<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY , 2000
REGISTRATION STATEMENT NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
GLOBAL TELESYSTEMS EUROPE B.V.
(Exact name of Registrant as specified in its charter)
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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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WORLD TRADE CENTER
STRAWINSKYLAAN 425
1077 XX AMSTERDAM
THE NETHERLANDS
31-20-575-2160
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
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CT CORPORATION SYSTEM
111 EIGHTH AVENUE
NEW YORK, NY 10011
(212) 894-8700
(Name, address, including zip code, and telephone number, including area code,
of agent for process)
---------------------
with copies to
DAVID J. BEVERIDGE, ESQ.
SHEARMAN & STERLING
BROADGATE WEST
9 APPOLD STREET
LONDON EC2A 2AP, ENGLAND
44-20-7655-5000
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(1) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------
10 1/2% Senior Notes due 2006... E225,000,000 100% $231,615,000 $61,146(2)
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11% Senior Notes due 2009....... E275,000,000 100% $283,085,000 $74,734(2)
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(1) Calculated based on the euro noon buying rate on January 7, 2000 of $1.0294
per E1.00.
(2) The registration fee was calculated pursuant to Rule 457(f)(2) under the
Securities Act based on the euro noon buying rate on January 7, 2000 of
$1.0294 per E1.00.
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 THIS 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 , 2000
[GLOBAL TELESYSTEMS EUROPE B.V. LOGO]
GLOBAL TELESYSTEMS EUROPE B.V.
OFFER TO EXCHANGE
ANY AND ALL OUTSTANDING
10 1/2% SENIOR NOTES DUE 2006
(E225,000,000 AGGREGATE PRINCIPAL AMOUNT OUTSTANDING)
FOR
10 1/2% SENIOR NOTES DUE 2006
AND
11% SENIOR NOTES DUE 2009
(E275,000,000 AGGREGATE PRINCIPAL AMOUNT OUTSTANDING)
FOR
11% SENIOR NOTES DUE 2009
OF
GLOBAL TELESYSTEMS EUROPE B.V.
TERMS OF EXCHANGE OFFER
- - Expires 5:00 p.m., London time on , 2000, 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., London time, 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 January , 2000.
<PAGE> 3
The Exchange Offer is not being made to, nor will we accept surrenders of
or exchange from, holders of outstanding notes in any jurisdiction in which the
Exchange Offer or the acceptance of outstanding notes 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 us. 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 using this prospectus shall under any circumstances, create
any implication that there has not been any change in the facts set forth in
this prospectus or in our affairs since the date of this prospectus.
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).
ii
<PAGE> 4
TABLE OF CONTENTS
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PAGE
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Where You Can Find More Information......................... iii
Incorporation of Certain Documents by Reference............. iv
Service of Process and Enforceability of Civil
Liabilities............................................... v
Disclosure Regarding Forward-Looking Statements............. v
Certain Definitions and Presentation of Information......... vi
Name Change................................................. vi
Summary..................................................... 1
Risk Factors................................................ 13
Use of Proceeds............................................. 27
The Exchange offer.......................................... 28
Capitalization.............................................. 34
Selected Consolidated Financial Data........................ 35
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 36
Business.................................................... 43
Licenses and Regulatory Issues.............................. 57
Management.................................................. 62
Security Ownership of Principal Shareholders and
Management................................................ 70
Certain Relationships and Related Transactions.............. 71
Description of Other Indebtedness........................... 73
Description of the Exchange Notes........................... 75
Certain Tax Considerations.................................. 109
Plan of Distribution........................................ 114
Legal Matters............................................... 114
Experts..................................................... 115
General Listing Information................................. 115
Glossary.................................................... 117
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. As a result, we file periodic reports, proxy statements
and other information with the Securities and Exchange 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 website
contains reports, proxy statements and other information regarding registrants
such as ourselves that have filed electronically with the Commission.
This prospectus constitutes a part of a registration statement filed by us
with the Commission under the Securities Act of 1933, as amended. 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 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
iii
<PAGE> 5
registration statement or otherwise filed with the Commission are not
necessarily complete, and in each instance you should refer 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 Securities Exchange Act. Even if we are not
subject to the periodic reporting and informational requirements of the
Securities 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 Securities 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 Securities 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
Securities Exchange Act. If the filing of such information is not accepted by
the Commission or is prohibited by the Securities 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 business and
financial 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) our Annual Report on Form 10-K for the fiscal year ended December
31, 1998, filed with the Commission on March 31, 1999.
(b) our Quarterly Reports on Form 10-Q for the fiscal quarter ended
March 31, 1999, filed with the Commission on May 17, 1999, the quarter
ended June 30, 1999, filed with the Commission on August 13, 1999, and the
quarter ended September 30, 1999, filed with the Commission on November 3,
1999.
(c) our Current Report on Form 8-K filed on November 23, 1999.
(d) all documents that we file pursuant to Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act after the date of the registration
statement of which this prospectus is part and prior to the effectiveness
thereof or after 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
IN OR DELIVERED WITH THIS PROSPECTUS. THESE DOCUMENTS ARE AVAILABLE WITHOUT
CHARGE UPON WRITTEN OR ORAL REQUEST FROM US AT OUR PRINCIPAL EXECUTIVE OFFICES
LOCATED AT WORLD TRADE CENTER, STRAWINSKYLAAN 425, 1077 XX AMSTERDAM, THE
NETHERLANDS, TELEPHONE NUMBER (011) (31-20) 575-2160. IN ORDER TO OBTAIN TIMELY
DELIVERY, YOU MUST REQUEST THE INFORMATION NO LATER THAN FIVE BUSINESS DAYS
BEFORE THE EXPIRATION OF THE EXCHANGE OFFER.
iv
<PAGE> 6
SERVICE OF PROCESS AND
ENFORCEABILITY OF CIVIL LIABILITIES
We are incorporated under the laws of the Netherlands and substantially all
of our assets are located outside the United States. In addition, certain
members of our management board and supervisory board 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 GTS Europe judgments of courts of the United
States based upon civil liabilities under the United States federal securities
laws. We have been advised by our Netherlands counsel, Allen & Overy, Amsterdam
office, 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, assuming submission by GTS Europe to the jurisdiction of the United
States courts, 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 GTS Europe, or members
of the management board or the supervisory board, or certain experts named in
this prospectus 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 GTS Europe or on the
members of the management board or the supervisory board 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 GTS Europe or
such members.
We are organized in the Netherlands as a besloten vennootschap and we
currently maintain our registered offices at World Trade Center, Strawinskylaan
425, 1077 XX Amsterdam, The Netherlands, and our telephone number is
31-20-575-2160. We have been incorporated since July 6, 1993 under the laws of
the Netherlands.
---------------------
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements as to how we may
perform in the future. We have based these forward-looking statements on our
current expectations and projections about future events and financial trends
affecting the financial condition of our business. These forward-looking
statements are subject to risks, uncertainties and assumptions about us,
including, among other things:
- Risk of delay in implementing our business plan;
- Risks relating to our network;
- Anticipated trends and conditions in our industry;
- Heightened competition; and
- Our need for additional, substantial financing.
These forward-looking statements are principally contained in the following
sections of the prospectus:
- Risk Factors;
- Management's Discussion and Analysis of Financial Condition and Results
of Operations; and
- Business.
v
<PAGE> 7
In addition, in those and other portions of this prospectus, the words and
phrases "will likely result," "are expected to," "will continue," "is
anticipated," "estimated," "intends," "plans," "projection" and "outlook" are
intended to identify forward-looking statements. These statements should be
viewed with caution.
These forward-looking statements may differ materially from actual results
because they involve estimates, assumptions and uncertainties. In making these
forward-looking statements in this prospectus, we claim the protection of the
safe harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1998. We undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
CERTAIN DEFINITIONS AND PRESENTATION OF INFORMATION
As used in this prospectus, "GTS Europe" or the "Company" means Global
TeleSystems Europe B.V., formerly known as Hermes Europe Railtel B.V., a
Netherlands corporation. Unless the context otherwise requires, the terms "we",
"us", "our" and similar terms used in this prospectus refer to GTS Europe.
References to "BF" are to Belgian Francs and references to "dollars," "U.S.
dollars," "U.S.$" or "$" are to United States dollars. References to "Euro" or
"E" are to the currency of the European Communities ("EC") introduced at the
start of the third stage of European economic and monetary union on January 1,
1999, pursuant to the Treaty on European Union.
Solely for the convenience of the reader, this prospectus contains
translations of certain Euro amounts into dollars and certain dollar amounts
into Euros. These translations should not be construed as representations that
the Euro amounts actually represent such dollar amounts or vice versa, or could
have been or will be converted into dollars or Euros at the rate indicated or at
all. Unless otherwise indicated, the translations of dollars into Euros have
been made at $1.041 per Euro, the noon buying rate in The City of New York for
cable transfers in Euros as certified for customs purposes by the Federal
Reserve Bank of New York on November 17, 1999.
Technical terms used in our business are explained in the "Glossary" at the
end of this prospectus.
NAME CHANGE
A notarial deed amending our Articles of Association to change our name
from Hermes Europe Railtel B.V. to Global TeleSystems Europe B.V. was executed
on October 22, 1999. The change in our legal name became effective on November
8, 1999.
---------------------
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 OF OUTSTANDING NOTES WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
vi
<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 iii. We
encourage you to read this entire document and the documents incorporated by
reference in this document.
The Exchange Offer
On November 24, 1999, we completed a private offering consisting of:
- E225,000,000 10 1/2% Senior Notes due 2006
and
- E275,000,000 11% Senior Notes due 2009.
On the same day, we entered into a registration rights agreement relating
to the 10 1/2% Senior Notes due 2006 and the 11% Senior Notes due 2009 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 180 days of the issuance of the 10 1/2% Senior Notes
due 2006 and the 11% Senior Notes due 2009. The 10 1/2% Senior Notes due 2006
and the 11% Senior Notes due 2009 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.
Our Company
We are one of the leading European providers of managed bandwidth and
related telecommunications services to telecommunications carriers, Internet
service providers and other bandwidth-intensive customers. We operate the
largest centrally managed fiber optic network in Europe over which we offer a
broad and sophisticated range of services. In addition, we operate a Tier-1
Internet backbone that connects European Internet service providers to the
Internet. We believe our early entry into the market, supported by the reach of
our high capacity network, a low-cost position and our focus on building
strategic relationships with our customers, has allowed us to create sustainable
advantages in a large and growing market.
For the three-month and nine-month periods ended September 30, 1999, we had
revenues of $90.1 million and $213.0 million, respectively, and EBITDA of $49.5
million and $112.2 million, respectively. At September 30, 1999, we had 156
customers under contract for service on our network, which represents an
increase from 133 and 137 customers at the end of the first two quarters of
1999, respectively. At September 30, 1999, our customers were contractually
obligated to pay us an aggregate of $548.2 million for future services, provided
we perform in accordance with contractual specifications. This amount increased
from $450.3 million and $498.7 million at March 31, 1999 and June 30, 1999,
respectively.
We primarily provide large capacity cross-border European and transatlantic
services over an integrated, managed network. Our network, based on dense
wavelength division multiplexing and synchronous digital hierarchy technology,
provides digital transmission capability upon which a broad range of advanced
applications may be built. Our network offers network availability, flexibility,
reliability and bandwidth speeds not widely available for transport of
telecommunications traffic across national borders in western Europe. Our
network is designed to provide customers with a wide variety of bandwidth
speeds, ranging from a data transmission rate of 2 megabits per second to a data
transmission rate of 2.5 gigabits per second. Access to our
1
<PAGE> 9
network allows our customers to rapidly enter the markets they are targeting
while benefitting from low unit cost that our network provides.
Tailored to meet the diverse requirements of several customer segments, our
services include three classes of outsourcing levels. First, our unprotected
ring services provide diversely routed paths on which customers deploy their own
termination equipment and perform protection schemes themselves. Second, our
protected services provide self-healing point-to-point links managed end-to-end
by us. Finally, we offer turn-key network solutions where we perform all network
management functions on infrastructure that is fully dedicated to our customer.
Depending on the customer's bandwidth and application requirements, these three
classes of bandwidth services run on two underlying technologies: either
synchronous digital hierarchy technology over dense wavelength division
multiplexing (for speeds ranging from 2 megabits per second to 155 megabits per
second) or directly on dense wavelength division multiplexing (for speeds
ranging from 155 megabits per second to 2.5 gigabits per second).
In addition to providing sophisticated and flexible value-added services,
we intend to quickly and efficiently deploy our network presence wherever our
current and future customers need to originate and/or terminate traffic. This
has led to the rapid expansion of our network throughout Europe, as well as to
our purchase of transatlantic transmission capacity.
The current and future growth in the Internet has a significant impact on
the carrier business. In addition to increasing the amount of data that is being
transported across borders, the Internet influences the transport technologies,
the traffic patterns and the segments that require carrier-like services.
We offer, through our GTS Ebone brand name, Internet service providers,
value added network service providers, multimedia providers and Web-hosting
companies, a carriers'-grade Internet access service.
We began providing services to our customers in November 1996. We believe
that our early entry into the European carriers' carrier market has provided us
with several competitive advantages over other providers of telecommunications
services to telecommunications carriers, Internet service providers and other
bandwidth-intensive customers. We believe we are a pioneer in Europe in fiber
optic network deployment and service development. We have established long-term
contracts with telecommunications carriers, Internet service providers and other
bandwidth-intensive customers, in many instances capturing customers in some of
the most rapidly growing new market segments. In many cases, by providing
mission-critical value-added solutions to our customers, we seek to establish
ourselves as their strategic partner. This degree of integration in our
customers' operations has often provided us with the opportunity to introduce
and implement additional products and services with the customer, thereby
enabling us to further penetrate our customer base. As a result of our strong
position in the European telecommunications market, we have been able to attract
and retain a talented, multi-cultural, highly skilled workforce specialized in
our leading-edge technological industry.
Our customers include:
- European incumbent telecommunications
operators
- alternative carriers
- voice resellers
- international carriers
- national Internet service providers
- multinational Internet service providers
- value added network service providers
- Web-centric and media-centric companies
Our network, which covers approximately 16,000 kilometers connecting 27
cities in 11 European countries, reaches a substantial portion of our targeted
customer base. We expect our network to extend approximately 25,000 kilometers
with points of presence in approximately 20 European countries by the end of
2000. Thereafter, additional points of presence will be added to our network as
warranted by customer demand. We also provide services that connect Europe to
the United States in order to address a significant portion of the market growth
which is Internet and Internet protocol related. This service is currently
provided through capacity leased from third parties. We intend to purchase a
dedicated fiber pair on the FLAG
2
<PAGE> 10
Atlantic-1 transatlantic fiber optic link using part of the proceeds of this
offering. We expect to begin offering unprotected services in the first quarter
of 2001 and fully protected services in the second quarter of 2001 over this
fiber pair. By owning this fiber pair, we will acquire capacity of 70 gigabits
per second, upgradeable to a maximum capacity of 400 gigabits per second of
fully protected capacity connecting the New York City area to our European
network. In addition, in order to meet and support the continuous increase in
bandwidth requirements of our current and future customers, we are upgrading our
transmission equipment to increase our network's transmission capacity.
OUR STRATEGY
Our goals are to reinforce our position as Europe's leading independent
provider of managed bandwidth and related telecommunications services to
telecommunications carriers, Internet service providers and other
bandwidth-intensive customers, and, taking advantage of our leadership position,
to capture additional revenues by extending our network closer to our customers
and providing new and enhanced services. The key elements of our strategy for
achieving these goals are to:
- Maintain our leadership position by delivering services which leverage
our low cost position
- Build on our experience as a first mover in the European carriers'
carrier market to further penetrate our existing customer base and expand
our service portfolio
- Capitalize on the experience of our management and workforce
- Focus on bandwidth-intensive customers
- Continue to invest in the reach and capacity of our network
- Extend our network closer to our customers and offer new and enhanced
services by:
- developing intra-city fiber networks
- expanding and enhancing the transatlantic capacity of our network
- capitalizing on demand for Web-based products and services
We were formed on July 6, 1993. We are a 98.7% owned subsidiary of Global
TeleSystems Group, Inc. (NYSE: GTS), a leading independent provider of
telecommunications services to businesses, other high-usage customers and
telecommunications providers in Europe.
3
<PAGE> 11
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
The exchange offer relates to the exchange of up to E225,000,000 aggregate
principal amount of the outstanding 10 1/2% Senior Notes due 2006 and up to
E275,000,000 aggregate principal amount of the outstanding 11% Senior Notes due
2009 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. Nor are the exchange
notes entitled to the benefits of the registration rights granted under the
registration rights agreement, executed as a part of the offering of the
outstanding notes, dated as of November 24, 1999, among GTS Europe and the
initial purchasers.
Registration Rights........ In November 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:
- E1,000 principal amount of 10 1/2% Senior Notes
due 2006 which have been registered under the
Securities Act of 1933 for each E1,000 principal
amount of our 10 1/2% Senior Notes due 2006, and
- E1,000 principal amount of 11% Senior Notes due
2009 which have been registered under the
Securities Act of 1933 for each E1,000 principal
amount of our 11% Senior Notes due 2009
which were issued on November 24, 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 E225 million in
aggregate principal amount of outstanding 10 1/2%
Senior Notes due 2006 and E275 million in aggregate
principal amount of outstanding 11% Senior Notes
due 2009.
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;
4
<PAGE> 12
- 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 5:00 p.m., London
time, for the outstanding notes, on ,
2000, 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 November
24, 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
November 24, 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 June 1,
2000 (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 interpretation of the staff of
the Securities and Exchange Commission of
5
<PAGE> 13
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 agreement executed as
part of the offering of the outstanding notes
should we fail to consummate the exchange offer.
Procedures for Tendering
Outstanding Notes........ If you are a holder of an outstanding note and you
wish to tender your note for exchange pursuant to
the exchange offer, you must transmit to Deutsche
Bank AG, London branch, as exchange agent for the
notes, on or prior to the expiration date:
- 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 which accompanies this prospectus;
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 which accompanies this prospectus, each
holder will represent to us that, among other
things, (i) the 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 Outstanding
Notes.................... If you wish to tender your outstanding 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
6
<PAGE> 14
may tender your outstanding notes pursuant to the
procedures described in this prospectus under the
heading "The Exchange Offer Guaranteed Delivery
Procedure for Outstanding Notes."
Withdrawal Rights.......... You may withdraw the tender of your outstanding
notes at any time prior to 5:00 p.m., London time,
on , 2000, the business day prior to
the expiration date, unless your notes were
previously accepted for exchange.
Acceptance of Outstanding
Notes and Delivery of
Exchange Notes........... Subject to the conditions 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 outstanding 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
Outstanding Notes.......... Deutsche Bank AG, London branch, is serving as
exchange agent in connection with the outstanding
notes. The exchange agent for the outstanding notes
can be reached at Winchester House, 1 Great
Winchester Street, London, EC2N 2DB United Kingdom.
For more information with respect to the exchange
of outstanding notes, the telephone number of the
exchange agent in London is (44 171)545-8000 and
the facsimile number is (44 171)545-6155.
7
<PAGE> 15
DESCRIPTION OF THE EXCHANGE NOTES
Securities Offered.................. E225,000,000 aggregate principal amount
of 10 1/2% Senior Notes due 2006 and
E275,000,000 aggregate principal amount
of 11% Senior Notes due 2009.
Maturity............................ The exchange notes due 2006: December
1, 2006.
The exchange notes due 2009: December
1, 2009.
Interest Payment Dates.............. December 1 and June 1, commencing June
1, 2000.
Ranking............................. The exchange notes will be general
unsecured obligations and will rank
senior to all our future subordinated
indebtedness. The exchange notes will
rank equally with all our existing and
future unsecured senior indebtedness,
including the exchange notes, the
11 1/2% senior notes due 2007, the
10 3/8% senior notes due 2006 and the
10 3/8% senior notes due 2009. The
exchange notes will effectively 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 a new senior
credit facility with one or more
institutional lenders in an aggregate
amount of between $400 million and $750
million that one of our subsidiaries
may enter into) of our subsidiaries.
As of September 30, 1999, on a pro
forma basis, we would have had total
long-term debt (including long-term
portion of capital leases) of $1,264.2
million (including the exchange notes,
the 11 1/2% senior notes due 2007, the
10 3/8% senior notes due 2009 and the
10 3/8% senior notes due 2006), and our
subsidiaries would have had $454.3
million of total liabilities reflected
on our balance sheet.
Optional Redemption................. We may redeem the exchange notes due
2009, in whole or in part, at any time
on or after December 1, 2004 at the
redemption prices set forth in this
prospectus.
The exchange notes due 2006 are not
subject to redemption, except as set
forth in this prospectus.
Public Equity Offering Option
Redemption.......................... Before December 1, 2002, we may redeem
up to 35% of the principal amount of
the exchange notes due 2009 at a price
equal to 111% 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; provided,
however, that at least 65% of the
principal amount of the exchange notes
due 2009 originally issued remains
outstanding after each such redemption.
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
November 24, 1999.
8
<PAGE> 16
Change of Control................... Following the occurrence of a change of
control event, each holder of exchange
notes will have the right to require us
to purchase all or any portion of such
holder's exchange notes at a price in
cash equal to 101% of the principal
amount thereof, plus accrued and unpaid
interest to the date of purchase. There
can be no assurance that we will have
the financial resources necessary to
purchase the exchange notes upon a
Change of Control. See "Description of
the Exchange Notes -- Change of
Control."
Certain Covenants................... The indentures under which the exchange
notes will be issued will contain
certain covenants that limit our
ability and the ability of our
restricted subsidiaries to, among other
things:
- incur additional indebtedness,
- make certain restricted payments,
- create certain liens,
- sell certain assets,
- enter into certain transactions with
affiliates,
- merge or consolidate with any other
person or transfer all or
substantially all of their assets, or
- sell or issue capital stock of
restricted subsidiaries.
