespective of the
completion status of Phase 3.
3.2 CALL-OFF PROCESS
The call-off process and leadtimes are given in the following table:
- --------------------------------------------------------------------------------
ACTIVITY TIMING
- --------------------------------------------------------------------------------
##MATERIAL OMITTED AND SEPARATELY
FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT##
- --------------------------------------------------------------------------------
##MATERIAL OMITTED AND SEPARATELY ##MATERIAL OMITTED AND SEPARATELY
FILED UNDER A REQUEST FOR FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT##
- --------------------------------------------------------------------------------
##MATERIAL OMITTED AND SEPARATELY
FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT## In accordance with Section 5A
- --------------------------------------------------------------------------------
3.3 ANTICIPATED CALL-OFF ORDERS (BETWEEN NDP's)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
CAPACITY TYPE QUANTITY PROPOSED ACTIVATION
DATE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
##MATERIAL OMITTED AND SEPARATELY ##MATERIAL OMITTED AND SEPARATELY ##MATERIAL OMITTED AND SEPARATELY
FILED UNDER A REQUEST FOR FILED UNDER A REQUEST FOR FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT##
- --------------------------------------------------------------------------------------------------------------------
##MATERIAL OMITTED AND SEPARATELY ##MATERIAL OMITTED AND SEPARATELY ##MATERIAL OMITTED AND SEPARATELY
FILED UNDER A REQUEST FOR FILED UNDER A REQUEST FOR FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT##
- --------------------------------------------------------------------------------------------------------------------
##MATERIAL OMITTED AND SEPARATELY ##MATERIAL OMITTED AND SEPARATELY ##MATERIAL OMITTED AND SEPARATELY
FILED UNDER A REQUEST FOR FILED UNDER A REQUEST FOR FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT##
- --------------------------------------------------------------------------------------------------------------------
##MATERIAL OMITTED AND SEPARATELY ##MATERIAL OMITTED AND SEPARATELY ##MATERIAL OMITTED AND SEPARATELY
FILED UNDER A REQUEST FOR FILED UNDER A REQUEST FOR FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT##
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
3.4 CALL-OFF ORDERING POINT
Richard Mountford
Cable & Wireless Communications Services Ltd.
26 Red Lion Square
London
WC1R 4HQ
Tel: + 44 171 528 3662
Fax + 44 171 528 3007
4 RE-CONFIGURATION OF STM-1 CONNECTIONS
4.1 RE-CONFIGURATION
The STM-1 Capacity can be re-configured between the NDP's in the USA and the
NDP's in the UK on 24 hours notice.
<PAGE> 48
4.2 RE-CONFIGURATION ORDER POINT
Richard Mountford
Cable & Wireless Communications Services Ltd.
26 Red Lion Square
London
WClR 4HQ
Tel: + 44 171 528 3662
Fax: + 44 171 528 3007
<PAGE> 49
CONFIDENTIAL TREATMENT
SECTION 3B
IMPLEMENTATION
UK LOCAL NETWORK CAPACITY
1 INTRODUCTION
This Section sets out the implementation phases and time-scales for the UK Local
Network Capacity being provided by C&W to the Purchaser.
2 PHASES
The Phases relate to the basic network design.
2.1 PHASE 1
Phase 1 provides for Local Network Capacity between an NDP in UK 1 and an NDP
in the Purchaser's 'Telehouse' site.
KEY MILESTONES
- --------------------------------------------------------------------------------
ACTIVITY DATE
- --------------------------------------------------------------------------------
##MATERIAL OMITTED AND SEPARATELY ##MATERIAL OMITTED AND SEPARATELY
FILED UNDER A REQUEST FOR FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT##
- --------------------------------------------------------------------------------
##MATERIAL OMITTED AND SEPARATELY ##MATERIAL OMITTED AND SEPARATELY
FILED UNDER A REQUEST FOR FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT##
- --------------------------------------------------------------------------------
2.2 PHASE 2
Phase 2 provides for the provision of infrastructure between an NDP in UK1 and
an NDP in the Purchaser's 'COLT' site, ready for activation of subsequent
STM-1s.