These covenants are subject to a number
of important exceptions and
qualifications. See "Description of the
Exchange Notes -- Certain Covenants."
Withholding Tax..................... Unless required by law, all 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 within any other
jurisdiction. We will pay such
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 notes in the
absence of such payments, withholding
or deduction. See "Description of the
Exchange Notes -- Additional Amounts."
Trustee, New York Paying Agent and
Registrar........................... United States Trust Company of New
York.
London Paying and Transfer Agent.... Deutsche Bank AG, London branch.
Luxembourg Paying and Transfer
Agents.............................. Banque Internationale a Luxembourg S.A.
and Bankers Trust Luxembourg S.A.
Listing............................. The Notes are listed on the Luxembourg
Stock Exchange.
Consequences of Failure to
Exchange............................ Untendered outstanding notes will
remain restricted securities and will
continue to be subject to the following
restrictions on transfer:
9
<PAGE> 17
(i) outstanding notes may be
resold only if registered pursuant to
the Securities Act of 1933, if an
exemption from registration is
available, 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 12 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, 1997 and 1998 are derived from our audited
consolidated financial statements. The following unaudited summary historical
consolidated financial data as of September 30, 1999 and for the nine months
ended September 30, 1998 and 1999 are derived from our 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
prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------- -------------------
1995 1996 1997 1998 1998 1999
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues....................... $ -- $ 48 $ 5,373 $ 85,251 $ 42,933 $213,012
Operating costs and expenses:
Telecommunication
services.................. -- 4,694 6,842 41,848 22,259 64,913
Selling, general and
administrative............ 6,626 9,894 17,868 28,273 16,747 35,940
Depreciation and
amortization.............. 560 1,266 5,229 28,638 18,642 45,152
(Loss) income from
operations.................. (7,186) (15,806) (24,566) (13,508) (14,715) 67,007
Other income (expense)......... 135 (771) (6,597) (33,084) (21,406) (40,296)
Net (loss) income.............. (7,051) (16,577) (31,163) (48,935) (37,940) 22,062
OTHER DATA:
EBITDA(1)...................... $(6,626) $(14,540) $ (19,337) $ 15,130 $ 3,927 $112,159
Net cash (used in) provided by
operating activities........ (2,655) (11,540) (4,417) 44,957 20,527 19,227
Net cash used in investing
activities.................. (4,405) (20,781) (107,466) (92,758) (34,541) (96,805)
Net cash provided by (used in)
financing activities........ 11,644 28,924 317,500 (21,463) 493 245,853
Ratio of earnings to fixed
charges(2).................. -- -- -- -- -- 1.3x
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1999
---------------------------
ACTUAL AS ADJUSTED(3)
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Total current assets...................................... $ 476,173 $1,031,242
Property and equipment, net............................... 528,487 528,487
Total assets.............................................. 1,142,803 1,713,303
Total current liabilities................................. 176,808 176,808
Total debt, including capital leases...................... 764,011 1,284,511
Total liabilities......................................... 1,022,798 1,543,298
Total shareholders' equity................................ 120,005 170,005
</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) Earnings consist of income before income taxes, plus fixed charges, except
where capitalized. Fixed charges consist of interest charges and
amortization of debt issuance costs, in each case whether expensed or
capitalized, and the portion of rent expense under operating leases
representing interest. Earnings were insufficient to cover fixed charges in
1995 by $7.1 million, in 1996 by $16.6 million, in 1997 by $31.2 million, in
1998 by $51.3 million and for the nine months ended September 30, 1998 by
$38.5 million.
(3) Adjusted to reflect the offering of the outstanding notes and the
application of net proceeds from that offering and a capital contribution
from our parent GTS 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 December 31, 1998 and March
31, June 30, and September 30, 1999 are derived from our unaudited consolidated
financial statements and our 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 prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED,
---------------------------------------------------
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1998 1999 1999 1999
------------ --------- -------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues....................................... $ 42.3 $ 55.7 $ 67.1 $ 90.1
Gross margin................................... 22.7 36.4 47.7 64.0
Net income (loss).............................. (11.0) (1.9) 7.5 16.4
OTHER DATA:
EBITDA(1)...................................... 11.2 $ 25.3 $ 37.4 $ 49.5
Cities on network (at end of period)........... 17 19 23 24
Kilometers operational (at end of period)...... 9,662 12,067 14,163 15,395
Number of contracted customers................. 126 133 137 156
Backlog (at end of period)..................... $ 418.0 $ 450.3 $ 498.7 $ 548.2
</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 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 our Company and our business in addition to
the other information contained in this prospectus.
RISKS RELATING TO THE NOTES
WE MAY BE UNABLE TO MEET OUR SUBSTANTIAL DEBT OBLIGATIONS
We have incurred substantial debt and may incur substantial additional debt
to implement our business plans.
The following chart shows certain important credit statistics as of
September 30, 1999 and as adjusted.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
-------------------------
ACTUAL AS ADJUSTED(1)
-------- --------------
(IN THOUSANDS)
<S> <C> <C>
Total debt, including capital leases................ $764,011 $1,284,511
Shareholder's equity................................ $120,005 $ 170,005
Debt to equity ratio................................ 6.4x 7.6x
</TABLE>
- ---------------
(1) Gives effect to the offering of the outstanding notes and the $50.0 million
capital contribution from our parent GTS as if they occurred on September
30, 1999.
We are currently evaluating entering into, through one of our subsidiaries,
a new senior credit facility with one or more institutional lenders in an
aggregate amount of between $400.0 million and $750.0 million. If we enter into
this new credit facility, debt incurred under it would be structurally senior to
the Notes. In the event of a bankruptcy, liquidation or reorganization of any of
our subsidiaries, creditors of our subsidiaries (including lenders under our new
credit facility) will generally be entitled to payment of their claims from the
assets of those subsidiaries before any assets are made available for
distribution to us.
Our ability to make principal and interest payments on our debt, 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 to make payments on our
debt. Insufficient future cash flow could impair our ability to raise additional
equity or debt financing, to expand the reach and capacity of our network, and
to construct our intracity fiber networks and data- and Web-hosting centers. Our
cash flow could also be insufficient to make principal and interest payments on
our debt, 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
refinance or renegotiate the terms of our debt when required.
As a result of our current high level of debt, we:
- will need significant cash to service our debt, which will reduce funds
available for operations, future business opportunities and investments
in new or developing technologies and make us more vulnerable to adverse
economic conditions;
- may increase our vulnerability to general adverse economic and industry
conditions;
- may find it more difficult to make interest and principal payments on
our other debt, which could be a default under the indentures relating
to the outstanding notes, the exchange notes, our 11 1/2% senior notes
due 2007, our 10 3/8% senior notes due 2006 and our 10 3/8% senior notes
due 2009;
- may not be able to refinance our existing debt or raise additional
financing to fund future working capital, capital expenditures, debt
service requirements, acquisitions or other general corporate
requirements;
13
<PAGE> 21
- may be less flexible in planning for, or reacting to, changes in our
business and in the telecommunications industry that affect how we
implement our financing, construction or operating plans; and
- will have more debt than some of our competitors, which may place us at
a competitive disadvantage with respect to such competitors.
If we fail to make the required payments or to comply with our debt
covenants, we will default on our debt. A default would permit our debtholders
to accelerate the maturity of the debt, which in turn could cause defaults under
our other debt.
COVENANTS IN OUR DEBT AGREEMENTS RESTRICT OUR OPERATIONS
The covenants in our currently outstanding debt may materially and
adversely affect our ability to finance our future operations or capital needs
or to engage in other business activities. Among other things, these covenants
limit our ability to:
- incur additional debt;
- pay dividends or make certain other restricted payments;
- limit our ability to use our assets as collateral for loans;
- dispose of our assets;
- enter into transactions with affiliates; or
- consolidate, merge or sell all or substantially all of our assets and
the assets of our subsidiaries.
WE WILL DEPEND ON THE CASH FLOW OR OUR SUBSIDIARIES TO SATISFY OUR OBLIGATIONS
UNDER THE NOTES
We are a holding company with limited assets. Accordingly, we rely entirely
upon distributions from our subsidiaries for the funds necessary to meet our
obligations, including payments on the Notes. 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 subsidiaries to
make payments to us (in any form) will depend on their earnings, tax
considerations and legal restrictions. We also expect that the new credit
facility we are contemplating, if entered into, would limit the ability of our
subsidiaries to make payments or otherwise transfer assets to us.
ALTHOUGH YOUR NOTES ARE REFERRED TO AS "SENIOR NOTES," THEY WILL BE EFFECTIVELY
SUBORDINATED TO THE DEBT OF OUR SUBSIDIARIES
The Notes will be general unsecured obligations of GTS Europe. 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".
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. 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 GTS Europe or our
subsidiaries. All or substantially all of our fixed assets could become security
for our debt. 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
14
<PAGE> 22
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.
RISKS RELATING TO OUR BUSINESS
COMPETITORS WITH GREATER RESOURCES MAY ADVERSELY AFFECT OUR REVENUES
We compete with various telecommunications companies, including MCI
WorldCom, Inc., Viatel, Inc., KPN Qwest B.V., COLT Telecom Group plc, Level 3
Communications, Inc., Carrier1 International S.A., Deutsche Telekom AG, France
Telecom S.A., Global Crossing Ltd. and British Telecommunications plc. Some of
these entities have announced plans to construct, have begun to construct or are
operating high bandwidth fiber optic networks across various European countries
and in several European metropolitan markets and in some cases, providing
transatlantic connectivity, which do or will compete with our network and our
planned intracity fiber networks. In addition, a number of telecommunications
companies and Internet service providers have begun offering or announced their
intentions to offer data- and Web-hosting services in key European cities.
We compete primarily on the basis of the range and quality of services
offered, customer service and price. Competitors may force us to lower our
prices or modify our service offerings to remain competitive. We cannot assure
you that we will be able to effectively market our expanded service offerings,
keep prices at a profitable level or attract and retain customers. Many
competitors have established customer bases and extensive brand name recognition
and have greater financial, management and other resources.
The ongoing liberalization of the European telecommunications market has
coincided with technological innovation to create an increasingly competitive
market, characterized by still-dominant incumbent telecommunications operators
as well as an increasing number of new market entrants. In addition, these
carriers own and operate fully built networks and infrastructure which provide
them with significant cost advantages. Since we utilize these networks in part
to provide many of our services, our failure to gain economical access to these
networks could have a material adverse effect on our business, results of
operations and financial condition.
WE ANTICIPATE THAT PRICES FOR FIBER ASSETS AND BANDWIDTH SERVICES WILL CONTINUE
TO DECLINE
We anticipate that prices for network transmission capacity will continue
to decline over the next several years due primarily to the following:
- price competition as various network providers complete construction of
networks that might compete with our network;
- installation by us and our competitors of excess fiber capacity; and
- recent technological advances that permit substantial increases in the
transmission capacity of both new and existing fiber optic networks.
These and other factors could create pressure on us to reduce our prices. If we
do not continue to introduce product and service enhancements or if there are no
increases in volume and reductions in cost in the services we now provide to
offset these lower prices, our future gross margins will decrease.
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<PAGE> 23
OUR COMPETITIVE POSITION MAY BE COMPROMISED BY OUR DEPENDENCE ON LOCAL ACCESS
PROVIDERS
We need to enter into agreements with local access providers operating in
our target markets. We may also need to enter into agreements which permit us to
place our equipment at the facilities of such local access providers and/or
lease telecommunications transport capacity from such local access providers. We
cannot assure you that we will be able to enter into these agreements on
satisfactory terms.
EUROPEAN USE OF THE INTERNET, ELECTRONIC COMMERCE, DATA TRANSMISSION SERVICES,
MULTIMEDIA AND OTHER BANDWIDTH INTENSIVE APPLICATIONS MAY NOT INCREASE AS WE
EXPECT
Our business plan assumes that European use of the Internet, electronic
commerce, data transmission services, multimedia and other bandwidth-intensive
applications will increase substantially in the next few years, in a manner
similar to the increased use in the United States market in the past few years.
If the use of data transmission services, multimedia and bandwidth-intensive
applications in Europe does not increase as we anticipate, demand for many of
our value added products and services, including managed bandwidth services,
Internet protocol transit services and data- and Web-hosting services, will be
lower than we currently anticipate. Reduced demand for our services will have a
negative effect on our pricing power and our financial condition, including our
ability to make payments to you, as a holder of the Notes.
WE MAY EXPERIENCE A 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.
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 between $750.0 million to $850.0 million through
2000 in additional capital expenditures, including capital lease obligations, to
expand the reach and capacity of our network, construct intracity fiber networks
and data-and Web-hosting centers in our target metropolitan markets and purchase
a dedicated fiber pair on the FLAG Atlantic-1 transatlantic cable system and
related equipment to upgrade its capacity. We believe that the net proceeds that
we received from the offering of the Notes, combined with existing cash
balances, the $50.0 million capital contribution from GTS and projected
internally generated funds, will be sufficient to fund our future capital
expenditures through at least December 31, 2000, as well as payments on the
long-term fiber lease arrangements. However, the actual amount and timing of our
future capital requirements may differ from our estimates. Thus, additional
financing may be needed to expand the reach and capacity of our network, to
construct our intracity fiber networks and data- and Web-hosting centers and
purchase the dedicated fiber pair on FLAG Atlantic-1 and related equipment. 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 reach and capacity of our
network, constructing our intracity fiber networks and data- and Web-hosting
centers and purchasing the dedicated fiber pair on FLAG Atlantic-1 and related
equipment. Delaying or abandoning these plans could have a negative effect on
our financial condition.
OUR ACTUAL COSTS AND REVENUES MAY VARY FROM WHAT WE EXPECT THEM TO BE
Our revenues and the costs of expanding the reach and capacity of our
network, constructing our intracity fiber networks and data- and Web-hosting
centers and operating our business depend upon a variety of factors, including
our ability to:
- efficiently manage the enhancement of our network and operations;
- negotiate favorable contracts with suppliers;
- obtain additional licenses, regulatory approvals, rights-of-way and
infrastructure contracts;
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<PAGE> 24
- 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, infrastructure
providers and customers, in connection with the enhancement of our
network.
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
enhance our network and construct our intracity fiber networks and data- and
Web-hosting centers will not be greater than anticipated. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
WE MAY ENCOUNTER DELAYS IN IMPLEMENTING KEY ELEMENTS OF OUR BUSINESS STRATEGY
Our ability to achieve our strategic objectives will depend in large part
on the successful, timely and cost-effective realization of numerous elements of
our business plan, including:
- our plan to develop and offer seamless connectivity between Europe and
the United States;
- our plan to construct intracity fiber networks in fourteen major
European cities by year-end 2001;
- our plan to offer data- and Web-hosting centers;
- the execution of agreements with various parties regarding, among other
things, rights-of-way, lease of dark fiber and development and
maintenance of infrastructure and equipment;
- the timely performance by third parties of their contractual obligations
to engineer, design and construct the infrastructure underlying our
intracity fiber networks, the extension of our network and the planned
additional transatlantic capacity that we intend to purchase from the
FLAG Atlantic-1 joint venture; and
- activation of full capacity on the FLAG Atlantic-1 transatlantic cable
could be delayed or prevented if the FLAG Atlantic-1 joint venture fails
to comply with interest coverage and other financial ratios in the
credit facility it has entered into to finance construction of the
cable.
We cannot assure you that we will execute such actions. In addition, any delays
in concluding such agreements would materially and adversely affect the timely
or successful realization of our business plan.
We believe that our cost estimates and the build-out schedule are
reasonable with respect to these projects. However, the actual construction
costs or time required to complete the plans could substantially exceed current
estimates. Any significant delay or increase in the costs to develop such plans
could have a material adverse effect on our operations.
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<PAGE> 25
WE HAVE A LIMITED OPERATING HISTORY AND HAVE SUSTAINED SUBSTANTIAL NET LOSSES
We have a limited operating history and have historically sustained
substantial operating and net losses. We cannot assure you that our operations
will sustain profitability or positive cash flow in the future. For the
following periods, we reported net losses of:
<TABLE>
<CAPTION>
PERIOD NET LOSS
- ------ -------------
<S> <C>
Year ended December 31, 1996................................ $16.6 million
Year ended December 31, 1997................................ $31.2 million
Year ended December 31, 1998................................ $48.9 million
Inception through September 30, 1999........................ $82.1 million
</TABLE>
Our operations, infrastructure and customer base have grown significantly
in the last three years as we have expanded into new European markets. In
addition, we intend to enter additional European markets and offer new
telecommunications services. You should evaluate our prospects in light of the
risks, costs and time constraints that we face in establishing operations and
introducing new telecommunications services in newly liberalizing markets.
WE ARE DEPENDENT ON THIRD PARTIES FOR CONSTRUCTING OUR INTRACITY FIBER NETWORKS
AND EXTENDING OUR NETWORK
Our ability to achieve our strategic objectives will depend in part on our
successful, timely and cost-effective construction of our intracity fiber
networks and extension of our network. The development of our intracity fiber
networks and extension of our network may be adversely affected by a variety of
factors. Many of these factors, such as the regulatory environment, strikes,
natural disasters and other casualties, are beyond our control. In addition, we
will need to negotiate and conclude agreements with various parties. These
agreements are necessary to establish rights-of-way and to develop and maintain
our infrastructure and equipment.
For development of the intracity fiber networks and extension of our
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, governmental
authorities, transit authorities and private landowners to install fiber
optic cable; and.
- rights of access to buildings, such as Internet protocol exchange points,
that we intend to link to our intracity fiber networks.
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 extend our network and
build our intracity fiber networks 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 intracity fiber networks and
extension 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 intracity fiber networks and core
network; and
- our ability to obtain and maintain applicable government approvals to
build and operate our intracity fiber networks and extend our network.
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<PAGE> 26
Development of our intracity fiber networks and extension 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 construct our intracity
networks and extend our network will not be greater than we currently expect.
Delays or increased costs in developing the intracity networks or extending our
network could have a negative effect on our financial condition.
WE MAY EXPERIENCE ADDITIONAL RISKS AS A RESULT OF EXPANDING OUR NETWORK INTO THE
UNITED STATES
Our strategy includes expanding our network into select cities in the
United States. The following are particular risks we may experience as a result
of expanding our network into the United States:
- we may not be able to obtain leases on intercity and intracity dark fiber
in our target markets in the United States on favorable terms, if at all;
- we may not be able to successfully compete with U.S. service providers;
- complying with applicable U.S. laws and regulations, including tax laws
and industry related regulations, could be burdensome or expensive; and
- if there are delays in the commencement of services on the FLAG
Atlantic-1 transatlantic fiber optic link, we may incur additional costs
as a result of having to lease additional transatlantic capacity from
third party providers.
We cannot assure you that we will be successful in overcoming these risks
or any other problems arising because of our expansion into the United States.
WE MAY BECOME DEPENDENT ON A SMALL NUMBER OF SIGNIFICANT CUSTOMERS
Our customers are, and a significant portion will continue to be,
telecommunications companies. For that reason, we may become dependent on a
small number of significant customers. In 1998, we had two major customers,
representing $9.5 million and $9.3 million or 11.1% and 10.9% of revenues,
respectively. The loss of a significant customer could significantly decrease
our revenues and, hence, adversely affect our financial condition.
WE MAY NOT BE ABLE TO UPGRADE OR EXPAND THE REACH AND CAPACITY OF OUR NETWORK TO
MEET THE EVOLVING DEMANDS OF OUR CUSTOMERS OR THE TECHNOLOGICAL ADVANCES BY
COMPETITORS
We anticipate that future expansions and adaptions of our network's
infrastructure, including the electronic and software components used in the
infrastructure, may be necessary in order to respond to growth in the number of
customers served, increased demands to transmit larger amounts of data, changes
in our customers' service requirements and technological advances by
competitors. Our ability to expand the reach and capacity of our network may
depend on our continued ability to lease dark fiber or bandwidth at a cost which
allows us to offer bandwidth at attractive prices for our customers. The
expansion and adaptation of our network will require substantial financial,
operational and managerial resources. We cannot assure you that we will be able
to expand or adapt our network to meet the evolving standards, demands and
requirements of our customers or advances of our competitors on a timely basis,
at a commercially reasonable cost, if at all. We also cannot assure you that we
will be able to deploy successfully an expanded and adapted network
infrastructure or that we will have access to capital to realize these goals.
Any failure to expand or adapt our network to the needs of our customers could
have a material adverse effect on our financial condition and results of
operations, including our ability to make payments on the Notes.
OUR BUSINESS WILL SUFFER IF WE LOSE KEY PERSONNEL OR FAIL TO ATTRACT AND RETAIN
OTHER QUALIFIED PERSONNEL
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. 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
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<PAGE> 27
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."
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
management, marketing, technical and sales executives and other personnel who
are in high demand and often have multiple employment options. The competition
for qualified management, marketing, technical and sales executives and other
personnel in the telecommunications industry is intense. We may lose key
employees or be forced to increase their compensation. We cannot assure you that
we will be able to hire or retain necessary personnel.
WE MAY ENCOUNTER DELAYS, OPERATIONAL PROBLEMS AND INCREASED COSTS IF WE ARE
UNABLE TO ACQUIRE KEY EQUIPMENT FROM OUR MAJOR SUPPLIERS
We are significantly dependent on the technology and equipment which we
acquire from telecommunications equipment manufacturers that may provide vendor
financing for, and maintenance of, this equipment. Without this equipment, we
would face delays, operational disruption and higher expenses. Our main
equipment suppliers are Alcatel, CIENA, Cisco Systems and Nortel Networks. While
we could obtain equipment of comparable quality from several alternative
suppliers, we may be unable to acquire compatible equipment from such
alternative sources on a timely and cost-efficient basis.