- --------------------------------------------------------------------------------
ACTIVITY DATE
- --------------------------------------------------------------------------------
##MATERIAL OMITTED AND SEPARATELY ##MATERIAL OMITTED AND SEPARATELY
FILED UNDER A REQUEST FOR FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT##
- --------------------------------------------------------------------------------
2.3 PHASE 3
Phase 3 relates to the Gemini Network Capacity only and provides for second
NDP's in the UK (UK 1 & UK2) and second NDP's in the US (US1 and US2).
<PAGE> 50
CONFIDENTIAL TREATMENT
3 CALL-OFF (APPLICABLE ONLY IF THE ##MATERIAL OMITTED AND SEPARATELY FILED UNDER
A REQUEST FOR CONFIDENTIAL TREATMENT## X STM-1 CONTRACT IS ENTERED INTO)
3.1 GENERAL
Following the Acceptance of the first STM1 connection, further STM-1s, up to a
total of ##MATERIAL OMITTED AND SEPARATELY FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT##, can be called-off irrespective of the completion
status of Phase 2.
3.2 CALL-OFF PROCESS
The order process and leadtimes are given in the following table:
- --------------------------------------------------------------------------------
ACTIVITY TIMING
- --------------------------------------------------------------------------------
##MATERIAL OMITTED AND SEPARATELY ##MATERIAL OMITTED AND SEPARATELY
FILED UNDER A REQUEST FOR FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT##
- --------------------------------------------------------------------------------
##MATERIAL OMITTED AND SEPARATELY ##MATERIAL OMITTED AND SEPARATELY
FILED UNDER A REQUEST FOR FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT##
- --------------------------------------------------------------------------------
##MATERIAL OMITTED AND SEPARATELY ##MATERIAL OMITTED AND SEPARATELY
FILED UNDER A REQUEST FOR FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT##
- --------------------------------------------------------------------------------
3.3 ANTICIPATED CALL-OFF ORDERS (BETWEEN NDP'S)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
CAPACITY TYPE QUANTITY PROPOSED ACTIVATION
DATE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
##MATERIAL OMITTED AND SEPARATELY ##MATERIAL OMITTED AND SEPARATELY ##MATERIAL OMITTED AND SEPARATELY
FILED UNDER A REQUEST FOR FILED UNDER A REQUEST FOR FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT##
- --------------------------------------------------------------------------------------------------------------------
##MATERIAL OMITTED AND SEPARATELY ##MATERIAL OMITTED AND SEPARATELY ##MATERIAL OMITTED AND SEPARATELY
FILED UNDER A REQUEST FOR FILED UNDER A REQUEST FOR FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT##
- --------------------------------------------------------------------------------------------------------------------
##MATERIAL OMITTED AND SEPARATELY ##MATERIAL OMITTED AND SEPARATELY ##MATERIAL OMITTED AND SEPARATELY
FILED UNDER A REQUEST FOR FILED UNDER A REQUEST FOR FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT##
- --------------------------------------------------------------------------------------------------------------------
##MATERIAL OMITTED AND SEPARATELY ##MATERIAL OMITTED AND SEPARATELY ##MATERIAL OMITTED AND SEPARATELY
FILED UNDER A REQUEST FOR FILED UNDER A REQUEST FOR FILED UNDER A REQUEST FOR
CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT## CONFIDENTIAL TREATMENT##
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
3.4 CALL-OFF ORDERING POINT
Richard Mountford
Cable & Wireless Communications Services Ltd.
26 Red Lion Square
London
WC1R 4HQ
Tel: + 44 171 528 3662
Fax: + 44 171 528 3007
4 RE-CONFIGURATION OF STM-1 CONNECTIONS
4.1 RE-CONFIGURATION
The STM-1 Capacity can be re-configured between the NDP's in the USA and the
NDP's in the UK, on 24 hours notice.
<PAGE> 51
4.2 RE-CONFIGURATION ORDERING POINT
Richard Mountford
Cable & Wireless Communications Services Ltd.
26 Red Lion Square
London
WC1R 4HQ
Tel: + 44 171 528 3662
Fax: + 44 171 528 3007
<PAGE> 52
SECTION 4A
SERVICE LEVEL AGREEMENT
GEMINI NETWORK CAPACITY
1 INTRODUCTION
This Section sets out the performance and availability expected of the Gemini
Network Capacity.
2 AVAILABILITY
The availability performance objective of the Gemini Network Capacity, is
99.9999% (excluding failures due to external aggression). Expected availability
will be in accordance with ITU-T G826.
3 UNAVAILABLE TIME
Unavailable Time begins at the onset of 10 consecutive SES events, including the
10 second observation period, in accordance with ITU-T G826.
4 ALLOCATED PERFORMANCE OBJECTIVE
The Allocated Performance Objective for the Gemini Network Capacity is
calculated in accordance with ITU-T M2101
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CAPACITY PATH DPL (24HOURS) UPL (15 MINUTES)
ALLOCATION
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
% ES SES BBE ES SES BBE
- --------------------------------------------------------------------------------
VC4/STM1 8% 415 5 N/A 58 1 N/A
- --------------------------------------------------------------------------------
</TABLE>
5 HAND BACK FOR PROBLEM CORRECTION
When the performance of the Gemini Network Capacity drops below the agreed
Service Levels set-out in this Section and associated ITU specifications, the
Purchaser shall notify C&W accordingly. C&W will immediately use its best
endeavors to rectify the problem and bring the Gemini Network Capacity back to
the agreed services levels.
The Gemini Network Capacity is defined as being below the agreed Services Levels
when:
The Gemini Network Capacity is unavailable as defined in Clause 3 of this
schedule, or
The performance of the Gemini Network Capacity drops below the Allocated
Performance Objectives defined in Clause 4 of this Schedule.
<PAGE> 53
Where C&W are providing end to end capacity which includes the UK Local Network
Capacity and Gemini Network Capacity if the end to end Service Levels drop below
that of either the Gemini or UK Local Capacity, the conditions of this Clause 5
shall apply.
4 RESTORATION
The Availability and Performance figures given in this Section assume
restoration within the Gemini Network Capacity. The Gemini Network Capacity is
as described in Section 2A
<PAGE> 54
SECTION 4B
SERVICE LEVEL AGREEMENT
UK LOCAL NETWORK CAPACITY
1 INTRODUCTION
This Section sets out the performance and availability expected of the UK Local
Network Capacity.
2 AVAILABILITY
The expected availability performance of the UK Local Network Capacity, is
99.99%, calculated on a calendar month basis and in accordance with ITU-T G826.
3 UNAVAILABLE TIME
Unavailable Time begins at the onset of 10 consecutive SES events, including the
10 second observation period, in accordance with ITU-T G826.
4 ALLOCATED PERFORMANCE OBJECTIVE
The Allocated Performance Objective for the UK Local Network Capacity is
calculated in accordance with ITU-T M2101
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CAPACITY PATH DPL (24HOURS) UPL (15 MINUTES)
ALLOCATION
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
% ES SES BBE ES SES BBE
- --------------------------------------------------------------------------------
VC4/STM1 2% 103 1 N/A 14 1 N/A
- --------------------------------------------------------------------------------
</TABLE>
5 HAND BACK FOR PROBLEM CORRECTION
When the performance of the Local Network Capacity drops below the agreed
Service Levels set-out in this Section and associated ITU specifications, the
Purchaser shall notify C&W accordingly. C&W will immediately use its best
endeavors to rectify the problem and bring the UK Local Network Capacity back to
the agreed services levels.
The UK Local Network Capacity is defined as being below the agreed Services
Levels when:
The UK Local Network Capacity is unavailable as defined in Clause 3 of this
schedule, or
The performance of the UK Local Network Capacity drops below the Allocated
Performance Objectives defined in Clause 4 of this Schedule.
<PAGE> 55
Where C&W are providing end to end capacity which includes the UK Local Network
Capacity and Gemini Network Capacity if the end to end Service Levels drop below
that of either the Gemini or UK Local Capacity, the conditions of this Clause 5
shall apply.
6 RESTORATION
The Availability and Performance figures given in this Section assume
restoration within the UK Local Network Capacity. The UK Local Network Capacity
is as described in Section 2A
<PAGE> 56
SECTION 5A
ACCEPTANCE PROCEDURES
GEMINI NETWORK CAPACITY
1 INTRODUCTION
This Section sets out the key acceptance principals to be observed for the
initial capacity provision and for the provision of subsequent STM-1 capacity.