WE MAY FACE DIFFICULTIES IN INTEGRATING, MANAGING AND OPERATING NEW TECHNOLOGY
Our operations depend on our ability to successfully integrate new and
emerging technologies and equipment. These include the technology and equipment
required for dense wavelength division multiplexing and Internet protocol
transmission using dense wavelength division multiplexing technology.
Integrating these new technologies could increase the risk of system failure.
Additionally, any damage to our network management center could harm our ability
to monitor and manage the network operations.
THE TECHNOLOGY OF OUR NETWORK COULD BECOME OBSOLETE
The telecommunications industry is subject to rapid and significant changes
in technology and such technological advances may reduce the relative
effectiveness of existing technology and equipment. The cost of implementation
of emerging and future technologies could be significant.
Development and operation of our network are also subject to certain
technological risks. Our network has been designed to utilize dense wavelength
division multiplexing and synchronous digital hierarchy technology. While the
current operational network segment has performed at or above design
specifications since November 1996, there can be no assurance that our network
will achieve the technical specifications for which we designed it or that we
will be able to upgrade our network as technological improvements in
telecommunications equipment are introduced.
IF WE EXPERIENCE SYSTEM FAILURE OR SHUTDOWN, WE MAY NOT BE ABLE TO DELIVER
SERVICES
Our success depends on our ability to deliver uninterrupted high quality
network services and reliable, high-speed access to the Internet. Our network
and our Internet backbone network are, and our intracity networks and data- and
Web-hosting centers will be, vulnerable to damage or cessation of operations
from:
- fire;
- earthquakes;
- severe storms;
- power loss;
- natural disasters;
- damage from human error and tampering;
- software defects;
- capacity limitations;
- breaches of security;
- physical break-ins;
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<PAGE> 28
- intentional acts of vandalism;
- telecommunications failures; and
- other factors that can cause interruptions in service or reduced capacity
for our customers.
We have designed our network to minimize the risk of such system failure but we
cannot assure that we will not experience failures or shutdowns relating to
individual points of presence or even catastrophic failure of the entire
network. Such significant or prolonged system failures or shutdowns could damage
our reputation and result in the loss of customers.
ALTHOUGH WE HAVE IMPLEMENTED NETWORK SECURITY MEASURES, OUR NETWORK MAY BE
SUSCEPTIBLE TO VIRUSES, BREAK-INS OR DISRUPTIONS
We have implemented many network security measures, such as limiting
physical and network access to our routers. Nonetheless, our network's
infrastructure is potentially vulnerable to computer viruses, break-ins and
similar disruptive problems caused by our customers or other Internet users.
Computer viruses, break-ins or other problems caused by third parties could lead
to interruptions, delays or cessation in service to our customers. Furthermore,
such inappropriate use of the Internet by third parties could also potentially
jeopardize the security of confidential information stored in the computer
systems of our customers. This could, in turn, deter potential customers and
adversely affect our existing customer relationships.
Security problems represent an ongoing threat to public and private data
networks. Attacks upon the security of Internet sites and infrastructure
continue to be reported to organizations such as the CERT Coordination Center at
Carnegie Mellon University, which facilitates responses of the Internet
community to computer security events. Addressing problems caused by computer
viruses, break-ins or other problems caused by third parties could have a
material adverse effect on us.
The security services that we offer in connection with our customers'
networks cannot assure complete protection from computer viruses, break-ins or
other disruptive problems. Although we attempt to limit contractually our
liability in such instances, the occurrence of such problems may result in
claims against us or could have a material adverse effect on our business or
reputation or on our ability to attract and retain customers for our products.
Moreover, until more consumer reliance is placed on security technologies
available, the security and privacy concerns of existing and potential customers
may inhibit the growth of the Internet service industry and our customer base
and revenues.
OUR INFRASTRUCTURE MAY NOT KEEP PACE WITH OUR RAPID GROWTH
Our operating and financial control systems and infrastructure may not be
adequate to maintain and effectively manage future growth. If we fail to
continuously upgrade our administrative, operating and financial control systems
or unexpected expansion difficulties arise resulting from our rapid growth, our
business, results of operations and financial condition could suffer a material
adverse effect. We must also purchase additional telecommunications facilities
and expand, train and manage the employee base. Inaccuracies in our forecasts of
market demand could result in insufficient or excessive telecommunications
facilities and fixed expenses that are not in line with our operations. As we
proceed with our development and expansion, there will be additional demands on
our customer support, sales and marketing and administrative resources and
network infrastructure.
FAILURE OF OUR COMPUTER SYSTEMS TO RECOGNIZE THE YEAR 2000 COULD DISRUPT OUR
BUSINESS AND OPERATIONS
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.
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<PAGE> 29
We have undertaken 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 involved 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 the first phase at the end of the fourth quarter of 1998. We
began the last three phases of this program during the first quarter of 1999.
All important upgrades were performed on our systems by the end of the second
quarter. The remaining actions include some upgrades on non-critical systems and
the installation of the latest year 2000 patches on certain systems. These were
completed by the end of the third quarter. Testing was performed through the
fourth quarter of 1999.
We also have taken steps to determine whether third parties significant to
our business will be Year 2000 compliant and are also working towards Year 2000
compliance. 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 Compliance."
We spent approximately [$0.8 million] for our Year 2000 compliance through
December 31, 1999. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Year 2000 Compliance."
DELAYS IN LIBERALIZATION OF THE EU TELECOMMUNICATIONS MARKET MAY ADVERSELY
AFFECT EXECUTION OF OUR BUSINESS STRATEGY
A substantial portion of our strategy depends on the timely implementation
of regulatory liberalization of the EU telecommunications market. We may
implement our business plan and make capital expenditures in a given country in
anticipation of regulatory liberalization which may not occur. This
liberalization is occurring in accordance with existing European Commission
directives. Even if an EU member state promptly adopts liberalization measures
in a timely fashion, established national or regional telecommunications
operators, regulators, trade unions and other sources may resist implementing
such measures. Further, our provision of services in Europe and the
implementation of our business plan may be materially adversely affected if any
EU member state imposes greater restrictions on international services between
the EU member state and non-EU countries.
DELAYS IN OBTAINING REGULATORY LICENSES AND APPROVALS COULD ADVERSELY AFFECT OUR
PLANS TO OFFER SERVICES IN OUR TARGETED MARKETS
Because we plan to provide an expanded array of telecommunications services
in Europe, we will become subject to significant additional regulation at the
EU, national and local levels. In particular, we must obtain additional
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 to expand the geographic reach of the
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<PAGE> 30
network. We must also apply for permits and other regulatory approval from
government and local authorities to construct our intracity fiber networks. In
addition, we are dependent on FLAG Atlantic Limited applying for and obtaining
the permits and other regulatory approvals required to build and operate the
FLAG Atlantic-1 transatlantic cable link. We cannot assure you that we or (as to
FLAG Atlantic-1) FLAG Atlantic Limited will be able to obtain or maintain the
necessary lease agreements, regulatory approvals, rights and permits on a timely
basis or that we will not be adversely affected by regulatory developments,
which could have a material adverse effect on these planned businesses. Delays
in receiving regulatory approvals, or the enactment of adverse regulations or
regulatory requirements, may delay or prevent us from expanding the geographic
reach of our network or building out our intracity fiber networks in our
targeted markets.
WE MAY BE LIABLE FOR INFORMATION DISSEMINATED THROUGH OUR NETWORK
The law relating to the regulation and liability of Internet service
providers in relation to information carried or disseminated is developing.
The EU Commission has prepared a proposal for a directive on certain legal
aspects of electronic commerce, which, if adopted by the European Parliament and
Council, would require member states to make certain changes to national laws.
The proposed directive would apply to us and other service providers established
in the EU and aims to establish a consistent legal framework for electronic
commerce within the EU.
The proposed directive includes provisions which would limit the liability
(other than for prohibitory injunctions) of "intermediaries" (such as Internet
service providers and carriers that transmit or host information provided by
third party users of the service) in respect of certain access, caching and
hosting services provided by them, subject to compliance with certain
conditions. The limitations potentially limit civil and criminal liability for
all types of illegal activities initiated by third parties on-line (e.g.
copyright piracy, unfair competition practices, misleading advertising,
copyright infringements, defamation, trademark infringements). If an
intermediary fails to qualify for such limitations, the nature and scope of his
liability will be established on the basis of member states' existing
legislation which may not provide us with the same protections from liability.
The proposed directive is still under review with member states and it is
impossible to predict whether it will eventually be adopted and, if so, in what
form. Decisions, laws, regulations and other activities regarding regulation and
content liability may adversely affect the development and profitability of
companies offering Internet access services, including us.
The imposition upon Internet and Web-hosting service providers of potential
liability for material carried on or disseminated through their systems could
require us to implement measures to reduce our exposure to liability. Such
measures may require that we spend substantial resources or discontinue some
product or service offerings. Any of these actions could have a material adverse
effect on our business, operating results and financial condition.
THERE MAY BE RESTRICTIONS ON OUR ABILITY TO CARRY CERTAIN TRAFFIC THROUGH OUR
NETWORK
In October 1999, the EU adopted a directive on data protection which
establishes minimum levels of protection for personal information and imposes
limits on the collection, processing, storage and dissemination of such data
without the subject's consent. The directive is being implemented in EU member
states in various stages. Certain functions typically carried out by
telecommunications carriers, including GTS Europe and its carrier customers
(e.g. storage of routing and billing information) are subject to the directive.
The directive forbids the transfer of personal information collected in the EU
to countries that lack "adequate" privacy protection. At the moment, the United
States is not judged to have "adequate" privacy protection. The EU and U.S.
authorities are currently holding discussions aimed at resolving this issue and
enabling the free circulation of personal information between the EU and the
United States. However, if these discussions are not successful, there is a
possibility that the movement of certain types of telecommunications traffic
from the EU to the United States could be disrupted, with consequent impact on
our revenues.
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<PAGE> 31
OUR RELATIONSHIP WITH OUR MAJORITY SHAREHOLDER COULD RESULT IN CONFLICTS OF
INTEREST
As of the date hereof, our parent, GTS, directly and through its wholly
owned subsidiary GTS Carrier Services, Inc., beneficially owns 98.5% of our
company. GTS therefore has the ability to strongly influence and/or control our
affairs and our business. Circumstances may occur in which the interests of GTS
could be in conflict with our interests. In addition, GTS may have an interest
in pursuing transactions that may involve risks to our company. We cannot assure
you that any such conflicts of interest will be resolved in our favor. We expect
to enter into capacity arrangements on an arms' length basis with other
subsidiaries of GTS.
GTS 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 GTS
could affect the perception that we are an independent operator and could
negatively impact our ability to attract and retain customers.
WE MAY BE SUBJECT TO RISKS BASED ON FLUCTUATIONS IN THE VALUE OF FOREIGN
CURRENCY
As of January 1, 1999, our functional currency is the Euro. Our reporting
currency is the U.S. dollar. 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."
ENFORCING JUDGMENTS AGAINST US COULD BE DIFFICULT
Substantially all of our assets are located outside the United States. As a
result, it will be necessary for investors to comply with foreign laws in order
to enforce judgments obtained in a U.S. court against our assets, including in
order to foreclose upon such assets. In addition, it may not be possible for
investors to: (i) effect service of process within the United States upon us or
(ii) enforce U.S. court judgements against such persons obtained in such courts
predicated upon U.S. federal securities laws. See "Service of Process and
Enforceability of Civil Liabilities."
DUTCH INSOLVENCY LAWS MAY ADVERSELY AFFECT A RECOVERY BY THE HOLDERS OF THE
NOTES
We are organized under the laws of the Netherlands. Dutch insolvency laws
differ significantly from insolvency proceedings in the United States and may
make it more difficult for holders of the Notes to effect a restructuring of our
company or to recover the amount they would have recovered in a liquidation or
bankruptcy proceeding in the United States. There are two primary insolvency
regimes under Dutch law: the first, moratorium of payment (surseance van
betaling), is intended to facilitate the reorganization of a debtor's debts and
enable the debtor to continue as a going concern. The second, bankruptcy
(faillissement), is primarily designed to liquidate and distribute the assets of
a debtor to its creditors.
Upon commencement of moratorium of payment proceedings, the court will
grant a provisional moratorium. The definitive moratorium will generally be
granted upon the approval of a qualified majority of the unsecured creditors. In
both cases, certain creditors will be precluded from attempting to recover their
claims from the assets of the debtor. This moratorium is subject to exceptions,
the most important of which excludes certain secured and certain preferential
creditors (such as tax and social security authorities) from the protection of
the moratorium. Unlike Chapter 11 proceedings under U.S. bankruptcy law, during
which both secured and unsecured creditors are generally barred from seeking to
recover on their claims, during Dutch moratorium of payment proceedings, certain
secured creditors may proceed against the assets that secure their claims to
satisfy their claims. A recovery under Dutch law, therefore, could involve a
sale of the
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<PAGE> 32
assets of the debtor in a manner that does not reflect the going concern value
of the debtor. Consequently, Dutch insolvency laws could preclude or inhibit the
ability of the holders of the Notes to effect a restructuring of our Company and
could reduce the recovery in a Dutch insolvency proceeding.
In connection with Dutch bankruptcy proceedings, the assets of a debtor are
generally liquidated and the proceeds distributed to the debtor's creditors on
the basis of the relative claims of those creditors, and certain parties (such
as secured creditors) will have special rights that may adversely affect the
interests of holders of the Notes. The claim of a creditor may be limited
depending on the date the claim becomes due and payable in accordance with its
terms. Generally, claims of holders of Notes which were not due and payable by
their terms on the date of a bankruptcy of our company will be accelerated and
become due and payable as of that date. Each of these claims will have to be
submitted to the receiver of our company to be verified by the receiver.
"Verification" under Dutch law means that the receiver determines the value of
the claim and whether and to what extent it will be admitted in the bankruptcy
proceedings. The valuation of claims that otherwise would not have been payable
at the time of the bankruptcy proceedings may be based on a net present value
analysis. Creditors that wish to dispute the valuation of their claims by the
receiver will need to commence a court proceeding. These verification procedures
could cause holders of Notes to recover less than the principal amount of their
Notes or less than they could recover in a U.S. liquidation. Such verification
procedures could also cause payments to the holders of Notes to be delayed
compared with holders of undisputed claims.
POSSIBLE INABILITY TO PURCHASE NOTES UPON A CHANGE OF CONTROL
Upon the occurrence of a change of control event, each holder of Notes will
be entitled to require us to purchase any or all of the Notes held by such
holder at the prices stated herein. However, our ability to purchase the Notes
upon a change of control event may be limited by the terms of our and our
subsidiaries' then existing contractual obligations. In addition, we may not
have adequate financial resources to effect such a purchase, and we cannot
assure you that we would be able to obtain such resources through a refinancing
of the Notes to be purchased or otherwise. If we fail to purchase all of the
Notes tendered for purchase upon the occurrence of a change of control event,
such failure will constitute an Event of Default under the Indentures.
With respect to the sale of assets referred to in the definition of Change
of Control, the phrase "all or substantially all" as used in such definition
varies according to the facts and circumstances of the subject transaction, has
no clearly established meaning under the relevant law and is subject to judicial
interpretation. Accordingly, in certain circumstances there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the assets of a person and
therefore it may be unclear whether a Change of Control has occurred and whether
the Notes are subject to an offer to purchase.
The Change of Control provision may not necessarily afford the holders
protection in the event of a highly leveraged transaction, including a
reorganization, restructuring, merger or other similar transaction involving us
that may adversely affect the holders, because such transactions may not involve
a shift in voting power or beneficial ownership or, even if they do, may not
involve a shift of the magnitude required under the definition of Change of
Control to trigger such provisions. Except as described under "Description of
the Notes -- Change of Control," the Indentures do not contain provisions that
permit the holders of the Notes to require us to purchase or redeem the Notes in
the event of a takeover, recapitalization or similar transaction.
A 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 outstanding notes are listed, and the exchange 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:
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<PAGE> 33
- 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.
RISK OF ERROR IN FORWARD LOOKING STATEMENTS
All statements in this prospectus that are not clearly historical in nature
are "forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Statements concerning the following areas of our
business are examples of forward looking statements:
- operations;
- prospects;
- markets;
- technical capabilities;
- funding needs;
- financing sources;
- spending;
- 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.
Moreover, we do not intend to publish updates or revisions of any
forward-looking statements included herein to reflect events or circumstances
after the date hereof or to reflect subsequent market analysis.
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<PAGE> 34
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the exchange
notes due 2006 (the "Exchange Notes due 2006") or the exchange notes due 2009
(the "Exchange Notes due 2009" and together with the Exchange Notes due 2006,
the "Exchange Notes") offered hereby. In consideration for issuing the Exchange
Notes contemplated by this prospectus, we 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 our indebtedness.
The net proceeds from the November 24, 1999 private offering (the
"Offering") of E225,000,000 10 1/2% Senior Notes due 2006 (the "Outstanding
Notes due 2006") and E275,000,000 11% Senior Notes due 2009 (the "Outstanding
Notes due 2009" and together with the Outstanding Notes due 2006, the
"Outstanding Notes"), after deducting the underwriting discounts and commissions
and estimated expenses, were approximately $505.1 million. Such net proceeds,
together with the proceeds of a $50.0 million capital contribution from GTS, our
parent, and existing cash balances, will be used to purchase a dedicated fiber
pair on the FLAG Atlantic-1 transatlantic cable system and related equipment to
upgrade its transmission capacity, build our intracity networks and our data-
and Web-hosting centers, expand the reach and capacity of our network, pursue
business development opportunities and for other general corporate purposes.
Until such time as the net proceeds of the offering are used for such purposes,
we will invest such proceeds in short term investment grade instruments.
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<PAGE> 35
THE EXCHANGE OFFER
GENERAL
In connection with the Offering, we entered into a registration rights
agreement with Donaldson, Lufkin & Jenrette International, Merrill Lynch
International, Lehman Brothers International (Europe), Deutsche Bank AG London
and Dresdner Bank AG London Branch (the "Initial Purchasers") relating to the
Outstanding Notes (the "Registration Rights Agreement"). Under the Registration
Rights Agreement, we agreed to file within 90 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"). We further agreed to use our reasonable best efforts to (i) cause the
Exchange Offer Registration Statement to become effective and commence the
Exchange Offer on or prior to the 150th day after the Issue Date, (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
Notes for all Notes validly tendered and not withdrawn pursuant to the Exchange
Offer on or prior to the fifth day following the Expiration Date.
Upon the terms and subject to the conditions set forth in this prospectus
and in the accompanying letter of transmittal, we will accept all Outstanding
Notes validly tendered prior to 5:00 p.m., London time on , 2000
(the "Expiration Date"). We will issue E1,000 principal amount of Exchange Notes
in exchange for each E1,000 principal amount of Outstanding Notes accepted in
the Exchange Offer. Holders may tender some or all of their Outstanding Notes
pursuant to the Exchange Offer in denominations of E1,000, and integral
multiples thereof.
Based on no-action letters issued by the staff of the Commission to third
parties, we believe 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 us to resell pursuant to Rule
144A or any other available exemption under the Securities Act or (ii) a person
that is an "affiliate" of ours 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 us 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 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. We have agreed that, for a period of
180 days after the Expiration Date, 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 resale. See "Plan of Distribution."
As of the date of this prospectus, E225 million aggregate principal amount
of the Outstanding Notes due 2006 and E275 million aggregate principal amount of
the Outstanding Notes due 2009 are outstanding. In connection with the issuance
of the Outstanding Notes, we arranged for the Outstanding Notes initially
purchased by Qualified Institutional Buyers and certain eligible persons in
"offshore transactions" (within the meaning of Regulation S under the Securities
Act) pursuant to Regulation S under the Securities Act of 1933 to be issued and
transferable in book-entry form through the facilities of Euroclear or CEDEL,
acting as depositary for the Outstanding Notes. The Exchange Notes will also be
issuable and transferable in book-entry form through Euroclear or CEDEL, as the
case may be.
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<PAGE> 36
This prospectus, together with the accompanying letter of transmittal, is
being sent to all registered holders as of , 2000 (the
"Record Date").
We will be deemed to have accepted validly tendered Outstanding Notes when,
as and if we have given oral or written notice thereof to the relevant Exchange
Agent. See "-- Exchange Agent." The Exchange Agent will act as agent for the
tendering holders of Outstanding Notes for the purpose of receiving Exchange
Notes from us 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. We 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 , 2000 unless we,
in our sole discretion, extend 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, we 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., London
time, on the next business day after the previously scheduled Expiration Date.
Such announcement may state that we are extending the Exchange Offer for a
specified period of time.
We reserve 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 us (if permitted to be waived by us), 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 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 we may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the Exchange Offer, we will have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than making a timely
release to the Dow Jones News Service.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from November 24, 1999, payable
semiannually in arrears on June 1 and December 1 of each year, commencing on
June 1, 2000, at the rate of 10 1/2% per annum, in the case of the Exchange
Notes due 2006, and 11% per annum, in the case of the Exchange Notes due 2009.
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 November 24, 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
June 1, 2000 (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.
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<PAGE> 37
PROCEDURES FOR TENDERING
To tender Outstanding 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
Notes to 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 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.
The tender by a holder of Outstanding Notes will constitute an agreement
between such holder and us in accordance with the terms and subject to the
conditions set forth in this prospectus 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 all other required
documents, to the Exchange Agent is at the election and risk of the holders.
Instead of delivery by mail, we recommend 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
us.
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 our books or the books
of any other person who has obtained a properly completed bond power from the
registered holder, or any person whose Outstanding Notes are held of record by
Euroclear or CEDEL, who desires to deliver such Outstanding 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 us,
evidence satisfactory to us of their authority to so act must be submitted with
the letter of transmittal.
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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 us in our sole discretion, which determinations will be final and
binding. We reserve the absolute right to reject any and all Outstanding Notes
not validly tendered or any Outstanding Notes our acceptance of which would, in
the opinion of our counsel, be unlawful. We also reserve the absolute right to
waive any irregularities or conditions of tender as to particular Outstanding
Notes. Our interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the letter of transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Outstanding Notes must be cured within such time as
we will determine. Neither we, 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, we reserve the right in our 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 ours
within the meaning of Rule 405 under the Securities Act.
GUARANTEED DELIVERY PROCEDURES FOR OUTSTANDING NOTES
Holders who wish to tender their Outstanding Notes and (i) whose
Outstanding Notes are not immediately available, or (ii) who cannot deliver
their Outstanding 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 or pursuant to
Euroclear's or CEDEL's standard operating procedures;
(b) prior to the Expiration Date (i) 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 Notes, the certificate number or numbers of
such Outstanding Notes and the principal amount of Outstanding 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 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, or
(ii) Euroclear or CEDEL receives an electronic transmission which contains
the character by which the participant acknowledges its receipt of and
agrees to be bound by the guaranteed delivery procedures set forth herein;
and
(c) such properly completed and executed letter of transmittal (or
facsimile thereof), together with the certificate(s) representing all
tendered Outstanding Notes in proper form for transfer (or to Euroclear or
CEDEL, as the case may be, of Outstanding Notes delivered electronically)
and all other documents
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<PAGE> 39
required by the Letter of Transmittal are received by the Exchange Agent
within five business days after the Expiration Date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Outstanding Notes may be
withdrawn at any time prior to 5:00 p.m., London time on the Expiration Date
unless previously accepted for exchange.
To withdraw a tender of Outstanding 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
written or facsimile notice of withdrawal for Outstanding Dollar Notes 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 us, and our
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 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, we 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 our
reasonable judgment, might materially impair our 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 our reasonable judgment, might materially impair our ability to
proceed with the Exchange Offer.
If we determine that we may terminate the Exchange Offer, as set forth
above, we 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, we will disclose
such change by means of a supplement to this prospectus that will be distributed
to each registered holder of Outstanding Notes, and we 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.
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EXCHANGE AGENT
Deutsche Bank AG, London branch, has been appointed as Exchange Agent for
the exchange of the Outstanding Notes. Questions and requests for assistance
relating to the exchange of the Outstanding Notes should be directed to the
Exchange Agent in London addressed as follows:
<TABLE>
<S> <C>
By Mail or Hand Delivery: Deutsche Bank AG, London branch
Winchester House
1 Great Winchester Street
EC2N 2DB London
United Kingdom
Attention:
Corporate Trust Administration
Facsimile Transmission: (44 171) 545-6155
Confirm by Telephone: (44 171) 545-8000
</TABLE>
FEES AND EXPENSES
We will bear the expenses of soliciting tenders pursuant to the Exchange
Offer. 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.
We will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. We, 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. We 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.
We will pay 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.
We 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 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.
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CAPITALIZATION
The following table sets forth as of September 30, 1999 (i) our historical
capitalization and (ii) our capitalization as adjusted to reflect the
consummation of the private offering of the Notes, and the $50.0 million capital
contribution from our parent GTS. This table should be read in conjunction with
the "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and notes thereto included
elsewhere in this prospectus. There has been no material change in our
capitalization since September 30, 1999.
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1999
-----------------------
ACTUAL AS ADJUSTED
(DOLLARS)IN THOUSANDS
<S> <C> <C>
Cash and cash equivalents................................... $309,590 $ 864,659(1)
======== ==========
Debt:
11 1/2% Senior Notes due 2007............................. $265,000 $ 265,000
10 3/8% Senior Notes due 2009............................. 200,000 200,000
10 3/8% Senior Notes due 2006............................. 90,508 90,508
Senior Notes offered hereby............................... -- 520,500(1)
Capital lease obligations (including current
maturities)............................................ 208,231 208,231
Other..................................................... 272 272
-------- ----------
Total debt (including current maturities)......... 764,011 1,284,511(1)
-------- ----------
Shareholders' Equity:
Common stock, 1,000 Dutch guilders par value (297,000
shares authorized and 199,683 shares issued and
outstanding)........................................... 101,518 101,518
Additional paid-in capital................................ 104,180 154,180
Accumulated other comprehensive loss...................... (3,559) (3,559)
Accumulated deficit....................................... (82,134) (82,134)
-------- ----------
Total shareholders' equity........................ 120,005 170,005
-------- ----------
Total capitalization........................................ $884,016 $1,454,516(1)
======== ==========
</TABLE>
- ---------------
(1) Assumes conversion of proceeds of the issuance of the Notes at a Euro
conversion rate of 1.0410.
34
<PAGE> 42
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below under the captions
Statement of Operations Data for the years ended December 31, 1995, 1996, 1997
and 1998 and Balance Sheet Data as of December 31, 1995, 1996, 1997 and 1998
have been derived from our consolidated financial statements audited by Ernst &
Young Reviseurs d'Entreprises S.C.C. The selected consolidated financial data as
of September 30, 1999 and for the nine months ended September 30, 1998 and 1999
have 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, 1998 and 1999 are not necessarily indicative of results for the
full fiscal year. We 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 our consolidated financial statements and notes thereto included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------ -------------------
1995 1996 1997 1998 1998 1999
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................................... $ -- $ 48 $ 5,373 $ 85,251 $ 42,933 $213,012
Operating costs and expenses:
Telecommunication services....................... -- 4,694 6,842 41,848 22,259 64,913
Selling, general and administrative.............. 6,626 9,894 17,868 28,273 16,747 35,940
Depreciation and amortization.................... 560 1,266 5,229 28,638 18,642 45,152
(Loss) income from operations...................... (7,186) (15,806) (24,566) (13,508) (14,715) 67,007
Other income/(expense):
Interest expense................................. (9) (153) (12,826) (30,852) (23,419) (54,181)
Foreign currency gains (losses).................. 19 (1,126) (367) (11,308) (5,227) (1,183)
Other, net....................................... 125 508 6,596 9,076 7,240 15,068
Net (loss) income.................................. (7,051) (16,577) (31,163) (48,935) (37,940) 22,062
OTHER DATA (IN THOUSANDS):
EBITDA(1).......................................... $(6,626) $(14,540) $ (19,337) $ 15,130 $ 3,927 $112,159
Net cash (used in) provided by operating
activities....................................... (2,655) (11,540) (4,417) 44,957 20,527 19,227
Net cash used in investing activities.............. (4,405) (20,781) (107,466) (92,758) (34,541) (96,805)
Net cash provided by (used in) financing
activities....................................... 11,644 28,924 317,500 (21,463) 493 245,853
Ratio of earnings to fixed charges(2).............. -- -- -- -- -- 1.3x
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30, 1999
-------------------------------- ----------------------------
1996 1997 1998 ACTUAL AS ADJUSTED(3)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Total current assets.................... $ 7,528 $249,325 $240,151 $ 476,173 $1,031,242
Property and equipment, net............. 20,303 204,944 438,984 528,487 528,487
Total assets............................ 29,466 504,668 744,110 1,142,803 1,713,303
Total current liabilities............... 11,915 61,744 169,413 176,808 176,808
Capital leases, including current
portion............................... -- 139,185 227,513 208,231 208,231
Other debt, including current portion... 562 265,383 265,353 555,780 1,076,280
Total liabilities....................... 12,414 445,008 688,403 1,022,798 1,543,298
Shareholders' equity(4)................. 17,052 59,660 27,948 120,005 170,005
</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 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) Earnings consist of income before income taxes, plus fixed charges, except
where capitalized. Fixed charges consist of interest charges and
amortization of debt issuance costs, in each case whether expensed or
capitalized, and the portion of rent expense under operating leases
representing interest. Earnings were insufficient to cover fixed charges in
1995 by $7.1 million, in 1996 by $16.6 million, in 1997 by $31.2 million, in
1998 by $51.3 million and for the nine months ended September 30, 1998 by
$38.5 million.
(3) Adjusted to reflect the offering of the Notes and the application of net
proceeds as described in "Use of Proceeds."
(4) Includes shareholders' loans and shareholders' equity of $34.9 million and
$(17.8) million for 1996, respectively.
35
<PAGE> 43
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of our financial condition and results of
operations as of September 30, 1999 and 1998, December 31, 1998, 1997 and 1996
and for the three and nine months ended September 30, 1999 and 1998 and for the
years ended December 31, 1998, 1997 and 1996. The following discussion should be
read in conjunction with the audited consolidated financial statements, the
notes related thereto and the other financial data included elsewhere in this
prospectus.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
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 revenues and costs
and (iii) changes in our competitive environment, contain forward-looking
statements concerning our 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.
In addition, any statements that express or involve discussions as to
expectations, beliefs, plans, objectives, assumptions or future events or
performance (often, but not always, through the use of words or phrases such as
"will likely result," "are expected to," "will continue," "is anticipated,"
"estimated," "intends," "plans," "projection" and "outlook") are not historical
facts and may be forward-looking and, accordingly, such statements involve
estimates, assumptions and uncertainties which could cause actual results to
differ materially from those expressed in the forward-looking statements.
Accordingly, any such statements are qualified in their entirety by reference
to, and are accompanied by, the factors discussed throughout this prospectus.
Among the key factors that have a direct bearing on our results of operations
are the potential risk of delay in implementing our business plan; the
political, economic and legal aspects of the markets in which we operate;
competition and our need for additional substantial financing. These and other
factors are discussed herein under "Risk Factors," "Business," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
elsewhere in this prospectus.
The factors described in this prospectus could cause actual results or
outcomes to differ materially from those expressed in any forward-looking
statements made by us or on behalf of us, and investors, therefore, should not
place undue reliance on any such forward-looking statements. Further, any
forward-looking statement speaks only as of the date on which such statement is
made, and we undertake no obligation to update any forward-looking statement or
statements to reflect events or circumstances after the date on which such
statement is made or to reflect the occurrence of unanticipated events. New
factors may emerge from time to time, and it is not possible for management to
predict all of such factors. Further, we cannot assess the impact of each such
factor on our business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements. Factors that could cause such differences
include, but are not limited to those discussed under "Risk Factors."
OVERVIEW
We are one of the leading European providers of managed bandwidth services
and related telecommunications services to telecommunications carriers, Internet
service providers and other bandwidth-intensive customers. As of September 30,
1999, we operated a centrally managed fiber optic network in Europe over
approximately 15,300 kilometers connecting 24 cities in 10 European countries,
with service to the United States provided through capacity leased on
transatlantic cables. On June 24, 1998, we acquired a 75% interest in Ebone A/S
("Ebone"). Ebone operates a Tier-1 Internet backone network that connects
European service providers to the Internet. We purchased the remaining 25%
interest on May 25, 1999. The results of Ebone have been included in the
accompanying consolidated financial statements from the date of acquisition.
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<PAGE> 44
RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 1998
Revenue. Our consolidated revenues for the three and nine months ended
September 30, 1999 were $90.1 million and $213.0 million, respectively, as
compared to $27.0 million and $42.9 million for the comparable periods in 1998.
The growth in revenue is attributable to the continued deployment of our
network.
Telecommunications Services. Our telecommunications services costs for the
three and nine months ended September 30, 1999 were $26.1 million and $64.9
million, respectively, as compared to $13.2 million and $22.3 million for the
comparable periods in 1998. The increase in telecommunications services costs
for the three and nine months ended September 30, 1999 was primarily due to
increased costs related to operating and maintaining the network as it continues
to be deployed, as well as the increase in local access costs resulting from
increased volume of traffic.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three and nine months ended September 30, 1999
were $14.5 million and $35.9 million, respectively, as compared to $6.7 million
and $16.7 million for the same periods in 1998. The increase in selling, general
and administrative expenses is reflective of the growth of our business
operations and support personnel. At September 30, 1999 we had 380 employees as
compared to 208 employees at September 30, 1998.
Depreciation and Amortization. Depreciation and amortization expense for
the three and nine months ended September 30, 1999 was $18.8 million and $45.2
million, respectively, as compared to $8.7 million and $18.6 million for the
comparable periods in 1998. The increase in depreciation and amortization
expense is attributable to depreciation of additional network assets due to the
continued build-out of our network.
Interest. Interest expense for the three and nine months ended September
30, 1999 was $20.2 million and $54.2 million, respectively, as compared to $7.9
million and $23.4 million for the comparable periods in 1998. The increase was
primarily attributable to the interest and related costs associated with the
issuance in January 1999 of $200 million aggregate principal amount of 10 3/8%
senior notes due 2009 ("Senior Notes due 2009") and E85 million aggregate
principal amount of 10 3/8% senior notes due 2006 ("Senior Notes due 2006").
Interest income for the three and nine months ended September 30, 1999 was
$7.5 million and $15.5 million, respectively, as compared to $1.9 million and
$7.8 million in the comparable periods in 1998. The increase is due to the
interest earned through our short-term investments that have increased as a
result of the investment of the proceeds from the issuance of the Senior Notes
due 2009 and the Senior Notes due 2006.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998 VS. DECEMBER 31, 1997
Revenue. Our consolidated revenue for the year ended December 31, 1998 was
$85.3 million as compared to $5.4 million for the comparable period in 1997. The
growth in revenue is attributable to the continued deployment of our network as
well as the inclusion of Ebone, whose revenue was $17.7 million for the period
from the date of acquisition through December 31, 1998.
Telecommunication Services. Our telecommunication services costs for the
year ended December 31, 1998 were $41.8 million compared to $6.8 million for the
comparable period in 1997. The increase in cost of revenue for the year ended
December 31, 1998 was primarily due to increased costs related to operating and
maintaining the network as it is continued to be deployed, as well as the
increase in local access costs.
Selling, General and Administrative. Selling, general and administrative
expenses for the year ended December 31, 1998 were $28.3 million as compared to
$17.9 million for the comparable period in 1997. The increase in selling,
general and administrative expenses is reflective of the growth of our business
operations
37
<PAGE> 45
and support personnel as the number of employees grew to 265 at December 31,
1998 from 130 at December 31, 1997.
Depreciation and Amortization. Depreciation and amortization expense for
the year ended December 31, 1998 was $28.6 million as compared to $5.2 million
in 1997. The increase in depreciation and amortization expense is attributable
to depreciation of additional network assets due to the continued build-out of
our network.
Interest. Interest expense for the year ended December 31, 1998 was $30.9
million as compared to $12.8 million for the comparable period in 1997. The
increase was primarily the result of incurring a full year of interest and
related costs associated with our issuance in August 1997 of $265.0 million
aggregate principal amount of 11 1/2% Senior Notes due 2007 (the "Senior Notes
due 2007") in 1998 as compared to only five months of interest and costs in
1997.
Interest income for the year ended December 31, 1998 was $10.0 million as
compared to $6.6 million for the comparable period in 1997. The increase in
interest income was the result of investing the excess cash generated from the
issuance of the Senior Notes due 2007 in various highly liquid investments.
Foreign Currency Losses. Foreign currency losses were $11.3 million for the
year ended December 31, 1998 as compared to $0.4 million for the comparable
period in 1997. The losses in 1998 were primarily the result of foreign exposure
from the issuance of the Senior Notes due 2007 in U.S. dollars and other U.S.
dollar cash and payables balances, the weakening of the dollar versus European
currencies in the third and fourth quarter and losses on several forward
exchange contracts.
YEAR ENDED DECEMBER 31, 1997 VS. DECEMBER 31, 1996
Revenue. Our consolidated revenue for the year ended December 31, 1997 was
$5.4 million. The revenues for the year ended December 31, 1996 were minimal.
Our 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.
Telecommunication Services. Our telecommunication services costs for the
years ended December 31, 1997 and 1996 were $6.8 million and $4.7 million,
respectively. 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 and local access costs.
Selling, General and Administrative. Selling, general and administrative
expenses for the years ended December 31, 1997 and 1996, were $17.9 million and
$9.9 million, respectively. The increase in operating expenses was reflective of
the growth of our business operations and support personnel. We had 130
employees as of December 31, 1997 as compared to 101 employees as of December
31, 1996.
Depreciation and Amortization. Depreciation and amortization expense for
the year ended December 31, 1997 was $5.2 million as compared to $1.3 million in
1996. The increase in depreciation and amortization expense is attributable to
an increase in depreciation on network assets due to the continued deployment of
our network.
Interest. Interest expense for the years ended December 31, 1997 and 1996
was $12.8 million and $0.2 million, respectively. The increase in interest
expense in 1997 is attributable to the interest and related costs associated
with the Senior Notes due 2007.
Interest income for the years ended December 31, 1997 and 1996 was $6.6
million and $0.5 million, respectively. The increase in 1997 was the result of
investing the excess cash generated from the issuance of the Senior Notes due
2007 in various highly liquid investments.
LIQUIDITY AND CAPITAL RESOURCES
The primary sources of our funding through September 30, 1999, have been
net proceeds of $251.3 million from the issuance in 1997 of the $265.0 million
aggregate principal amount of the Senior Notes
38
<PAGE> 46
due 2007, net proceeds of $289.3 million from the issuance in January 1999 of
the Senior Notes due 2009 and Senior Notes due 2006 and cash equity
contributions of $103.2 million in 1997. The Senior Notes due 2009 and the
Senior Notes due 2006 are general unsecured obligations and have substantially
the same terms of the Senior Notes due 2007.
In November 1999, we conducted an offering in which we issued E500 million
of general unsecured senior notes (the "Notes"). In addition, we are currently
evaluating entering into, through a wholly owned subsidiary, a new credit
facility (the "New Credit Facility") with one or more institutional lenders in
an aggregate amount of between $400.0 million to $750.0 million. Borrowings
under the New Credit Facility would be structurally senior to the Senior Notes
due 2007, the Senior Notes due 2006, the Senior Notes due 2009 and the Notes.
Development of our fiber optic network has been capital intensive. We
currently expect that we will incur, in the fourth quarter of 1999 through
December 31, 2000, between $750.0 million to $850.0 million in capital
expenditures, including capital lease obligations, to expand the reach and
capacity of our network, construct intracity fiber networks and data- and
Web-hosting centers in our target metropolitan markets and purchase a dedicated
fiber pair on the FLAG Atlantic-1 transatlantic cable system and related
equipment to upgrade its capacity. We believe that the net proceeds from the
issuance of the Notes, combined with existing cash balances, the $50.0 million
capital contribution from GTS and our projected internally generated funds,
should be sufficient to fund our currently identified capital expenditures, at
least through December 31, 2000, including payments on the long-term fiber lease
arrangements. However, the actual amount and timing of our future requirements
may differ materially from our estimates. Any failure to obtain necessary
financing may require that we delay or abandon our plans for expanding the reach
and capacity of our network, constructing our planned intracity fiber networks
and data- and Web-hosting centers and purchasing a dedicated fiber pair on the
FLAG Atlantic-1 transatlantic cable system and related equipment to upgrade its
capacity and could jeopardize our viability.
We had a positive working capital of $299.4 million and $70.7 million as of
September 30, 1999 and December 31, 1998, respectively. We had cash and cash
equivalents of $309.6 million and $130.1 million at September 30, 1999 and
December 31, 1998, respectively. We did not have restricted cash at September
30, 1999. We had $30.1 million of restricted cash at December 31, 1998. The
restricted cash at December 31, 1998 primarily represents our obligation to
place into escrow the first four scheduled semi-annual interest payments on the
Senior Notes due 2007.
During the three and nine months ended September 30, 1999, operating
activities provided $19.0 million and $19.2 million, respectively, and provided
cash of $33.5 million and $20.5 million for the comparable periods in 1998.
Investing activities used cash of $33.2 million and $96.8 million for the three
and nine months ended September 30, 1999 as compared to using cash of $30.7
million and $34.5 million for the comparable periods in 1998.
We have developed risk management policies that establish guidelines for
managing foreign exchange risk. We continuously evaluate the materiality of
foreign exchange exposures in different countries and the financial instruments
available to mitigate this exposure. We have designed reporting processes to
monitor the potential exposure on an ongoing basis. We have limited our foreign
currency exposure by entering into a foreign currency swap agreement. We find it
impractical to hedge all foreign currency exposure and as a result, will
continue to experience foreign currency gains and losses.
YEAR 2000 COMPLIANCE
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.
39
<PAGE> 47
Issues Posed by the Year 2000 Issue. We are exposed to the Year 2000 Issue
in a number of ways. Among other things, the Year 2000 Issue might affect our:
(i) computer hardware and software; (ii) telecommunications equipment and other
systems with embedded logic (among other things, this includes our fire
detection, access control systems, heating, ventilation and air conditioning,
and uninterruptible power supply; (iii) operating partners and organizations
upon which we are dependent; (iv) local access connections, upon which we are
dependent; and (v) supply chain.
Year 2000 Compliance Program. We have substantially completed 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 us or our 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 our operations is affected by dates, prior to, during and after 2000. The
scope of the Year 2000 Compliance Program includes all of the business
functions, locations and resources that are essential. The resources that are
within the scope of the Year 2000 Compliance Program are, among other things,
our computer systems, software, vendor supplied software, telecommunications
equipment, third party telecommunications partners and other network service
suppliers, environmental and building control systems, internal communications
systems and other interfaces with third party services. As explained below, our
efforts to assess 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 us, (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 we have identified substantially all of our 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
that might be materially impacted by Year 2000 issues. Our observations from the
assessment phase during the third and fourth quarters of 1998 is that most of
our telecommunications equipment and software has been purchased within the last
three years and the majority is already compliant or can be made compliant with
minor upgrades. We completed the assessment phase of our Year 2000 readiness in
the fourth quarter of 1998.