The parties agree to work together, retaining the principals setout in this
Section, to produce and agree a set of Acceptance Procedures and Acceptance
Criteria for the Gemini Network Capacity, within 14 days from the date of
signature of this agreement.
2 ACCEPTANCE PROCEDURE
2.1 At least five working days prior to the date C&W intends to present an
STM-1 for acceptance by the Purchaser, C&W shall inform the Purchaser of
the Presentation Date and relevant interface information.
2.2 On presentation of the STM-1 capacity, C&W conducts and the Purchaser
witnesses, the agreed Acceptance Tests. If the tests are successful the
Purchaser will sign the Acceptance Certificate and return a copy to C&W,
within five working days of the Presentation Date.
2.3 If the STM-1 capacity fails to meet the agreed Acceptance Criteria, C&W
takes back the STM-1 capacity for rectification.
2.4 In the event of the circumstances outlined in 2.3, C&W will proceed to
rectify the problem and re-present the STM-1 Capacity for acceptance, as
setout in this Section 2 within a further 5 working days.
2.5 Following failure of an initial Stability Test, the Purchaser can demand a
further 7 days Stability Test for the second and subsequent Acceptance
Tests.
2.6 The signing of the Acceptance Certificate is the trigger for the payment
process for the relevant STM-1 Capacity.
2.7 If the Purchaser fails to return the signed Acceptance Certificate or
notify C&W that the STM-1 Capacity does not meet the agreed standards,
within five working days of the Presentation Date, the Network capacity is
deemed to have been Accepted by the Purchaser and the relevant payments
become due.
<PAGE> 57
3 KEY ACCEPTANCE CRITERIA
Successful achievement of the following key Acceptance Criteria will constitute
Acceptance by the Purchaser of STM-1 Capacity.
3.1 QUALITY CHECK
Include as a minimum: Checks that the C&W interface equipment being interfaced
and its installation meets accepted industry standards for physical and
electrical safety and quality.
3.2 FUNCTIONAL TESTS
Include as a minimum the following tests:
o Interface standards
o Proper working of the protection scheme
o Switching time
o Alarm Generation
o Round trip delay
o Synchronisation compliance
3.3 STABILITY TEST (BIS TEST)
Include as a minimum the following tests:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
BRINGING INTO SERVICE (BIS) (ITU REC G.826) 7 DAYS
- --------------------------------------------------------------------------------
CAPACITY PATH S1 S2
ALLOCATION
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
% ES SES ES SES
- --------------------------------------------------------------------------------
STM1 8% 37 1 39 2
- --------------------------------------------------------------------------------
</TABLE>
The results of any BIS test shall be interpreted as follows:
Better than S1 - Acceptable
Between S1-S2 - To be retested
Worse than S2 - Not acceptable
4 ACCEPTANCE CERTIFICATE
The Form of Acceptance Certificate to be used in respect of Acceptance of
Network Capacity is attached to this Section as Annex 1.
<PAGE> 58
ANNEX 1
FORM OF ACCEPTANCE CERTIFICATE
C&W/HERMES EUROPE RAILTEL
Acceptance Certificate
Introduction:
A. On [ ] HER and C&W entered into an Agreement in respect of STM-1
Capacity.
B. C&W notified HER on [ ] that the STM-1 Capacity would be ready for
Acceptance Testing on [ ]
C. This said STM-1 Capacity was actually made ready for Acceptance Testing on
[ ]
D. HER has completed a satisfactory Acceptance Test.
E. This Certificate is being provided in accordance with the terms and using
the definitions of the above mentioned agreements.
HER HEREBY CERTIFIES THAT, subject to any qualifications set out below, it has
tested capacity and has demonstrated to the satisfaction of HER that:
1. The Equipment, the Software and the [ ] have been supplied and
completed in all respects in accordance with the [ ] and the
[ ];
2. All requirements and performance levels required under any part of the
Technical Specification are met; and
3. In all respects, the capacity performed in accordance with the agreed
Acceptance Test and is formally Accepted for us by HER.