Remediation, Prevention and Testing Phase. Based on those resources
identified in the assessment phase, we developed a detailed plan in the fourth
quarter of 1998, that was followed by an upgrade, a remediation, a prevention
and a testing phase in early 1999. All important upgrades were performed on our
systems by the end of the second quarter. The remaining actions, including some
upgrades on non-critical systems and the installation of the latest Year 2000
patches on certain systems, were completed by the end of the third quarter 1999.
Testing will continue through the fourth quarter of 1999.
Assessment of Third Party Compliance. As noted above, we have also
undertaken our 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 us, we are obtaining
confirmations from its primary telecommunications 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. We have received responses from approximately 84% of our vendors,
including all critical ones. We have not received any responses that indicate
material problems that would require our follow-up.
Worst Case Scenario for the Company. Our worst case scenario would be the
failure of our telecommunications equipment, power providers and/or interfaces
with other telecommunication vendors. These cases would create business
interruption of our operations and would adversely affect our revenues. However,
we have 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, we currently have diesel generators
at almost all of our sites and expect to install diesel generators in the
remaining sites in 1999. Based on our assessment during the third and fourth
quarters of 1998, we do not foresee a material loss due to these
40
<PAGE> 48
conditions and we are hopeful that our remediation and testing efforts will
ensure that we have addressed our Year 2000 readiness. However, there can be no
assurance that Year 2000 non-compliance by our systems or the systems of
vendors, customers, partners or others will not result in a material adverse
effect.
Contingency Plans. We have developed a contingency plan to address our
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
telecommunications providers at reasonable terms.
Costs related to the Year 2000 Issue. We expect that we will incur
approximately $0.8 million to complete the assessment, detailed planning,
remediation prevention and testing phases, including costs to be incurred at our
Crisis Command Center, of which approximately $0.6 million has been incurred for
the nine months ended September 30, 1999. These costs will 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 were included in the initial assessment during the
third and fourth quarters of 1998. We do not expect that the costs of addressing
our Year 2000 readiness will have a material effect on our financial condition
or results of operations. However, there can be no assurance that Year 2000
non-compliance by our systems or the systems of vendors, customers, partners or
others will not result in a material adverse effect.
Crisis Command Center. We expect to operate a twenty-four hour Crisis
Command Center beginning December 30, 1999 to assist in the detection of
problems and to facilitate internal and external communication. It is
anticipated that the Crisis Command Center will remain open until at least
January 7, 2000.
Risks Related to the Year 2000 Issue. Although our efforts to be Year 2000
compliant are intended to minimize the adverse effects of the Year 2000 issue on
our business and operations, the actual effects of the issue will not be known
until 2000. Difficulties in implementing the remediation or prevention phases or
our failure to fully implement the planning or remediation phases or the failure
of our 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 our business,
results of operations, and financial condition.
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, where we have our headquarters and the majority of our subsidiaries and
operations, established fixed conversion rate 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 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.
We have significant operations within the European Union including many of
the countries that have adopted the Euro. We continue to evaluate the impact the
Euro will have on our continuing business operations and no assurances can be
given that the Euro will not have material adverse affect on our business,
financial condition and results of operations. However, we do not expect the
Euro to have a material effect on our competitive position as a result of price
transparency within the European Union as we have always operated as a
pan-European business with transparent pricing in ECU for the majority of our
customers. Moreover, we have evaluated our ability to update our information
systems to accommodate the adoption of the Euro and we do not expect to incur
material costs in the updating of such systems. In addition, we cannot
accurately predict the impact the Euro will have on currency exchange rates or
on our currency exchange risk.
We adopted the Euro as our functional currency on January 1, 1999.
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<PAGE> 49
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK AND TREASURY AND
CURRENCY EXPOSURE MANAGEMENT
Our treasury function manages our funding, liquidity, and exposure to
interest rate and foreign exchange rate risks. Our treasury operations are
conducted within a framework of policies and guidelines authorized by our Board
of Directors. In accordance with our policy, we do not enter into any
transactions of a speculative nature.
We are exposed to market risk from changes in interest rates on long-term
obligations and as a global company, we also face exposure to adverse movements
in foreign currency exchange rates. A portion of our debt obligations are
denominated in currencies which expose us to risks associated with changes in
foreign exchange rates. We have developed risk management policies that
establish guidelines for managing foreign exchange risk and periodically
evaluate the materiality of foreign exchange exposures and the financial
instruments available to mitigate this exposure.
We have entered into a foreign currency swap agreement in order to mitigate
our exposure on U.S. dollar denominated debt. We also attempt to mitigate this
and other exposures from debt obligations denominated in exposed currencies by
maintaining assets in the exposed currency wherever possible. We find it
impractical to hedge all foreign currency exposure and as a result will continue
to experience foreign currency gains and losses. The introduction of the Euro as
a common currency for members of the European Union occurred on January 1, 1999.
We have not determined what impact, if any, the Euro will have on our foreign
exchange exposure.
The following table provides information about our debt obligations that
are sensitive to changes in interest rates.
<TABLE>
<CAPTION>
FAIR VALUE
1999 2000 2001 2002 2003 THEREAFTER TOTAL 12/31/98
---- ---- ---- ---- ---- ---------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LONG-TERM DEBT, INCLUDING CURRENT PORTION:
Fixed rate...................................... -- --.. -- -- -- $265,000 $265,000 $285,538
Avg. interest rate.............................. -- -- -- -- -- 11.5% -- --
</TABLE>
The following tables provide information about our derivative financial
instruments and other financial instruments by functional currency and where
applicable, presents such information in U.S. dollar equivalents. The tables
summarize information on instruments that are sensitive to foreign currency
exchange rates, including a foreign currency swap agreement and foreign currency
denominated debt obligations.
<TABLE>
<CAPTION>
FAIR VALUE
1999 2000 2001 2002 2003 THEREAFTER TOTAL 12/31/98
------- ------- ------- -------- -------- ---------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LONG-TERM DEBT, INCLUDING CURRENT
PORTION:
U.S. Dollars
Fixed rate....................... -- -- -- -- -- $265,000 $265,000 $285,538
Avg. interest rate............... -- -- -- -- -- 11.5% -- --
CURRENCY SWAP AGREEMENTS RELATED TO
LONG-TERM DEBT:
Receipt of USD
Notional amount.................. -- $30,475 $30,475 $295,475 -- -- $356,425 $330,689
Avg. contract rate............... 1.82 1.82 1.82
Receipt of DEM
Notional amount.................. $22,000 -- -- -- -- -- $ 22,000 $ 23,882
Avg. contract rate............... 0.55
</TABLE>
The only significant change since December 31, 1998 is the issuance in
January 1999 of the Senior Notes due 2006 which exposes us to changes in
interest rates and the Senior Notes due 2009 which exposes us to changes in
interest and foreign exchange rates.
The Notes will also expose us to changes in interest and foreign exchange
rates.
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<PAGE> 50
OVERVIEW BUSINESS
We are one of the leading European providers of managed bandwidth and
related telecommunications services to telecommunications carriers, Internet
service providers and other bandwidth-intensive customers. We operate the
largest centrally managed fiber optic network in Europe over which we offer a
broad and sophisticated range of services. In addition, we operate a Tier-1
Internet backbone network that connects European Internet service providers to
the Internet. We believe our early entry into the market, supported by the reach
of our high capacity network, a low cost position and our focus on building
strategic relationships with our customers, has allowed us to create sustainable
advantages in a large and growing market.
For the three-month and nine-month periods ended September 30, 1999, we had
revenues of $90.1 million and $213.0 million, respectively, and EBITDA of $49.5
million and $112.2 million, respectively. At September 30, 1999, we had 156
customers under contract for service on our network, which represents an
increase from 133 and 137 customers at the end of the first two quarters of
1999, respectively. At September 30, 1999, our customers were contractually
obligated to pay us an aggregate of $548.2 million for future services, provided
we perform in accordance with contractual specifications. This amount increased
from $450.3 million and $498.7 million at March 30, 1999 and June 30, 1999,
respectively.
Our network, which covers approximately 16,000 kilometers connecting 27
cities in 11 European countries, reaches a substantial portion of our targeted
customer base. We expect our network to extend approximately 25,000 kilometers
with points of presence in approximately 20 European countries by the end of
2000. Thereafter, additional points of presence will be added to our network as
warranted by customer demand. We also provide services that connect Europe to
the United States in order to address a significant portion of the market growth
which is Internet and Internet protocol related. This service is currently
provided through capacity leased from third parties. We intend to purchase a
dedicated fiber pair on the FLAG Atlantic-1 transatlantic fiber optic link using
part of the proceeds of this offering. We expect to begin offering unprotected
services in the first quarter of 2001 and fully protected services in the second
quarter of 2001 over this fiber pair. By owning this fiber pair, we will acquire
capacity of 70 gigabits per second, upgradeable to a maximum capacity of 400
gigabits per second of fully protected capacity connecting the New York City
area to our European network. In addition, in order to meet and support the
continuous increase in bandwidth requirements of our current and future
customers, we are upgrading transmission equipment that uses dense wavelength
division multiplexing technology to substantially increase our network's
transmission capacity.
Dense wavelength division multiplexing, or DWDM, is a technology that
allows transmission of multiple waves of light over a single fiber optic strand,
thereby increasing network capacity. By using current dense wavelength division
multiplexing technology, we are currently able to derive up to 40 wavelengths
per fiber optic pair, each wavelength with a capacity of 2.5 gigabits per
second, for a total capacity of 100 gigabits per second over a single fiber
optic strand. By year-end 2000, we expect to be able to derive up to 96
wavelengths per fiber optic pair, each wavelength with a capacity of 10 gigabits
per second, for a total capacity of 960 gigabits per second over a single fiber
optic strand, or nearly 1 terabit (or 1 trillion bits) per second.
We began providing services to our customers in November 1996. We believe
that our early entry into the European carriers' carrier market has provided us
with several competitive advantages over other providers of telecommunications
services to telecommunications carriers, Internet service providers and other
bandwidth-intensive customers. We believe we are a pioneer in Europe in fiber
optic network deployment and service development. We have established long-term
contracts with telecommunications carriers, Internet service providers and other
bandwidth-intensive customers in some instances capturing some of the new
customers in some of the most rapidly growing market segments. In many cases, by
providing mission-critical value-added solutions to our customers we seek to
establish ourselves as their strategic partner. This degree of integration in
our customers' operations has often provided us with the opportunity to
introduce and implement additional products and services with the customer,
thereby enabling us to further penetrate our customer base. As a result of our
strong position in the European telecommunications market, we have been able to
attract and retain a talented, multi-cultural, highly skilled workforce
specialized in our leading-edge technological industry.
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<PAGE> 51
Our customers include:
- European incumbent telecommunications
operators
- alternative carriers
- voice resellers
- international carriers
- national Internet service providers
- multinational Internet service providers
- value added network service providers
- Web-centric and media-centric companies
We believe that cross-border transmission capacity will increasingly be
used to transport data as the volume of data traffic will substantially exceed
voice traffic. This trend is being driven by the rapid growth of the Internet
and other data-intensive applications, such as electronic commerce, application
hosting, video-conferencing and multimedia applications, that require
high-quality and cost-effective transmission capacity.
We intend to continue to participate in this rapidly growing market by
providing comprehensive telecommunications transport services to established and
emerging telecommunications carriers, Internet service providers and other
bandwidth-intensive customers. Since we are providing for a significant amount
of redundancy in the construction of our network, we expect to be able to
satisfy increasing capacity demands from our customers by placing into service
additional fiber pairs as well as implementing dense wavelength division
multiplexing upgrades on our network. We believe that our customers will
increasingly demand Internet or Internet protocol based services such as
Internet access, Web-hosting and data management services in order to
participate in the expected growth of data communication and the Internet. In
order to reinforce our leadership position, we will continue to add new services
on our network and sell our services in additional markets throughout Europe. We
also intend to invest in additional infrastructure that can further lower our
costs.
OUR STRATEGY
Our goals are to reinforce our position as Europe's leading independent
provider of managed bandwidth and related telecommunications services to
telecommunications carriers, Internet service providers and other
bandwidth-intensive customers and, taking advantage of our leadership position,
capture additional revenues by extending our network closer to our customers and
providing new and enhanced services. The key elements of our strategy for
achieving these goals are to:
- Maintain our leadership position by delivering services which leverage
our low cost position. We intend to continue to leverage our position as
a low-cost provider of flexible and high capacity products and services.
We have planned and implemented our network development to ensure that we
have a supply of capacity adequate to meet our customers' demands and
have reduced our cost basis by investing in new technologies. We have
priced our capacity to capture market share and to fulfill an increasing
demand for bandwidth. We believe that by making available increased
supplies of capacity at appropriate prices, we can sustain attractive
margins over an expanding capacity base even as more competitors enter
the market.
- Build on our experience as a first mover in the European carriers'
carrier market to further penetrate our existing customer base and expand
our service portfolio. We are the first European company to operate a
centrally managed pan-European fiber optic network. In the 36 months
since we began offering service on our network, we have developed a
significant customer base encompassing over 150 telecommunications
carriers, Internet service providers and other bandwidth-intensive
customers. As a result of being first in the market, we have gained
significant experience in how to tailor our service offering to meet our
customers' rapidly evolving needs and have developed service innovations.
By providing mission-critical value added solutions to our customers, we
seek to establish ourselves as their strategic partner. We will seek to
further penetrate our customer base and strengthen our customer
relationships by continuing to develop service innovations that enable us
to deliver the lowest cost and highest quality transport service for our
customers. Our managed gigabit network is a service
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<PAGE> 52
that we recently introduced that we believe shows our commitment to being
at the forefront of innovations among European providers of bandwidth
services.
- Capitalizing on the experience of our management and workforce. We have
assembled and will continue to build a management team and highly skilled
workforce with significant expertise in the design, engineering,
construction, operation, maintenance and enhancement of fiber optic
network. Due to our early entry in the European bandwidth services
market, our workforce has gained extensive experience in marketing,
selling, configuring and providing customer support for the tailored
solutions that we offer our customers. We intend to build on this
experience and expertise in order to develop new and enhanced products
and services that enable us to strengthen our customer relationships and
generate additional revenues.
- Focus on bandwidth-intensive customers. We intend to continue to focus on
providing high-quality telecommunications services to carriers, Internet
service providers and other bandwidth-intensive customers to enable these
operators to more successfully meet the needs of their own end-user
customers. We believe this should enable us to provide superior customer
service while avoiding investments in billing and related systems and
general administrative costs associated with retail operations. In
addition, we intend to continue to focus on emerging data-centric
companies that require large amounts of bandwidth to service their
end-user customers. These types of customers include broadband multimedia
providers such as UPC's chello broadband, content providers such as
motion picture studios and broadcasters, Internet applications providers
such as portals and electronic commerce companies, and emerging data
transmission providers such as wireless operators. The Internet and the
general acceptance of Internet protocol as a worldwide transmission
standard are fostering the emergence of these new market segments.
- Continue to invest in the reach and capacity of our network. We will
continue to invest in our network to expand its geographic reach and
capacity in order to ensure that we can accommodate our customers' future
capacity requirements. We are continuing to build our network by
extending its coverage to include approximately 25,000 kilometers across
Europe by the end of 2000. We are continuing to deploy dense wavelength
division multiplexing technology that will permit significant enhancement
of our network's transmission capacity and will allow us to upgrade the
capacity, reliability and efficiency of the network in the future. The
capacity of our network is currently 40 wavelengths per fiber optic pair,
each wavelength with a capacity of 2.5 gigabits per second, or a total
capacity of 100 gigabits per second on the majority of our routes. We
intend to install additional upgrades to further increase our network's
capacity in 2000. When introduced, these upgrades are expected to
increase the capacity of a single fiber pair to 96 wavelengths per fiber
optic pair, each wavelength with a capacity of 10 gigabits per second, or
a total capacity of 960 gigabits per second.
- Extend our network closer to our customers and offer new and enhanced
services.
- Develop City Enterprise Networks. In order to offer true end-to-end
transmission services to our carrier and other bandwidth intensive
customers, we intend to build intracity fiber networks, called City
Enterprise Networks, in major European cities. Through us and other
subsidiaries, our parent GTS currently operates five such networks,
in Paris, Budapest, Prague, Berlin and Geneva. We expect to have
deployed intracity fiber networks in six additional cities by
mid-year 2000. Each City Enterprise Network will be designed to
connect, within a city, the major telecommunications transmission
centers, including points of presence on our network, points of
presence of our affiliates in such city, telehouses, Internet
protocol exchange points and, where economically feasible our
existing customers' points of presence in that city. This will allow
us to reach our customers without relying on third-party local
access providers. We expect an increase in service quality and
higher margins as traffic will be managed on-net end-to-end, leading
to an enhanced competitiveness of our service portfolio.
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<PAGE> 53
- Expand and enhance the transatlantic capacity of our network. We
believe that a large portion of our market growth will come in the
form of Internet protocol-based data and voice services. We currently
lease transatlantic capacity from third parties. Because a majority of
Internet protocol traffic originates in the United States, we are
investing in our own transatlantic capacity infrastructure through the
acquisition of a dedicated fiber pair on the FLAG Atlantic-1
transatlantic fiber optic link. By owning this fiber pair, we will
acquire capacity of 70 gigabits per second upgradeable up to a maximum
of 400 gigabits per second of fully protected capacity from the New
York City area directly to our European network. We believe that
owning a large volume of transatlantic capacity to and from the United
States will enhance our competitive low cost position in Europe while
extending our network to the United States at favorable prices. In
addition, in order to maintain and reinforce our strong market
position in the increasingly global carriers' carrier market and
data-centric market, we are planning to enter into arrangements to
obtain network capacity connecting several key U.S. markets by the end
of 2000.
- Capitalize on demand for Web-based services and products. We intend to
capitalize on the trend of companies seeking to outsource their
critical business applications and integrate Web-based services and
products into their marketing efforts by aggressively developing data-
and Web-hosting centers in key cities in Europe. We intend to open
data- and Web-hosting centers in 13 major European cities by year-end
2001. We expect to establish data- and Web-hosting capability in
London in January 2000 and expect to open three additional centers in
Amsterdam, Frankfurt and Paris by mid-2000. These centers are a
natural extension of our strategy to meet the end-to-end needs of the
Web- and media-centric content and application providers who are
leading the rapid growth of the Internet- and multimedia-related
segments of our target markets in Europe. In addition to carrying
these customers' international traffic on our network, we will be able
to host and distribute their applications, support their electronic
commerce activities and provide peering arrangements.
OUR SERVICES
We offer our customers high-quality transmission services and extended
network capabilities at competitive prices. The diverse services we offer
reflect the complex and dynamic nature of the carrier market and the rapidly
evolving Web-centric market. We have developed a broad range of services that
vary in technology (synchronous digital hierarchy, dense wavelength division
multiplexing, Internet protocol), configuration (point-to-point, ring, virtual
network services), quality requirements and geographical reach (domestic, pan-
European, transatlantic services). Service innovation and the ability to package
and price services flexibly have allowed us to serve the needs of our customers
effectively.
Our service offering has the following competitive advantages:
- Tailored solutions. We have significant experience in tailoring highly
customized contract terms and volume discounts that allow our customers
to select varying capacity, access, guaranteed availability and contract
terms.
- High capacity cross-border network facilities. Our dense wavelength
division multiplexing network provides high capacity cross-border network
facilities without requiring customers to invest in network
infrastructure or to be constrained by a narrow range of capacity
offerings.
- Diverse routing. The fiber optic network's diverse, redundant routes are
designed to allow us to provide strong performance commitments. On most
routes the fiber optic network performed at over 99.9% availability.
- Cost reduction through advanced technology. We have substantially reduced
our unit cost by increasing the available capacity on a fiber pair and
deploying advanced dense wavelength division multiplexing technology on
the majority of our routes.
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<PAGE> 54
- Uniform network architecture. The uniform technology of our international
managed transmission network allows us to provide a better quality and
reliability of service as well as uniformity of features throughout our
fiber optic network.
In addition to providing sophisticated and flexible value-added services,
we intend to quickly and efficiently deploy our network presence wherever our
current and future customers need to originate and/or terminate traffic. This
has led to the rapid expansion of our network throughout Europe, as well as to
our purchase of transatlantic transmission capacity.
We continue to focus on maintaining a low-cost position for our evolving
services in our network deployment efforts. Through the increase in available
capacity on a fiber pair and through advances in dense wavelength division
multiplexing technology, we have substantially reduced our unit cost since we
began operations.
MANAGED BANDWIDTH SERVICES
We primarily provide large capacity cross-border European and transatlantic
services over an integrated, managed network. Our network, based on dense
wavelength division multiplexing and synchronous digital hierarchy technology,
provides digital transmission capability upon which a broad range of advanced
applications may be built. Our network offers network availability, flexibility,
reliability and bandwidth speeds not widely available for transport of
telecommunications traffic across national borders in Western Europe. Our
network is designed to provide customers with a wide variety of bandwidth
speeds, ranging from a data transmission rate of 2 megabits per second to a data
transmission rate of 2.5 gigabits per second. Access to our network allows our
customers to rapidly enter the markets they are targeting while benefitting from
the low unit cost that our network provides.
Tailored to meet the diverse requirements of several customer segments, our
services include three classes of outsourcing levels. First, our unprotected
ring services provide diversely routed paths on which customers deploy their own
termination equipment and perform protection schemes themselves. Second, our
protected services provide self-healing point-to-point links managed end-to-end
by us. Finally, we offer turn-key network solutions where we perform all network
management functions on infrastructure that is fully dedicated to our customer.
Depending on the customer's bandwidth and application requirements, these three
classes of bandwidth services run on two underlying technologies: either
synchronous digital hierarchy technology over dense wavelength division
multiplexing (for speeds ranging from 2 megabits per second to 155 megabits per
second) or directly on dense wavelength division multiplexing (for speeds
ranging from 155 megabits per second to 2.5 gigabits per second).
Services using synchronous digital hierarchy technology may include local
access capacity between our network point of presence and the customer's point
of presence, depending on customer requirements, due to our numerous agreements
with local access providers.
Services using dense wavelength division multiplexing technology are
delivered on a standard basis at our point of presence. On a special project
basis and shortly through our City Enterprise Network, dense wavelength division
multiplexing services may be expanded to the customer's point of presence.
- DIVERSELY ROUTED RING SERVICES
Many medium to large carriers and operators purchase network capacity in
excess of actual requirements and prefer to have control over the physical
configuration of their networks. This service connects multiple customer
locations with diverse routed paths in a ring configuration. Through its own
termination equipment, the customer has full control of its different traffic
flows. Configuration changes can be made directly by the customer at any time
without our involvement. This gives the customer the opportunity to optimize its
usage of the available ring bandwidth based on the volume requirements of its
individual applications.
These services are available at speeds of 45 and 155 megabits per second
using synchronous digital hierarchy over dense wavelength division multiplexing
technology as well as directly on dense wavelength
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division multiplexing technology at speeds of 2.5 gigabits per second which is
expected to be upgraded to 10 gigabits per second in 2000.
- PROTECTED SERVICES
Our protected services offer domestic and international point-to-point
transmission capacity across our pan-European network. Our services are designed
with a stand-by capacity on our network, fully-dedicated to protecting the
working bandwidth. As a result, the customer avoids having to provide for the
redundancy of its traffic, as it would for unprotected services. We therefore
manage the end-to-end bandwidth reliability of the customer's circuit. We offer
customers service level agreements with service guarantees appropriate for
mission-critical applications These guarantees cover on-time service delivery
and service availability.
Due to the availability of a broad range of bandwidths, its attractive
pricing structure and the quality of service guarantees it offers, we believe
this service is a significant improvement to international private leased
circuits. These services are available in bandwidths from 2 megabits per second
to multiples of 140 megabits per second or 155 megabits per second using
synchronous digital hierarchy over dense wavelength division multiplexing
technology. A similar service running directly on dense wavelength division
multiplexing technology is currently under development.
Our existing transatlantic capacity allows us to provide, manage and
maintain end-to-end bandwidth requirements of our customers between the New York
City area and any points of presence on our network in Europe at data
transmission rates of 34 megabits per second, 45 megabits per second and 155
megabits per second.
- TURN-KEY NETWORK SOLUTIONS
With the liberalization of the European telecommunications market and
additional carriers and other telecommunications service providers planning to
expand their operations across Europe, a need arises for a flexible and
cost-effective means of telecommunications transport. These service providers
have traditionally obtained international transport service by leasing
international private leased circuits. Leasing private leased circuits requires
a carrier to lease channels on a segment-by-segment basis from multiple public
telecommunications operators, resulting in significant time-to-market, cost and
network management issues. Telecommunications carriers could also construct
their own network, which involves high financial risk and requires time-
consuming and complex engineering and sub-contracting arrangements which may not
be justified by traffic volume.
Our recently launched managed gigabit network service provides a new
solution and an attractive alternative to leasing circuits or building
infrastructure. This service enables our 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 our network with a pricing
structure based on the overall amount of leased capacity for the customer's
entire network. The service provides a turn-key, fully-managed network solution
with dedicated synchronous digital hierarchy equipment installed, maintained and
managed by us on behalf of the customer. The customer gains time-to-market
advantage, avoids staffing and deployment problems and limits its investment in
technology.
The service supports protected and unprotected bandwidth at data
transmission rates of 155 megabits per second over customer-dedicated 2.5
gigabits per second infrastructure.
INTERNET PROTOCOL TRANSIT SERVICES
The current and future growth in the Internet has a significant impact on
the carrier business. In addition to increasing the amount of data that is being
transported across borders, the Internet influences the transport technologies,
the traffic patterns and the segments that require carrier-like services.
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Through our GTS Ebone brand name, we offer to Internet service providers,
value added network service providers, multimedia providers and Web-hosting
companies a carriers'-grade Internet access service with the following
significant features:
- Reliable access to Internet service throughout Europe and the United
States, which is made possible by maintaining multiple relationships with
different Tier-1 Internet backbone providers, both in the United States
as well as in Europe;
- A network consisting of interconnecting rings and based on dense
wavelength division multiplexing technology, which ensures an ample
supply of bandwidth;
- Access to one of the largest installed bases of Internet service
providers in Europe;
- Access to other Internet networks through peering arrangements with
Tier-1 Internet backbones in Europe and in the United States; and
- Access speeds ranging from 2 megabits per second to 2.5 gigabits per
second.
We offer two types of GTS Ebone services:
- Ebone Global Carrier Services, which provides general purpose, congestion
free access to the worldwide Internet; and
- Ebone Europe Carrier Services, which is focused on low delay, high
performance access to the European domain of the worldwide Internet.
In addition, we are using optical Internet protocol technology to offer in
Europe real-time Internet protocol performance that is needed by Internet
protocol operators and by providers of voice, fax and video-
over-Internet-protocol services. GTS Ebone Europe Services is the first of a
series of future services to fully benefit from the performance offered by
optical Internet technology.
PLANNED INITIATIVES
TRANSATLANTIC EXPANSION OF OUR NETWORK
We currently provide connectivity between Europe to the United States
through capacity leased from third parties. In January 1999, a subsidiary of
GTS, our parent, entered into an agreement with FLAG Telecom, to establish a
50/50 joint venture to build and operate the world's first transatlantic dual
cable system designed to carry voice, high-speed data and video traffic at data
transmission rates of up to 2.4 terabits per second. The joint venture has
announced that this high-capacity fiber optic link between Europe and the United
States, which is called FLAG Atlantic-1, is expected to begin offering
unprotected services in the first quarter of 2001 and fully protected services
in the second quarter of 2001. The joint venture plans to offer a direct link
between the New York City area, London and Paris.
On October 13, 1999, GTS announced that it has committed to purchase one
dedicated fiber pair on FLAG Atlantic-1. We purchased this fiber pair from GTS
in December 1999. By owning this fiber pair, we will acquire capacity of 70
gigabits per second upgradeable to a maximum capacity of 400 gigabits per second
of fully protected capacity (or 800 gigabits per second of unprotected capacity)
from the New York City area directly to our network in Europe. This supply of
capacity will allow us to accommodate the growing volume of transatlantic
traffic at a competitive low cost base. We expect to commence service on our
fiber pair at the same time that FLAG Atlantic-1 begins offering services.
Finally, we have identified the need to be able to offer services beyond
the New York City area, our current point of presence in the United States. We
therefore expect to lease substantial network capacity connecting several key
U.S. markets by the end of 2000.
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CITY ENTERPRISE NETWORKS
In order to originate and/or terminate our transmission services closer to
our customers, we intend to build intracity fiber networks, called City
Enterprise Networks, in major European cities. Each City Enterprise Network
will, subject to regulatory constraints and market conditions, consist of up to
144 fiber pairs in underground ducts that we will buy, lease or lay. We believe
this high number of fiber pairs is justified by the economies of the
short-distance environment of city centers and the higher numbers of connection
points to link customers to the network. We also expect to install dense
wavelength division multiplexing equipment to enhance the efficiency of the City
Enterprise Networks.
Each City Enterprise Network will typically connect, within a city, the
major telecommunications transmission centers, including, points of presence of
our network in such city, points of presence of our affiliates in such city,
telehouses, Internet protocol exchange points and, where economically feasible,
points of presence of our existing customers in such city.
Relying on our own local infrastructure in key cities through our City
Enterprise Networks will allow us to reduce operating expenses (by avoiding or
reducing our payments to local access providers) and to enhance the robustness
of our network (through end-to-end network management and compatibility of the
City Enterprise Networks with our existing network). Such fully integrated
network of intracity and intercity connectivity will, we believe, appeal to our
customers in need of managed bandwidth services. We also plan to introduce
wavelength services, also known as optical sub-networks during the build-out of
our City Enterprise Networks. In addition, we plan to add fiber "sub-rings" to
the core of our City Enterprise Networks to extend our geographic reach. We will
also connect our data- and Web-hosting centers to the initial core rings. By
offering co-location and data- and Web-hosting capabilities as a bundled product
with our broadband network capabilities, we intend to attract Web-centric and
media-centric companies to our network without procuring expensive services from
local access providers.
Through us and other subsidiaries, our parent GTS currently operates City
Enterprise Networks in Berlin, Paris, Budapest, Prague and Geneva. We do not
currently expect to own or operate the City Enterprise Networks in Paris,
Berlin, Prague or Budapest. Therefore, we may in the future purchase local
connectivity on those City Enterprise Networks for resale to our customers. We
have accelerated our rollout plans and we expect to have City Enterprise
Networks operational in the following six additional cities by mid-year 2000:
- - Stockholm
- - Frankfurt
- - London
- - Amsterdam
- - Madrid
- - Vienna
We are also evaluating construction of City Enterprise Networks in the
following additional cities:
- - Milan
- - Brussels
- - Zurich
- - Munich
- - Barcelona
- - Stuttgart
- - Dusseldorf
Our intracity network rings in Western Europe will eventually connect
customers at data transmission rates of up to 2.5 gigabits per second.
DATA AND WEB-HOSTING CENTERS
Our strategy is to strengthen our offering of Internet protocol transit
services by deploying data- and Web-hosting centers near key public Internet
exchange points. This will establish the necessary facilities to undertake data-
and Web-hosting services and facilitate electronic commerce solutions. The
centers will allow us to meet the end-to-end needs of the providers of Web and
media-centric content and applications who are leading the rapid growth of the
Internet and multimedia related segments of our target markets in Europe. Thus,
in addition to carrying these customers' international traffic on our network,
we will be able to host and distribute their applications, support their
e-business activities and provide peering arrangements.
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We expect to establish data- and Web-hosting capacity in London in January
2000 and expect to open an additional three centers by mid-2000 in Frankfurt,
Paris and Amsterdam. We intend to construct nine additional data- and
Web-hosting centers during the next two years. Sites will be selected to provide
up to approximately 25,000 square feet per location. These facilities will be
specifically designed to offer high-speed access to our network and provide
co-location, dedicated and shared data- and Web-hosting services. Each data- and
Web-hosting center will be equipped with environmental controls, back-up
generators, round-the-clock security and continuous monitoring.
Additional benefits of the data- and Web-hosting centers include:
- providing Internet service providers with telehousing and managed
services for their Internet protocol routers and servers;
- providing a NT or UNIX based server, allowing Internet service providers
and Web-centric companies to take full advantage of our expertise in
traffic and server management; and
- providing a shared server and management, offering an entry solution to
emerging Internet service providers and Web-centric companies at a
reasonable cost.
Increasing Internet demand is driving Internet service providers to
co-locate their servers and Internet protocol routers closer to their customers,
thereby improving their network reach and performance. Data- and Web-hosting
centers directly connecting Web servers to an Internet protocol backbone remove
the bottlenecks associated with traditional hosting facilities. In addition,
increasing demand for Web content is driving Web-centric companies to locate
servers at those facilities to ensure superior Internet connectivity. Our data-
and Web-hosting centers will offer seamless and scalable Internet pan-European
for emerging Internet service providers and Web-centric companies, offering
direct connection to our large seamless network at bandwidths of initially 2.5
gigabits per second, with upgrades up to 10 gigabits per second. We believe that
offering data-and Web-hosting services will provide opportunities to cross-sell
services on our fiber optic network, thereby improving customer retention and
enabling us to address new target segments.
We will offer high performance distribution of bandwidth intensive,
multimedia applications and regional content through our extensive peering
arrangements. Our networked data- and Web-hosting centers are a key component of
the infrastructure required to serve the future needs of our customer segments.
We plan to extend data- and Web-hosting and co-location services to enable
application service providers to distribute applications from their data- and
Web-hosting centers. We also intend to offer Internet service providers
network-based application services such as unified messaging and facilitate
electronic commerce solutions through our data- and Web-hosting centers.
PRICING AND DISTRIBUTION
Sales of our services are currently conducted through our subsidiary GTS
Carrier Services (Ireland) Limited.
Currently, the price of cross-border pan-European calls are often
significantly higher than the underlying cost of transmission 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
us to attractively and competitively price our services in the face of declining
overall prices for telecommunication services. Our low-cost basis is due to,
among other things, our network's use of advanced fiber optic cable and
electronic equipment permitting high capacity transmission over longer distances
between regeneration/amplifier facilities than legacy networks.
The term of a typical customer agreement currently ranges from one to three
years in length. In addition, we offer ten year leases which require an up-front
payment and produce recurring operation and maintenance charges. Our customer
agrees to purchase, and we agree to provide, transmission services. In general
our customer agrees to pay certain non-recurring charges upfront and recurring
charges on an annual basis, payable in twelve monthly installments. If a
customer terminates a service order prior to the end of the contract term, the
customer is generally required to pay us a cancellation charge equal to three
months of
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service for each of the twelve months remaining in the contract term. We
typically guarantee transmission services to a specified service level. If such
levels are not met or we fail 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
Our high capacity, dense wavelength division multiplexing and synchronous
digital hierarchy based fiber optic network is designed to enable incumbent
telecommunications operators, Internet service providers and other
bandwidth-intensive customers to integrate high quality, cross-border capacity
into their end user offerings. At September 30, 1999, 156 customers were under
contract for service on our network. These customers included incumbent
telecommunications operators, alternative carriers, voice resellers,
international carriers, national Internet service providers, multinational
Internet service providers, value added network service providers and
Web-centric and media-centric companies. As of September 30, 1999, our customers
were contractually obligated to pay us an aggregate of $548.2 million for future
services, provided our network performs in accordance with contractual
specifications.
We target eight major market segments or customer groups, which can be
characterized as follows:
- European Incumbent Telecommunications Operators. This customer group
consists of the traditional European incumbent telecommunications
operators that generally participate in the standard bilateral agreements
for cross-border connections. We lower the cost of delivering their
international service and provide a vehicle for them to compete in
non-domestic markets.
- Alternative Carriers. This group consists of second carriers, mobile
carriers and competitive access providers. These new carriers have chosen
to compete with the incumbent telecommunications operators in their
respective countries. We provide these companies with the capacity to
enter markets quickly and competitive costs for their international
services and/or national infrastructure.
- Voice Resellers. Voice resellers are voice carriers that do not own
transmission facilities, but obtain communications services from other
carriers for resale to the public. Voice resellers are also a growing
segment of the market and are expected to increase their market share in
conjunction with the liberalization of the European telecommunications
market. In the United States, for example, voice resellers were a
significant factor in the expansion of competition.
- International Carriers. This customer group consists of multinational
carriers with traffic between European and other international gateways.
We can provide these customers a pan-European distribution network to
gather and deliver traffic to and from their own and other networks.
- National Internet Services Providers. Internet service providers are a
fast growing segment generating significant bandwidth requirements. These
customers provide Internet access, web-hosting and related value added
services to a national customer base. They can be independent, owned by
cable TV companies, incumbent or alternative operators. They originate
and terminate large amounts of international Internet traffic, for which
they typically require congestion-free Internet access. Alternatively,
these customers require large managed bandwidth capacity to U.S. Internet
providers. Our GTS Ebone Europe services, based on our large pan-European
optical Internet protocol network with multiple connections to key U.S.
backbones, position us well to serve this segment.
- Multinational Internet Service Providers. These customers provide
Internet access, web-hosting and related value added services to multiple
national customer bases and to international business customers. In
addition to the traffic generated between their national networks, they
originate and terminate large amounts of international Internet traffic.
They typically require large managed bandwidth capacity to their core
Internet protocol backbone in the United States, completed by
congestion-free Internet access to the European domains of the worldwide
Internet. Alternatively, these customers require bandwidth between
Internet exchanges (point of interconnection between local Internet
service providers) in different European countries. Our extensive
pan-European and
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transatlantic bandwidth services, combined with our GTS Ebone Europe
services, allow us to serve this segment effectively.
- Value Added Network Service Providers. Value added networks are data
communications systems in which special service features enhance the
basic data transmission facilities offered to customers. Value added
networks currently purchase their own international circuits and build
the required amount of resiliency into their network infrastructure. Such
value added network service providers are often offered by global
consortia of telecommunications operators, which have pooled their
resources in order to compete more effectively in important
telecommunications markets, such as those in Western Europe, particularly
outside their home market. We allow such customers to meet their needs
cost-effectively and to extend their services to new markets or customers
without substantial capital investment. These providers build data
communications systems in which added value services (e.g. Frame Relay,
ATM, LAN-Interconnect) 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.
- Web-centric and Media-centric Companies. The emergence of the Internet is
causing many companies of all sizes and sectors to rely on Web presence
to expand their businesses. These companies need congestion-free highly
reliable Internet access and presence which makes them our natural target
given our Internet protocol network and installed user base in Europe.
Their requirements in terms of Web-hosting and European-focused Internet
access lead them to demand the carrier-quality Internet solutions. We
expect that the performance made possible by our implementation of
optical Internet protocol technology will trigger the emergence of new
broadband applications, such as streaming audio or cable TV programming
distribution to the end-user via the Internet.
We expect that additional demand for services will be derived from
increased Internet usage caused by the subscription-free Internet phenomenon and
usage of dedicated circuits, as well as the exponential increase in volume
caused by new Internet applications, such as voice-over Internet protocol,
broadband applications, electronic commerce applications and Web-hosting, and
the wider deployment of corporate data solutions.
NETWORK DESIGN
The design of our network is based on a layered architecture which
separates the physical layer, the optical layer, the transmission layers and the
data (Internet protocol) layer of our network with standard interfaces and
protocols in order to optimize design and operation and provide flexibility for
introducing new technologies, new applications and new services.
The physical layer of our network is based on a mesh of dark fiber routes
interconnecting cities on our network via at least two or three physically
diverse paths for maximum resilience against fiber or facilities failures. In
each major city there will be two additional customer access sites for
reliability.
The optical layer of our network represents the core of our network and is
based on dense wavelength division multiplexing. This layer supports the
provision of optical services direct to customers at 2.5 gigabits per second and
provides for the operation of multiple synchronous digital hierarchy and/or
Internet protocol systems to run concurrently on a single fiber pair in a highly
cost efficient manner. The optical layer of our network is based on Ciena 40
wavelength systems with a capacity of 100 gigabits per second on a fiber pair.
We are using synchronous digital hierarchy (SDH) time division multiplexing
equipment to consolidate, groom and add or drop low and high order traffic
coming from our various network components and to support the provision of
synchronous digital hierarchy leased lines services to customers at data
transmission rates ranging from 2 megabits per second to 155 megabits per
second.
The synchronous digital hierarchy layer of the network runs via dense
wavelength division multiplexing channels in our network with a multilayered
architecture consisting of multiple synchronous digital hierarchy rings
optimized for different traffic characteristics. Each synchronous digital
hierarchy ring supports full
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automatic re-routing of traffic in the case of a break in the ring. This layer
is based on Alcatel STM-16 (2.5 gigabits per second) systems, which are
installed throughout the operational network.
A gigabit Internet protocol layer is implemented using the latest
generation of Internet protocol routing equipment, the Cisco GSR 12000. Backbone
links interconnect core network nodes at data transmission rates of 2.5 gigabits
per second, providing high quality, seamless Internet protocol connections
throughout Europe. The Internet protocol connections gigabit routers are coupled
directly to the optical wavelength division multiplexing infrastructure without
any additional intermediate equipment, reducing network complexity and costs and
increasing efficiency. Core network routers are deployed in a redundant
configuration to ensure maximum reliability. Since we design and operate
directly both the optical network layer and the Internet protocol layer, a
further optimization of the resulting network architecture is achieved. The
Internet application implemented on top of the gigabit Internet protocol
platform configures us among the prominent Tier-1 Internet service providers in
Europe, with direct connections to the other major European Internet backbone
providers. For a direct interconnection with major U.S. Internet backbones, two
network nodes are deployed in the United States, with high-speed connections to
the European gigabit backbone. The high-performance core Internet protocol
network is designed to support a flexible introduction of Internet protocol
based added-value services at the edge of our network.
A main network management center, located in Brussels, controls our
network. The network operations centers can pinpoint potential service problems
and can deal with service re-routing if required much more effectively than in
networks controlled by multiple operators in different countries. Our advanced
operational support systems also allows us to manage 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, our combination of backup paths and management components enable
us to recover from individual failures at the optical, synchronous digital
hierarchy and Internet protocol layers. Our resilient approach provides for a
high level of network performance and reliability. As a result, we are able to
enter into strong performance commitments with our customers, and services on
most routes of our network have performed at or above 99.9% availability.
We own substantially all of our 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 us because they
reduce the burden of building large quantities of capacity before they can be
used. When we lease dark fiber, the infrastructure provider will generally be
responsible for maintaining such fiber optic cable. We have entered into
agreements with equipment vendors, infrastructure providers and other third
parties to supply and/or maintain the equipment for our network.
NETWORK CAPACITY
Our network includes Ciena 40 dense wavelength division multiplexing
systems on a substantial majority of our routes and by mid-2000 all our routes
will be dense wavelength division multiplexing based with a data transmission
rate of at least 100 gigabits per second per fiber pair. This 100 gigabits per
second allows for synchronous digital hierarchy and Internet protocol systems of
2.5 gigabits per second to be installed only when required, thus providing for
efficient management of capital investment.
We will deploy on our core pan-European fiber optic network routes, during
2000 and according to traffic demand, per core route a new generation of
wavelength division multiplexing systems scalable up to a minimum of 960
gigabits per second. These systems will be able to handle wavelengths at 2.5 and
10 gigabits per second allowing us to increase the amount of bandwidth carried
per fiber pair as well as to reduce interface prices in both wavelength division
multiplexing and client layer equipments. We plan to extend capacity via
additional routes providing further resilience as well as by adding fiber pairs
and dense wavelength division multiplexing upgrades on selected existing routes
whenever demand for capacity will justify it. This approach to fiber utilization
again provides for an optimal management of fiber investment.