Qualification:
EITHER:
This Certificate is not qualified
OR
This Certificate is qualified in the following respects:
a)
b)
c)
Signed by Received and approved by
- ----------------------- ------------------------
For HER For C&W
Date: Date:
------------------ -------------------
<PAGE> 59
SECTION 5B
ACCEPTANCE PROCEDURES
UK LOCAL NETWORK CAPACITY
1. INTRODUCTION
This Section sets out the key acceptance principals to be observed for the
initial capacity provision and for the provision of subsequent STM-1
capacity.
The parties agree to work together, retaining the principals setout in this
Schedule, to produce and agree a set of Acceptance Procedures and
Acceptance Criteria for the UK Local Network Capacity, within 14 days from
the date of signature of this agreement.
2. ACCEPTANCE PROCEDURE
2.1 At least five working days prior to the date C&W intends to present an
STM-1 for acceptance by the Purchaser, C&W shall inform the Purchaser
of the Presentation Date and relevant interface information.
2.2 On presentation of the STM-1 capacity, C&W conducts and the Purchaser
witnesses, the agreed Acceptance Tests. If the tests are successful
the Purchaser will sign the Acceptance Certificate and return a copy
to C&W, within five working days of the Presentation Date.
2.3 If the STM-1 capacity fails to meet the agreed Acceptance Criteria,
C&W takes back the SMT-1 capacity for rectification.
2.4 In the event of the circumstances outlined in 2.3, C&W will proceed to
rectify the problem and re-present the STM-1 Capacity for acceptance,
as setout in this Section 2 within a further 5 working days.
2.5 Following failure of an initial Stability Test, the Purchaser can
demand a further 7 days Stability Test for the second and subsequent
Acceptance Tests.
2.6 The signing of the Acceptance Certificate is the trigger for the
payment process for the relevant STM-1 Capacity.
2.7 If the Purchaser fails to return the signed Acceptance Certificate or
notify C&W that the STM-1 Capacity does not meet the agreed standards,
within five working days of the Presentation Date, the Network
capacity is deemed to have been Accepted by the Purchaser and the
relevant payments become due.
<PAGE> 60
3. KEY ACCEPTANCE CRITERIA
Successful achievement of the following key Acceptance Criteria will constitute
Acceptance by the Purchaser of STM-1 Capacity.
3.1 QUALITY CHECK
Include as a minimum:-Checks that the C&W interface equipment being interfaced
and its installation meets accepted industry standards for the physical and
electrical safety and quality.
3.2 FUNCTIONAL TESTS
Include as a minimum the following tests:-
*Interface standards
*Proper working of the protection scheme
*Switching time
*Alarm Generation
*Round trip delay
*Synchronisation compliance
3.4 STABILITY TEST (BIS TEST)
Include as a minimum the following tests:
BRINGING INTO SERVICE (BIS) (ITU REC G.826) 7 DAYS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CAPACITY PATH S1 S2
ALLOCATION
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
% ES SES ES SES
- --------------------------------------------------------------------------------
STM1 2% 4 1 5 1
- --------------------------------------------------------------------------------
</TABLE>
The results of any BIS test shall be interpreted as follows:
Better than S1 -Acceptable
Between S1-S2 -To be retested
Worse than S2 -Not acceptable
4. ACCEPTANCE CERTIFICATE
The Form of Acceptance Certificate to be use in respect of Acceptance of Network
Capacity is attached to this Section as Annex 1.
<PAGE> 61
ANNEX 1
FORM OF ACCEPTANCE CERTIFICATE
C&W/HERMES EUROPE RAILTEL
Acceptance Certificate
Introduction:
A. On [ ] HER and C&W entered into an Agreement in respect of STM-1
Capacity.
B. C&W notified HER on [ ] that the STM-1 Capacity would be ready for
Acceptance Testing on [ ]
C. This said STM-1 Capacity was actually made ready for Acceptance Testing on
[ ]
D. HER has completed a satisfactory Acceptance Test.
E. This Certificate is being provided in accordance with the terms and using
the definitions of the above mentioned agreements.
HER HEREBY CERTIFIES THAT, subject to any qualifications set out below, it has
tested capacity and has demonstrated to the satisfaction of HER that:
1. The Equipment, the Software and the [ ] have been supplied and
completed in all respects in accordance with the [ ] and the
[ ];
2. All requirements and performance levels required under any part of the
Technical Specification are met; and
3. In all respects, the capacity performed in accordance with the agreed
Acceptance Test and is formally Accepted for us by HER.