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NETWORK AGREEMENTS
We have entered into agreements and letters of intent with various
infrastructure providers for construction and/or leasing of dark fiber for
portions of our network. Our agreements for leases of portions of our 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 dates we provide. The term of a lease agreement generally ranges
from 10 to 18 years. An agreement typically contains optical specification
standards for the fiber and methods of testing. We are allowed to use the cable
for the transmission of messages and other purposes, including increasing
capacity. The infrastructure provider is responsible for maintenance of the
cable facilities. The infrastructure provider may also provide space for the
location of our equipment and related maintenance. The agreements typically
provide for termination by the parties only for material breach, but allow the
breaching party 90 days to cure the breach. The agreements typically contain a
transition period after termination of the agreement to allow us to continue to
serve our customers until we can reach agreement with an alternative
infrastructure provider. In certain areas of our network where it is not
possible to lease dark fiber (which we do not expect to exceed more than 10
percent of our network), we have signed agreements or letters of intent for the
right to use managed bandwidth. The terms of these agreements typically range
from 10 to 25 years.
We are also deploying our network along the rights-of-way of a variety of
alternative sources, including railways, motorways, waterways, pipelines and
utilities. We constantly evaluate multiple alternative infrastructure suppliers
in order to maximise our flexibility. Many portions of our network utilise
long-term right-of-way agreements with landowners. As a result of our network
development activities to date, we have gained access to infrastructure for our
network routes, which we believe, will be difficult for competitors to
duplicate.
COMPETITION
We compete with various telecommunications companies, including MCI
WorldCom, Inc., Viatel, Inc., KPN Qwest B.V., COLT Telecom Group plc, Level 3
Communications, Inc., Carrier1 International S.A., Deutsche Telekom AG, France
Telecom S.A., Global Crossing Ltd. and British Telecommunications plc. Some of
these entities have announced plans to construct, have begun to construct or are
operating high bandwidth fiber optic networks across various European countries
and in several European metropolitan markets and in some cases, providing
transatlantic connectivity, which do or will compete with our network and our
planned City Enterprise Networks. In addition, a number of telecommunications
companies and Internet service providers have begun offering or announced their
intentions to offer data- and Web hosting services in key European cities.
We compete primarily on the basis of the range and quality of services
offered, customer service and price. Competitors may force us to lower our
prices or modify our service offerings to remain competitive. Many competitors
have established customer bases and extensive brand name recognition and have
greater financial, management and other resources.
The ongoing liberalization of the European telecommunications market has
coincided with technological innovation to create an increasingly competitive
market, characterized by still-dominant incumbent telecommunications operators
as well as an increasing number of new market entrants. In addition, these
carriers own and operate fully built networks and infrastructure which provide
them with significant cost advantages.
PROPERTIES
We own substantially all of the telecommunications equipment required for
our business; however, a substantial part of the fiber is leased on a long-term
basis. Our installed fiber optic cable is laid under the various rights-of-way
held by us. Other fixed assets are located at various leased locations in
geographic areas served by us. Other fixed assets are located at various leased
locations in geographic areas that we serve.
Our principal administrative offices and our 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
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addition, we have short-term leases expiring on February 28, 2000 in Rixensart,
Belgium and on September 1, 2000 in Kraainem, Belgium. We have negotiated leases
for two additional buildings in the same complex as our principal offices. The
buildings are currently under construction and are expected to be ready for
occupancy in the first quarter of 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, we have a leased office space in
Dublin, Ireland, which expires on October 2, 2022, in London, United Kingdom,
which expires in August 2002, in Frankfurt, Germany, which expires in March 2004
and Madrid, Spain, which expires in January 2004. We lease various offices on a
short-term basis for regional sales and service personnel.
EMPLOYEES
As of September 30, 1999, we employed 380 employees. We believe our future
success will depend on our continued ability to attract and retain highly
skilled and qualified employees. We believe that our relations with our
employees are good.
LEGAL PROCEEDINGS
We are subject to various claims and proceedings in the ordinary course of
our business. In addition, we are party to the following claims and proceedings:
Interactive Communications Services (ICS) has brought a claim against our
wholly owned subsidiary GTS Carrier Services (Ireland) Limited for damages
alleged to exceed E2.9 million. Proceedings were issued on October 11, 1999 and
a detailed claim has not yet been served. ICS has obtained an injunction
preventing GTS Carrier Services (Ireland) Limited from suspending or terminating
certain telecommunications services provided to ICS. However, the injunction was
discharged on October 26, 1999 because ICS failed to pay L267,000 to GTS Carrier
Services (Ireland) Limited, which was a condition for the injunction to remain
in place. From evidence before the court in connection with that injunction it
appears that ICS's damages claim relates to an alleged breach of contract in GTS
Carrier Services (Ireland) Limited not commissioning or connecting
telecommunications circuits as quickly as ICS claims GTS contracted to do. We
believe that ICS's claim is without merit.
On March 26, 1999, we opposed the license fee imposed by the French
regulator as, among other things, contrary to Article 11 of EC Directive 97/13
which requires license fees to cover only the administrative cost of managing
the license. On September 23, 1999, the French regulator informed us that they
rejected our position. On November 24, 1999 we filed a complaint before the
French administrative tribunal opposing the license fee. Under French law, we
are not be required to pay the license fee and the French regulator does not
have the right to terminate our license until such time as a ruling by the
French administrative tribunal is issued. If our claim is rejected in a final
non-appealable judgment, we will be required to pay our license fee in France.
Based on information currently available, we believe that none of such
current claims or proceedings, individually or in the aggregate, will have a
material adverse effect on our 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
OVERVIEW
The EU has progressively liberalized its telecommunications markets over
the past decade. In 1987, a policy document, the EC Green Paper on
Telecommunications, charted the course for the current changes in the EU
telecommunications industry by advancing principles such as separation of
operators from regulators, transparency of procedures and information, cost
orientation of tariffs, access to monopoly public telephone operator networks
and the liberalization of services. In 1990, the EU adopted two measures based
on these principles: the Open Network Provision Framework Directive and the
Services Directive. These two directives set forth basic rules for access to
public telephone networks and required the liberalization of the provision of
all telecommunications services within the EU except for certain "reserved
services", including voice telephony.
In 1992, the EU adopted the Open Network Provision Leased Line Directive,
which requires the incumbent operators to lease lines to competitors and
end-users at cost-oriented prices, and to establish cost accounting systems for
these products by the end of 1993. Even though most EU member states have
established regulatory frameworks requiring incumbent telecommunications
operators to lease lines to competitors and end-users, we believe that, in some
EU member states, such lines are not yet being offered at cost-orientated
prices.
In October 1999, the EU Commission opened an investigation into the
condition of the provisioning and pricing of leased lines. The aim of the
investigation is to establish whether current telephone company practices
infringe EU competition rules.
In 1996, the EU adopted the Full Competition Directive, which requires EU
member states to permit the provision of telecommunications services, other than
reserved services, over (1) networks established by the provider of the
services, (2) network infrastructure provided by third parties or (3) by means
of sharing of networks from July 1996. Since then, there has been an increasing
supply of such capacity offered at attractive prices from such alternative
suppliers. The Full Competition Directive also established January 1, 1998 as
the date by which all EU member states must remove all remaining restrictions on
the provision of telecommunications services, including voice telephony. A
number of EU member states were granted a delay in implementing the Full
Competition Directive. The EU member states that are still subject to the
derogation are as follows:
(1) Greece, through December 31, 2000;
(2) Ireland, through January 1, 2000; and
(3) Portugal, through January 1, 2000.
Ireland, however, implemented the Full Competition Directive in December
1998.
Subject to the foregoing, each EU member state is obliged, under EU law, to
enforce the terms of the Full Competition Directive in such a manner so as to
ensure that its aim and purpose is carried out. Enforceability of the Full
Competition Directive may be challenged at the EU level or at the EU member
state level. In practice, implementation and enforcement of the directive has
been and may also continue to be delayed on a country by country basis.
In June 1997, the EU adopted a directive that governs the manner in which
public network operators and service providers interconnect with the incumbent
telecommunications operators' public networks. Among other things, this
directive requires EU member states to ensure that incumbent telecommunications
operators with significant market power should provide interconnection on the
basis of cost-oriented charges.
In April 1997, the EU 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 are be required
to be dealt with
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in a timely fashion. The number of licenses may be restricted only to the extent
required to ensure the efficient use of scarce resources, such as radio
frequencies or numbers.
In February 1998, the EU adopted a directive on the application of the Open
Network Provision to voice telephony and on universal service.
We believe that the adoption of the Full Competition Directive and the
various related directives adopted by the EU have resulted in the removal of
most regulatory barriers to the establishment and operation of
telecommunications infrastructure in the countries of the EU where we currently
operate.
However, some EU member states are still in the initial stages of
liberalizing their telecommunications markets and establishing competitive
regulatory structures suitable for a competitive environment. For example, some
EU member states have only recently established a national regulatory authority.
In addition, the implementation, interpretation and enforcement of EU directives
differs significantly among the EU member states. While some EU member states
have embraced the liberalization process and achieved a high level of openness,
others have delayed the full implementation of the directives and maintained
various restrictions on full competition.
Member states of the EU are bound as a matter of international law to
comply with certain multilateral trade rules and regulations. On February 15,
1997, over 60 members of the World Trade Organization committed to open their
telecommunications markets for basic telecommunications services to foreign
competition and ownership and to adopt regulatory measures designed to protect
foreign telecommunications providers against anticompetitive behavior by
domestic incumbent telecommunications operators. For most parties, these
commitments took effect on February 5, 1998 (including the EU member states). We
believe that this Agreement will contribute to the creation of a more
competitive environment internationally. Specifically, it will result in
downward pressure on call termination charges outside the EU. For a discussion
of the regulatory risks involved, see "Risk Factors -- Delays in regulatory
liberalization in EU member states could adversely affect our service offerings
in those countries."
As a multinational telecommunications company, we are subject to varying
degrees of regulation in each of the jurisdictions in which we provide our
services and deploy our network. Local laws and regulations and the
interpretation of such laws and regulations differ significantly among the
jurisdictions in which we operate. For a discussion of the regulatory risks we
face, see "Risk Factors -- Delays in regulatory liberalizations in EU member
states could adversely affect our service offerings in those countries."
GTS EUROPE NETWORK
We require licenses, authorizations or registrations in almost all
countries to operate our network and provide our service. Licenses,
authorizations or registrations have been obtained in Austria, Belgium, Czech
Republic, Finland, France, Germany, Italy, Luxembourg, The Netherlands, Spain,
Sweden, Switzerland, the United Kingdom and the United States. No license or
authorization is required to operate our network in Denmark. We intend to file
applications in other countries in anticipation of service launch in accordance
with our network roll-out plan.
A summary discussion of the regulatory framework in certain countries where
we have developed and are developing our 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.
Austria. A new Telecommunications Act entered into force in Austria in
1997. On May 3, 1999, we were granted a concession to build and operate our
network, including our City Enterprise Networks, throughout Austria.
Belgium. The implementing legislation regarding the licensing regimes for
the provision of voice telephony services and the establishment of public
network infrastructure entered into force in July 1998. Until such entry into
force, the Belgian Telecommunication Authority worked with a system of
provisional licenses. Through a wholly owned subsidiary, we obtained a
provisional license in February 1997 from the
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Belgian regulatory authority to build infrastructure between major Belgian
population centers and the relevant border crossings. We also had an
authorization to provide liberalized services using alternative infrastructure.
We were granted a permanent license to build and operate our network on January
26, 1999. In December, 1999, we obtained an extension to our license in order to
operate routes linking a planned point of presence in Diegem. We will be
required to notify the Belgium regulator in the event that we deploy City
Enterprise Networks in Belgium.
Czech Republic. Through a wholly owned subsidiary, we were granted a
license for the provision of our international services on October 6, 1999. The
license is valid for 10 years.
Denmark. In July 1997, Denmark fully liberalized its telecommunications
markets in accordance with the requirements of the relevant EU Directives.
According to the Danish rules, we do not require any regulatory approval in
order to install or operate our network in Denmark.
Finland. In 1997, Finland enacted the Telecommunications Market Act, which
brought its laws into conformity with the Full Competition Directive. The Act
requires persons intending to provide telecommunications services to notify the
responsible Ministry in advance. On July 7, 1999, the Ministry notified us that
we could provide international telecommunications services.
France. In 1996, France approved legislation to implement the Full
Competition Directive and to remove all remaining restrictions on competition
from January 1998. On November 19, 1997, we obtained authorization to build and
operate our network in specific regions of France. In September 1998, we were
granted an extension of our authorization in order to extend our network in
France to reach Italy and Spain. Our authorization requires prior notification
to and approval by the French regulator of any substantial changes in our
capital or our controlling shareholder. The authorization is valid for 15 years.
Germany. Germany adopted legislation implementing the Full Competition
Directive and removing all remaining restrictions on competition from August
1996. We were granted a license by the German regulatory authorities on July 18,
1997. The license permits us to build and operate the portions of our network in
Germany connecting Dusseldorf, Frankfurt and Stuttgart; Dusseldorf to the Dutch
border; and Stuttgart to the French border. In August 1998, we were granted
extensions to our license to build and operate routes linking Hamburg, Hanover,
Munich and Berlin and of routes to Denmark. On November 12, 1999, we obtained an
infrastructure nationwide license to cover all of Germany. This nationwide
license will allow us to deploy planned City Enterprise Networks in Germany.
Italy. Although in the past Italy has been dilatory in implementing EC
liberalization measures, Italy adopted legislation in July 1997 creating an
independent national regulatory authority for the telecommunications and
audiovisual sectors. In September 1997, Italy adopted a regulation implementing
all EC directives in the telecommunications sector and since then specific laws
relating to licensing and interconnection and universal service have been
adopted. The Italian authorities granted a license to us in August 1998,
enabling the development of our network in the northwest region of Italy and the
offering of services in Milan. We expect to apply for an extension of our
license in order to offer services in other cities, and continue to expand our
network, including our planned City Enterprise Network, in Milan. The Italian
license is valid for 15 years.
Luxembourg. A new Telecommunication Act entered into force in April 1997,
and a Royal Decree on licensing conditions entered into force in July 1998. On
February 11, 1999, we were granted a license to build and operate a public
telecommunications network, which is valid for 30 years.
The Netherlands. In July 1997, the Dutch government abolished the
prohibition on the use of fixed infrastructure for the provision of competitive
public voice telephony, thereby complying with the requirements of the Full
Competition Directive six months ahead of schedule.
A new Telecommunications Act came partly into force on December 15, 1998.
The new Act confirms the full liberalization of the telecommunications market in
accordance with EU law. The Dutch regulator granted a registration to us as a
public telecommunications network operator on March 3, 1999. This registration
supersedes a registration which was granted to us on August 1, 1996.
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Spain. Spain was granted the right to a delay in liberalizing its
telecommunications market until November 30, 1998. In April 1998, Spain adopted
the LGT, its new telecommunications law. 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. We were granted a license to install and operate a telecommunications
network in Spain on January 14, 1999. The license is valid for 20 years.
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 EU
Directives and to supplement the pre-existing licensing regime with a general
authorization regime for certain services. We registered with Swedish
authorities and have been able to provide service in Sweden since July 1998.
Switzerland. A new Swiss Telecommunications Law entered into force in
January 1998. Although Switzerland is not a member state of the EU, the effect
of the law is largely to mirror the EU telecommunications liberalization
directives. From that date, the existing voice telephony monopoly was abolished
and the provision of competing services fully liberalized. On September 18,
1998, the Swiss regulatory authority granted a definitive concession to us
(replacing an earlier provisional concession) to build and operate our network
in Switzerland. We are expecting to apply for an extension to our concession in
the event that we deploy City Enterprise Networks in Switzerland.
United Kingdom. Since the elimination in 1991 of the UK telecommunications
duopoly consisting of British Telecommunications and Mercury, it has been the
stated goal of the UK regulator 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. We have received a license from the Secretary of State for Trade
and Industry dated December 18, 1996 which grants the right to run a
telecommunications system or systems in the United Kingdom connected to overseas
telecommunications systems and to provide international services over such
systems. The license was modified on September 27, 1999, and now, in addition to
international services, the license permits us to provide domestic services over
our own system. At the same time, the term of the license was extended to 25
years.
United States. The Federal Communications Commission ("FCC") granted a
license to us pursuant to Section 214 of the Communications Act of 1934
authorizing us to provide limited global facilities-based and global resale
services, (subject to the terms and conditions imposed by the law and
authorization), effective October 23, 1998. The Section 214 authorization does
not allow us to offer U.S. services between the United States and Hungary,
Poland, the Czech Republic, Romania, Monaco, Russia, Ukraine, Kazakhstan,
Uzbekistan, Azerbaijan, China and India. On August 16, 1999, we filed an
application with the FCC for a Section 214 authorization to provide
international facilities-based and resale service between the United States and
the latter countries. The FCC issued a public notice stating that the portion of
the application relating to service between the United States and Russia was
removed from stream line processing, and that the remainder of the application
was granted on October 13, 1999. We do not require any authorization to provide
state-to-state services within the United States. We expect to be able to obtain
any license that may be required to be issued by a state regulatory commission
to provide services between points within a single state.
We intend to file applications in other countries including Croatia,
Hungary, Ireland, Poland, Portugal, Slovakia and Russia in anticipation of
service launch in accordance with our network roll-out plan. With the exception
of Ireland and Portugal, which are members of the EU and whose laws must comply
with EU Directives, these countries have not generally liberalized their
telecommunications sector. We cannot assure you that they will do so in a timely
manner or at all. In addition, the terms and conditions of our licenses,
authorizations or registrations may limit or otherwise affect our scope of
operations. We cannot assure you that (1) we will be able to obtain, maintain or
renew licenses, authorizations or registrations to provide the services we
currently provide and plan to provide, (2) such licenses, authorizations or
registrations will be issued or renewed on terms or with fees that are
commercially viable, or (3) the licenses, authorizations or registrations
required in the future can be obtained by us. The loss of, or failure to obtain,
these licenses, authorizations or
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<PAGE> 68
registrations or a substantial limitation upon the terms of these licenses,
authorizations or registrations could have a material adverse effect on us.
INTERNET PROTOCOL TRANSPORT SERVICES
At present there is no general consensus on the regulatory position of
Internet protocol transport services in Europe and the United States. Currently,
Internet protocol transport services are generally treated as unregulated or, in
some European countries, as a telecommunications service subject to minimal
regulatory requirements. We cannot assure you that Internet protocol transport
services will not be regulated in the future in Europe or the United States. We
will continue to monitor regulatory developments that may affect Internet
protocol transport services' operations.
DATA- AND WEB-HOSTING
The laws relating to the regulation and liability of companies providing
Web-hosting services in relation to the information carried or disseminated
through their services are in the process of development in Europe. In England,
for example, a recent court decision held an Internet service provider liable
for certain allegedly defamatory content carried through its network under
factual circumstance in which the Internet service provider had been notified by
the complainant about the message which the Internet service provider had failed
to delete when asked to do so by the complainant. Decisions, laws regulation and
content liability may significantly affect the services we intend to offer. We
will continue to monitor the developments that may affect these services.
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<PAGE> 69
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 and their respective ages as of December 31,
1999 and positions are set forth below.
BOARD OF SUPERVISORY DIRECTORS
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert J. Amman........................ 61 President and Chief Operating Officer of Global TeleSystems
Group, Inc.
Mikel H. Williams...................... 41 Vice-President -- Finance Operations of Global TeleSystems Group,
Inc.
</TABLE>
BOARD OF MANAGING DIRECTORS
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Jim Reynolds........................... 47 Managing Director
Gerard J. Caccappolo................... 56 Managing Director
</TABLE>
EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Jim Reynolds........................... 47 President and Managing Director (Principal Executive Officer)
Gerard J. Caccappolo................... 56 President of Marketing and Sales and Managing Director
Philip J. Blanchette................... 49 Vice President of Operations
Bruce C. Rudy.......................... 43 Vice President of Fiber and Facilities Purchasing
John Allan Shearing.................... 49 Vice President of Engineering
Jan De Wispelaere...................... 39 Vice President and General Counsel
Mikel Williams......................... 41 Acting Vice President -- Chief Financial Officer (Principal
Financial and Accounting Officer)
</TABLE>
BOARD OF SUPERVISORY DIRECTORS
Our general affairs and business 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).
Our Articles of Association (the "Articles of Association") provide for at
least two 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." 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
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<PAGE> 70
and the general course of our affairs. 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 our best
interests.
The members of the Board of Supervisory Directors are as follows:
Robert J. Amman. Mr. Amman was elected to GTS's Board of Directors in May
1998 and was appointed President of GTS in March 1999. Mr. Amman was Chairman,
President and Chief Executive Officer of John H. Harland Company, a printing
firm, from 1995 to 1998. Previously, from 1994 to 1995, he served as Vice
Chairman of First Financial Management Corporation, where he was responsible for
the merchant services businesses consisting of Western Union, NaBanco,
Telecheck, Nationwide Credit and International Banking Technologies. From 1988
to 1994, Mr. Amman served as President and Chief Executive Officer of Western
Union Corporation, where he oversaw the transformation of the firm from a
telecommunications to a financial services company.
Mikel H. Williams. Mr. Williams has served as Vice President -- Finance
Operations of Global TeleSystems Group, Inc. 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. Mr. Williams is also Acting Vice President,
Finance of GTS's Carrier Services division.
BOARD OF MANAGING DIRECTORS
The Board of Managing Directors, consisting of two members, is charged with
the management of the Company in accordance with our business plan under the
supervision of the Board of Supervisory Directors. Jim Reynolds 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 our business plan and annual
budget; (b) to incur expenses in excess of the adopted or amended annual budget;
(c) to incur loans outside of our ordinary business, except draw-downs of
amounts previously approved on our 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 our ordinary business;
(e) to commit us to guarantee debts of third parties outside our ordinary
business; (f) to extend our business into a new line of business and to
discontinue our business; and (g) to alienate a considerable part of our assets.