Qualification:
EITHER:
This Certificate is not qualified
OR
This Certificate is qualified in the following respects:
a)
b)
c)
Signed by Received and approved by
- ----------------------- ------------------------
For HER For C&W
Date: Date:
------------------ -------------------
<PAGE> 62
SECTION 6A
OPERATIONS AND MAINTENANCE PROCEDURES
GEMINI NETWORK CAPACITY
1 INTRODUCTION
This Section sets out the key O&M principals to be observed for the initial
capacity provision and for subsequent STM-1 capacity.
The parties agree to work together, retaining the principals setout in this
Schedule, to produce and agree a set of O&M procedures for the Gemini Network
Capacity, within 14 days from the date of signature of this agreement.
2 C&W / PURCHASER INTERACTION
2.1 INTRODUCTION
This section describes how C&W and the Purchaser will interact for maintenance
of Gemini Network Capacity.
2.2 FAULT REPORTING
Upon detection of a problem on one of the STM-1's the Purchasers NOC will
contact the C&W NOC and request their follow-up. The following information will
at least be exchanged:
o Circuit identification
o Description of the fault
o Time of occurrence
o Section involved - if known
o HER and C&W fault reference number
o Contact names and telephones
As confirmation the Purchasers NOC will fax the C&W NOC a description of the
problem.
2.3 PROBLEM STATUS UPDATES
During the fault resolution process the C&W NOC will endeavour to inform the
Purchasers NOC at least every 60 minutes about the progress on the problem
resolution.
<PAGE> 63
2.4 FAULT CLEARANCE
After a problem is solved, C&W will fax the Purchasers NOC=within one working
day - a Trouble Closure report which will contain at least the following
information:
o HER and C&W Trouble Ticket numbers
o Description of the problem and the actions taken
o A BERT printout STM-1 Capacity - if Possible
o Any documentation / reports issued by Gemini
If there are any discrepancies in this closure report C&W will fax these within
one working day to the Purchasers NOC.
2.5 FAULT HISTORY
At both the Purchasers and C&W's history records of maintenance activities will
be stored in their own problem database. Retention periods for fault history
will be one year.
2.6 ESCALATION
In case the progress on the repair is inadequate the Purchaser can escalate this
within the C&W organisation. At least 3 Escalation contacts are available and
kept informed 24 hrs/day. The following escalation levels and timers will be
used:
1st level NOG Supervisor 1 hour
2nd level Manager International Operations 4 hour
3rd level Manager Transmission Operations 8 hours
4th level Director Network Operations 24 hours
5th level Director Operations 48 hours
2.7 INCIDENT REPORTS
If one of the STM-1 Capacities was unavailable for longer than 8 hours a
post-mortum report will be issued by C&W describing the nature of the problem,
the solution and actions to be taken to prevent re-occurrence.
The report will be issued within three working days after the problem occurred.
<PAGE> 64
2.8 PLANNED WORKS
All information related to the planned activities are exchanged between the
Purchasers NOC and the C&W NOC.
The following timing will be respected:
1. Advance notice given by fax 30 days in advance for service
affecting works
2. The Purchaser will confirm notification within 1 working day
3. On the day of the planned activities, at least 1 hour before the
start, the C&W NOC will contact the Purchasers NOC and will
reconfirm the activities to continue as planned.
Emergency planned works with notification less than 30 days will be
accepted if the reason for the works are beyond C&W's reasonable
control.
<PAGE> 65
SECTION 6B
OPERATIONS AND MAINTENANCE PROCEDURES
UK LOCAL NETWORK CAPACITY
1 INTRODUCTION
This Section sets out the key O&M principals to be observed for the initial
capacity provision and for subsequent STM-1 capacity.
The parties agree to work together, retaining the principals setout in this
Section, to produce and agree a set of O&M procedures for the UK Local Network
Capacity, within 14 days from the date of signature of this agreement:
2 C&W/PURCHASER INTERACTION
2.1 INTRODUCTION
This section describes how C&W and the Purchaser will interact for maintenance
of UK Local Network Capacity.
2.2 FAULT REPORTING
Upon detection of a problem on one of the STM-1 the Purchasers NOC will contact
the C&W NOC and request their follow-up. The following information will at least
be exchanged:
o Circuit identification
o Description of the fault
o Time of occurrence
o Section involved - if known
o HER and C&W fault reference number
o Contact names and telephones
As confirmation the Purchasers NOC will fax the C&W NOC a description of the
problem.
2.3 PROBLEM STATUS UPDATES
During the fault resolution process the C&W NOC will endeavour to inform the
Purchasers NOC at least every 60 minutes about the progress on the problem
resolution.
<PAGE> 66
2.4 FAULT CLEARANCE
After a problem is solved, the C&W Customer Care Department will fax the
Purchasers NOC - within one working day - a Trouble Closure report which will
contain at least the following information:
o HER and C&W Trouble Ticket numbers
o Description of the problem and the actions taken
o A BERT printout STM-1 Capacity - If Possible
o Any documentation / reports issued by Gemini
If there are any discrepancies in this closure report C&W will fax these within
one working day to the Purchasers NOC.
2.5 FAULT HISTORY
At both the Purchasers and C&W's history records of maintenance activities will
be stored in their own problem database. Retention periods for fault history
will be one year.
2.6 ESCALATION
In case the progress on the repair is inadequate the Purchaser can escalate this
within the C&W organisation. At least 3 Escalation contacts are available and
kept informed 24 hrs/day. The following escalation levels and timers will be
used:
1st level NOC Supervisor 1 hour
2nd level Manager International Operations 4 hour
3rd level Manager Transmission Operations 8 hours
4th level Director Network Operations 24 hours
5th level Director Operations 48 hours
2.7 INCIDENT REPORTS
If one of the STM-1 Capacities was unavailable for longer than 8 hours a post
mortum report will be issued by C&W describing the nature of the problem, the
solution and actions to be taken to prevent re-occurrence.
The report will be issued within three working days after the problem occurred.
<PAGE> 67
2.8 PLANNED WORKS
All information related to the planned activities are exchanged between the
Purchasers NOC and the C&W NOC.
The following timing will be respected:
1. Advance notice given by fax 30 days in advance for service
affecting works
2. The Purchaser will confirm notification within 1 working day
3. On the day of the planned activities, at least 1 hour before the
start, the C&W NOC will contact the Purchasers NOC and will
reconfirm the activities to continue as planned.
Emergency planned works with notification less than 30 days will be
accepted if the reason for the works are beyond C&W's reasonable
control.
END OF TECHNICAL SPECIFICATION
<PAGE> 1
EXHIBIT 12.1
Statement Regarding
Computation of Deficiency of Earnings Available to Cover Fixed Charges
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
----------------------------------- -----------------------
1995 1996 1997 1997 1998
----------------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
Pretax Loss ............................... (6,502) (15,969) (29,689) (15,675) (33,351)
Adjustments: Fixed charges ................ 9 153 12,826 4,593 23,419
------- ------- ------- ------- -------
Adjusted earnings from
continuing operations .................. (6,493) (15,816) (16,863) (11,082) (9,932)
Interest expense from
indebtedness, including
amortization of discount .................. 9 153 12,826 4,593 23,419
------- ------- ------- ------- -------
Total fixed charges ................... 9 153 12,826 4,593 23,419
Deficiency of earnings
available to cover fixed
charges ................................... (6,502) (15,969) (29,689) (15,675) (33,351)
======= ======= ======= ======= =======
</TABLE>
<PAGE> 1
Exhibit 21.1
List of Subsidiaries
1. Hermes Europe Railtel Holdings B.V.
2. Ebone A/S [75% holding]
3. Hermes Europe Railtel (Ireland) Ltd.
4. Hermes Europe Railtel (Network) Ltd.
5. HER Network Services BVBA
6. Hermes Europe Railtel (France) SARL
7. Hermes Europe Railtel (Germany) GmbH
8. Hermes Europe Railtel (UK) Ltd.
9. Hermes Europe Railtel (Sweden) AS
10. Hermes Europe Railtel (Spain) S.L.
11. Hermes Europe Railtel (Italy) S.r.l.
12. Hermes Europe Railtel (US) Inc.
13. Hermes Europe Railtel (Denmark)
14. Hermes Europe Railtel (Switzerland)
<PAGE> 1
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG REVISEURS D'ENTREPRISES S.C.C.,
INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Auditors" and to the
use of our report dated February 26, 1998 (Hermes Europe Railtel B.V.), in the
Registration Statement (Form S-4) and related Prospectus of Hermes Europe
Railtel B.V., dated on or about January 15, 1999.
/s/ Ernst & Young Reviseurs D'Entreprises S.C.C.
Brussels, Belgium
January 13, 1999
<PAGE> 1
Exhibit 25.1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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) [ ]
----------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------
Hermes Europe Railtel B.V.
(Exact name of obligor as specified in its charter)
Hermes Europe Railtel B.V.
(Translation of Registrant's name into English)
The Netherlands None
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Terhulpsesteenweg 6A
1560 Hoeilaart
Belgium
(Address of principal executive offices) (Zip code)
----------
10-3/8% Senior Notes due 2009
10-3/8% Senior Notes due 2006
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Name Address
- -------------------------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R.
229.10(D).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains
the authority to commence business and a grant of powers to
exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to
Form T-1 filed with Registration Statement No. 33-6215, Exhibits
1a and 1b to Form T-1 filed with Registration Statement No.
33-21672 and Exhibit 1 to Form T-1 filed with Registration
Statement No. 33-29637.)
2. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form
T-1 filed with Registration Statement No. 33-31019.)
3. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-
44051.)
4. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
-2-
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 13th day of January, 1999.
THE BANK OF NEW YORK
By: /s/ THOMAS C. KNIGHT
---------------------------------
Name: THOMAS C. KNIGHT
Title: ASSISTANT VICE PRESIDENT
<PAGE> 4
================================================================================
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business June 30, 1998,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin.... $ 7,301,241
Interest-bearing balances............................. 1,385,944
Securities:
Held-to-maturity securities........................... 1,000,737
Available-for-sale securities......................... 4,240,655
Federal funds sold and Securities purchased under
agreements to resell.................................. 971,453
Loans and lease financing receivables:
Loans and leases, net of unearned
income.............................................. 38,788.269
LESS: Allowance for loan and
lease losses........................................ 632,875
LESS: Allocated transfer risk
reserve............................................. 0
Loans and leases, net of unearned income,
allowance, and reserve.............................. 38,155,394
Assets held in trading accounts.......................... 1,307,562
Premises and fixed assets (including capitalized
leases)............................................... 670,445
Other real estate owned.................................. 13,598
Investments in unconsolidated subsidiaries and 215,024
associated companies..................................
Customers' liability to this bank on acceptances
outstanding........................................... 974,237
Intangible assets........................................ 1,102,625
Other assets............................................. 1,944,777
-----------
Total assets............................................. $59,283,692
===========
LIABILITIES
Deposits:
In domestic offices................................... $26,930,258
Noninterest-bearing................................... 11,579.390
Interest-bearing...................................... 15,350,868
In foreign offices, Edge and Agreement
subsidiaries, and IBFs.............................. 16,117,854
Noninterest-bearing................................... 187,464
Interest-bearing...................................... 15,930,390
Federal funds purchased and Securities sold under
agreements to repurchase.............................. 2,170,238
Demand notes issued to the U.S.Treasury.................. 300,000
Trading liabilities...................................... 1,310,867
Other borrowed money:
With remaining maturity of one year or less........... 2,549,479
With remaining maturity of more than one year
through three years................................. 0
With remaining maturity of more than three years...... 46,654
Bank's liability on acceptances executed and
outstanding........................................... 983,398
Subordinated notes and debentures........................ 1,314,000
Other liabilities........................................ 2,295,520
-----------
Total liabilities........................................ 54,018,268
===========
EQUITY CAPITAL
Common stock............................................. 1,135,284
Surplus.................................................. 731,319
Undivided profits and capital reserves................... 3,385,227
Net unrealized holding gains (losses) on
available-for-sale securities......................... 51,233
Cumulative foreign currency translation adjustments...... (37,639)
-----------
Total equity capital..................................... 5,265,424
-----------
Total liabilities and equity capital..................... $59,283,692
===========
</TABLE>
I, Robert E. Keilman, 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.
Robert E. Keilman
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.
J. Carter Bacot )
Thomas A. Renyi ) Directors
Alan R. Griffith )
================================================================================