The Articles of Association provide that the Board of Managing Directors
shall consist of at least one member. 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.
The members of the Board of Managing Directors are as follows:
Jim Reynolds, President and Managing Director. Mr. Reynolds joined GTS in
March 1999, and assumed his current positions at GTS Europe in June and
September 1999. Mr. Reynolds was formerly chief operating officer of Esprit
Telecom Group plc. His experience and track record extends over 26 years in the
information technology and telecommunications field. Previously Director of
Products and Services at Mercury Communications, Mr. Reynolds was responsible
for the rationalization and development of the Mercury service portfolio during
the period when Mercury was focusing on making major improvements to service
delivery and profit. As part of this role he managed the Mercury Enterprise
businesses disposing of a number of these and integrating others into the main
company. Before joining Mercury in 1992 he led the first Digital Equipment
product group outside the United States and spent 15 years with ITT Corporation.
Mr. Reynolds is also President of GTS's Network Services division.
Gerard J. Caccappolo, President of Marketing and Sales and Managing
Director. Mr. Caccappolo joined GTS Europe in January 1995 as Director of
Marketing and Sales, responsible for market and customer
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<PAGE> 71
segmentation, services development, and pricing and sales strategies. Mr.
Caccappolo also serves as President of GTS's Carrier Services division. Prior to
joining GTS Europe, from September 1988 to December 1994, he was Vice President
of Marketing and Sales -- International Carriers at Ascom Timeplex Equipment
(Telecommunications) Manufacturer.
EXECUTIVE OFFICERS OF THE COMPANY
Philip J. Blanchette, Vice President of Operations. Mr. Blanchette jointed
GTS in October 1998 as Vice President, network operations and engineering of its
Access Services division. In June 1999, he assumed his current position at GTS
Europe and also became President, GTS Network Operations at GTS's Network
Services division. Before joining GTS, Mr. Blanchette served as senior executive
consultant for Bayan Telecommunications Holding Co. For Bayan, he consulted with
the company in its start up of a 350,000-line competitive local exchange carrier
in the Philippines, as well as the establishment of operational procedures.
Prior to that, from 1969 to 1996, he held a variety of progressively responsible
positions with NYNEX Corporation and its predecessor company. In his last
position at NYNEX, Mr. Blanchette headed operations for a start-up cable
television venture in Bangkok, Thailand.
Mr. Caccappolo's background is described above under "Board of Managing
Directors."
Mr. Reynolds' background is described above under "Board of Managing
Directors."
Bruce C. Rudy, Vice President of Fiber and Facilities Purchasing. Mr. Rudy
joined GTS Europe in 1996 and was 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, Vice President of Engineering. Mr. Shearing joined GTS
Europe in November 1995 as Director of Operations, with responsibility for
network operations, customer service and information systems. Before joining GTS
Europe, 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, Vice President and General Counsel. Mr. De Wispelaere
joined GTS Europe as a consulting attorney in 1995 and has since been promoted
to the position of Vice President -- Corporate Secretary and General Counsel.
Prior to joining GTS Europe, 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 -- Feldmuhle HQ Company, as
well as several Scott Paper operating entities in Europe.
Mr. Williams' background is described above under "Board of Supervisory
Directors."
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.
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<PAGE> 72
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 GTS Europe) and the four most highly compensated executive officers
other than the chief executive officer during the fiscal year ended December 31,
1998:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM COMPENSATION AWARDS
COMPENSATION -------------------------------------
------------------- OTHER ANNUAL RESTRICTED STOCK SECURITIES ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) UNDERLYING OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR $ ($) ($) ($) (#) ($)
- ------------------ ---- -------- -------- ------------ ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Jan Loeber(1)........... 1998 $310,000 $119,400 $101,840(2) -0- 150,000(12) $178,565(11)
Managing Director 1997 235,000 78,608 46,598(2) -0- 4,812(4) 179,450(11)
1996 235,000 78,608 42,806(2) (3) 3.5(4) 12,986(11)
Gerard J.
Caccappolo(1)......... 1998 191,042 52,500 83,125(6) -0- 61,000(12) 4,000(5)
Corporate Director of 1997 173,750 80,000 32,043(6) -0- 1,714(4) 4,000(5)
Marketing and Sales... 1996 160,000 40,000 42,108(6) -0- 1.5(4) 3,750(5)
Bruce Rudy(1)........... 1998 158,417 55,800 73,017(9) -0- 55,000(12) 4,000(5)
Corporate Director of 1997 140,500 13,500 15,096(9) -0- 476(4) 3,850(5)
Business Development 1996 135,000 13,509 18,416(9) -0- 0.5(4) 2,532(5)
and Regulatory
John Shearing........... 1998 147,051(7) 44,260(7) --(8) -0- 34,000(12) -0-
Corporate Operations 1997 186,678(7) 31,491(7) (8) -0- 476(4) -0-
Director 1996 173,594(7) 35,163(7) (8) -0- -- -0-
Steven Andrews(1)....... 1998 187,000 18,700 67,794(10) -0- -- 2,337(5)
Corporate
Administration 1997 62,333 -- 9,200(10) -0- 952(4) --
Director 1996 -- -- -- -- -- --
</TABLE>
- ---------------
(1) The terms of the named executive officer's employment are included in an
agreement between the named executive officer and an affiliate of GTS. Such
named executive officer is seconded to GTS Europe for a fee. In June 1999,
Mr. Loeber became Executive Vice President of Strategic Planning of GTS and
Mr. Reynolds became President of GTS Europe. In September 1999, Mr.
Reynolds replaced Mr. Loeber as Managing Director of GTS Europe. In June
1999, Messrs. Caccappolo, Rudy and Shearing assumed the positions set forth
under "-- Executive Officers of the Company" and Mr. Andrews left GTS
Europe and became President of another GTS affiliate.
(2) For 1998, the amount listed represents the sum of a cost of living
allowance of $21,700, a tax equalizing payment of $58,613 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 gross-up payment for
certain tax liabilities in the amount of $21,527. 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
Global TeleSystems Group, Inc. 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 "GTS Europe 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. No stock options were granted in 1998.
(5) These named executive officers participate in the GTS 401(k) plan to which
GTS contributed the amounts indicated for 1998, 1997 and 1996.
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(6) Mr. Caccappolo received a cost of living allowance of $13,373, $12,163 and
$11,200 in 1998, 1997 and 1996, respectively, and resides in a company
apartment which the company paid the equivalent of $16,595, $16,109 and
$17,928 per year in rent in 1998, 1997 and 1996, respectively. In 1998, Mr.
Caccappolo also received a tax equalization payment of $42,278, paid home
leave of $3,660 and a gross-up payment for certain tax liabilities of
$1,011. In addition, we provided Mr. Caccappolo with the use of a company
car in 1998, 1997 and 1996.
(7) Converted from Belgian Francs to U.S. Dollars at an exchange rate of
BF34.57=$1.00, BF35.77=$1.00 and BF32.04=$1.00 in 1998, 1997 and 1996,
respectively.
(8) Perquisites and other personal benefits paid to Mr. Shearing during 1998,
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.
(9) Mr. Rudy received a housing allowance of $14,904, $15,096 and $16,855
during 1998, 1997 and 1996, respectively. In 1998, Mr. Rudy also received a
tax equalization payment of $32,501, paid home leave of $16,822, tuition
reimbursement of $1,932 and a gross-up for certain tax liabilities of
1,059. In addition, we provided Mr. Rudy with the use of a company car in
1998,1997 and 1996.
(10) Mr. Andrews received a cost of living allowance of $13,090 and $4,363 and a
housing allowance $16,548 and $4,124 during 1998 and 1997, respectively. In
1998, Mr. Andrews also received a tax equalization payment of $21,583 and
paid home leave of $5,427. In addition, we provided Mr. Andrew with the use
of a company car in 1998 and 1997.
(11) This amount represents premiums paid by Global TeleSystems Group for
$1,000,000 in term life insurance for Mr. Loeber and contributions to Mr.
Loeber's account by Global TeleSystems Group under the 401(k) Plan. For
1998 and 1997, the amount also includes $156,700 which represents the value
as of December 31, 1998 and 1997 of 10,000 shares of Global TeleSystems
Group restricted common stock which vested in each of 1998 and 1997.
(12) For 1998, represents stock option for Global TeleSystems Group common stock
awarded under the Global TeleSystems Group Stock Option Plan.
OPTION GRANTS IN THE LAST FISCAL YEAR --
GLOBAL TELESYSTEMS GROUP STOCK OPTION PLAN
<TABLE>
<CAPTION>
NUMBER OF SECURITIES % OF TOTAL OPTIONS EXERCISE OR
UNDERLYING GRANTED TO EMPLOYEES BASE PRICE EXPIRATION GRANT DATE
NAME OPTIONS GRANTED(#) IN FISCAL YEAR ($/SHARE) DATE PRESENT VALUE($)(3)
---- -------------------- -------------------- ----------- ---------- -------------------
<S> <C> <C> <C> <C> <C>
Jan Loeber........... 150,000(1) 4.0 $25.75 10-14-08 $2,476,905
Gerard J.
Caccappolo......... 25,000(2) 0.6 46.75 03-31-08 763,660
36,000(1) 0.9 25.75 10-14-08 594,457
------- --- ----------
Total...... 61,000 1.5 1,358,117
Bruce Rudy........... 25,000(2) 0.6 46.75 03-31-08 763,660
30,000(1) 0.8 25.75 10-14-08 495,381
------- --- ----------
Total...... 55,000 1.4 1,259,041
John Shearing........ 10,000(2) 0.3 46.75 03-31-08 305,464
24,000(1) 0.6 25.75 10-14-08 396,305
------- --- ----------
Total...... 34,000 0.9 701,769
Steven Andrews....... -- -- -- -- --
</TABLE>
- ---------------
(1) All these options in Global TeleSystems Group common stock would vest in
February 2005, when financial results for 2004 are expected to be publicly
announced. If certain performance targets are met or exceeded, these options
could be fully exercisable in February 2002, when financial results for 2001
are expected to be publicly announced.
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<PAGE> 74
(2) The options in Global TeleSystems Group common stock vest one-fourth on each
of the first four anniversaries of the date of grant.
(3) The present value of each grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions: dividend yield 0%, expected volatility of 0.75, risk-free
interest rate of 4.23% and expected life of five years.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND
FISCAL YEAR-ENDED OPTION VALUES
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ON REALIZED OPTIONS AT FY-END(#) AT FY-END($)(2)
NAME EXERCISE(#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ---------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Jan Loeber................. 3,209 $2,129,793 1,603/-0- 1,292,928/-0-
Gerard J. Caccappolo....... 1,143 739,389 571/-0- 460,673/-0-
Bruce Rudy................. 318 179,754 158/-0- 112,042/-0-
John Shearing.............. 159 99,359 159/158 84,448/84,237
Steven Andrews............. -- -- 317/635 255,987/512,063
</TABLE>
- ---------------
(1) Based on the difference between fair value price on the date of exercise and
the option exercise price.
(2) Based on a valuation price of $889.61 per share of GTS Europe common stock
at December 31, 1998. This valuation was determined by the valuation per
common share that GTS Carrier Services paid to AB Swed Carrier for acquiring
all of its minority interest in GTS Europe on October 31, 1998.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND
FISCAL YEAR-ENDED OPTION VALUES -- GLOBAL TELESYSTEMS GROUP
STOCK OPTION PLAN
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FY-END(#) AT FY-END($)(2)
NAME EXERCISABLE/UNEXERCISABLE(1) EXERCISABLE/UNEXERCISABLE
---- ---------------------------- -------------------------
<S> <C> <C>
Jan Loeber...................................... 0/150,000 $0/$4,500,000
Gerard J. Caccappolo............................ 0/61,000 0/ 1,305,000
Bruce Rudy...................................... 0/55,000 0/ 1,125,000
John Shearing................................... 0/34,000 0/ 810,000
</TABLE>
- ---------------
(1) No options were exercised during the year ended December 31, 1998.
(2) Based on the closing price of $55.75 on the Nasdaq Stock Market of the
Global TeleSystems Group Common Stock on December 31, 1998.
KEY EMPLOYEE STOCK OPTION PLAN OF GTS EUROPE
We have adopted the Key Employee Stock Option Plan of GTS Europe. (the "New
Plan"). Under the New Plan certain employees of GTS Europe will be granted stock
options to purchase its common stock. Subject to adjustment in the event of
certain changes in capitalization, a maximum of 24,760 shares of GTS Europe
common stock are authorized for grant under the New Plan.
The New Plan is administered by 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 will
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
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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, we 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. Mr. Shearing
participates 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 1997 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. We have entered into an agreement with an insurance
company for the provision of a group insurance policy (the "Policy"). 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
us. 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.
<TABLE>
<CAPTION>
PENSION PLAN TABLE
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
<TABLE>
<S> <C> <C>
S = annual salary
S1 = S up to the "ceiling"
S2 = S above the "ceiling"
N = years of service up to a maximum of 35
</TABLE>
For purposes of this calculation the "ceiling" is U.S. $42,200.
EMPLOYMENT AGREEMENTS
All the named executive officers have employment agreements with either GTS
Europe (the "Company Employment Agreements") or an affiliate of Global
TeleSystems Group (the "GTS Employment Agreements"). We reimburse Global
TeleSystems Group for payments made to named executive officers under contracts
with Global TeleSystems Group. 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.
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<PAGE> 76
Mr. Shearing has an employment agreement. Mr. Shearing's 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. Mr.
Shearing's gross salary for fiscal year 1998 was BF5,083,553. He may also
receive a yearly performance-based bonus of up to 20% of his base salary at our
discretion. Mr. Shearing participates in our pension plan and is provided with a
company car.
See "Certain Relationships and Related Transactions" for a description of
the GTS Employment Agreements.
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<PAGE> 77
SECURITY OWNERSHIP OF PRINCIPAL
SHAREHOLDERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the common shares of GTS Europe, as of September 30, 1999 and after
giving effect to the exchange of GTS shares for GTS Europe shares described in
footnote 2 below, by each beneficial owner of 5% or more of the common shares
and by directors and officers of GTS Europe. The following table assumes that
the registration of the relevant deeds of transfer in respect of such exchange
and other transfers had occurred as of September 30, 1999. 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>
SHARES OF STOCK SHARES OF STOCK TO BE
BENEFICIALLY OWNED BENEFICIALLY OWNED
IMMEDIATELY BEFORE THE IMMEDIATELY AFTER THE
COMPLETION OF THE COMPLETION OF THE
GTS EUROPE SHARE GTS EUROPE SHARE
EXCHANGE OFFER(2) EXCHANGE OFFER(2)
---------------------- ----------------------
NUMBER OF NUMBER OF
NAME OF BENEFICIAL OWNER SHARES PERCENTAGE SHARES PERCENTAGE
------------------------ --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
GTS Carrier Services, Inc.......................... 190,468 95.2% 190,468 95.2%
Global TeleSystems Group, Inc...................... -- -- 6,565 3.3
Gerard Caccappolo(1)............................... 1,714 * 571 *
Bruce Rudy(1)...................................... 476 * 158 *
John Shearing(1)................................... 318 * 159 *
Jan De Wispelaere(1)............................... 318 * 159 *
------- -------
All Directors and Executive Officers as a Group (4
persons)......................................... 2,826 1.4% 1,047 *
------- -------
Total of above........................... 193,294 198,080
======= =======
</TABLE>
- ------------------------------
* Less than 1%.
(1) The shares are beneficially owned by these persons and GTS Europe has
established a stock option plan pursuant to which key officers and
employees were granted options to purchase common shares of GTS Europe.
GTS Europe does not intend to grant additional options to purchase common
shares of GTS Europe. See "Management -- Executive Compensation."
(2) On October 15, 1999, GTS entered into an exchange agreement with all of
the minority interest holders of GTS Europe's common shares and grantees
of GTS Europe stock options that provides for the acquisition by GTS of
their equity interest in GTS Europe. Specifically, the agreement provides
that GTS will acquire the respective minority interest holders common
shares of GTS Europe that have been held by them for a period greater than
six months based on the current fair market value of GTS Europe on the
date of the exchange, as determined by a globally-recognized investment
banking firm that is mutually acceptable to the parties of the agreement.
The agreement also provides that GTS would issue its common shares to GTS
Europe's minority interest holders based on the fair market value, as
defined in the exchange agreement, of GTS common shares on the date of the
exchange.
In addition, as part of this agreement, and effective October 15, 1999,
GTS has exchanged 5,985,930 of its common shares for 6,565 of GTS Europe's
common shares. Accordingly, subsequent to the October 15, 1999 exchange,
minority interest holders of GTS Europe have beneficial ownership rights
in GTS Europe's common shares, and stock options to purchase common
shares, totaling 3,601 common shares of GTS Europe. As stated previously,
GTS intends to acquire these common shares in the future; however, future
acquisitions will be based on future market values of GTS Europe and GTS.
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<PAGE> 78
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PURCHASE OF SHARES BY GTS CARRIER SERVICES
In connection with its purchases of AB Swed Carrier's and SNCB/NMBS's
minority common share interests in GTS Europe in December 1998 and June 1999,
respectively, GTS Carrier Services paid approximately $10.0 million to a company
that is affiliated with a member of the Supervisory Board of GTS Europe for
negotiating with AB Swed Carrier and SNCB/NMBS on behalf of GTS Carrier Services
to purchase their respective ownership interests in GTS Europe.
GTS EMPLOYMENT AGREEMENTS
Messrs. Loeber, Caccappolo, Blanchette 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, except Mr. Blanchette, 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 GTS Europe Stock Option Plan. In addition, in
1996, Mr. Loeber received a restricted stock award of 30,000 shares of GTS
common stock.
TRANSACTIONS WITH OUR GTS BUSINESS SERVICES AFFILIATES
Our parent, GTS, provides a range of telecommunications services to
businesses and other high usage customers throughout Europe through its Business
Services division. GTS conducts its Business Services operations through its
recently acquired subsidiaries NetSource Europe ASA, Esprit Telecom Group plc,
Omnicom SA and InTouch Telecom B.V. As a result of these acquisitions, GTS has a
significant established retail customer base of businesses, governmental
agencies and other high usage customers.
As GTS integrates NetSource, Esprit Telecom, Omnicom and InTouch into its
Business Services operations, GTS intends to route as much of their end-user
customers' traffic as possible over the GTS Europe network in order to realize
the benefits of owning its own infrastructure.
PURCHASES OF SERVICES
As part of GTS' strategy of increasing the amount of "on-net" customer
traffic, we are leasing point to point circuits on our network to Esprit Telecom
to connect switches on its switched voice network, and we may enter into similar
arrangements in the future with other Business Services affiliates. We are also
leasing capacity on our network to Esprit Telecom to enable it to fulfill orders
from carrier customers who had purchased transport services on the fiber optic
network that Esprit Telecom was building when it was acquired by GTS in March
1999.
We may also enter into transactions with Business Services affiliates in
connection with our implementing our plan to build City Enterprise Networks in
sixteen metropolitan markets in Europe by year-end 2001. GTS's City Enterprise
Networks in Berlin and Paris were deployed by Esprit Telecom and Omnicom,
respectively. The City Enterprise Networks in Prague and Budapest were deployed
by other GTS subsidiaries operating in Central Europe. We do not currently
expect to own or operate the city networks in Berlin, Paris, Prague and
Budapest. Therefore, we may in the future purchase local connectivity on those
city networks from our GTS affiliates for resale to our own customers.
Conversely, as we deploy City Enterprise Networks in other cities, we may sell
or lease local connectivity services on these city networks to our Business
Services affiliates to enable them to resell those services to their retail
customers.
We intend to enter into and conduct these intercompany transactions with
NetSource, Esprit Telecom, Omnicom and other Business Services affiliates in
accordance with applicable covenants under our existing
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<PAGE> 79
indebtedness, in the indentures governing the Notes and in the indentures or
other agreements governing the existing indebtedness of such affiliates.
PURCHASES OF ASSETS
We will use approximately $250.0 million of the proceeds of this offering
to finance our purchase from a subsidiary of GTS of a dedicated fiber pair on
the FLAG Atlantic-1 transatlantic cable link. In addition, as part of GTS'
strategy for integrating the operations of NetSource, Esprit Telecom, Omnicom
and InTouch, we may purchase assets from one or more of those companies. As
noted above, we intend to enter into and conduct these intercompany transactions
in accordance with applicable covenants under our existing indebtedness and in
the indentures governing the Notes and in the indentures or other agreements
governing the existing indebtedness of such affiliates.
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<PAGE> 80
DESCRIPTION OF OTHER INDEBTEDNESS
PROPOSED NEW SENIOR CREDIT FACILITIES
$400.0 to $750.0 million facility
We are currently evaluating entering into a $400.0 to $750.0 million
multi-currency eight-year senior credit facility through a subsidiary of ours.
Our ability to enter into a credit facility is subject to, among other things,
the arranging banks' review and satisfaction with our business plan and
operations, there not being any material adverse change in our business or
operating results, and there not being any disruption in the commercial lending
markets.
E35 million facility
We are currently negotiating a E35 million credit facility with another
bank. The borrower would be a subsidiary of ours. The credit facility would be
structured in three tranches with varying maturities of up to 5 years. Advances
under the facility would be used to finance the purchases of network assets and
equipment and for the issuance of performance and/or payment guarantees in the
ordinary course of business.
GTS EUROPE SENIOR NOTES DUE 2007
We sold $265.0 million aggregate principal amount of notes in August 1997.
These notes have a ten year maturity and are unsecured, senior obligations of
GTS Europe. The notes were issued pursuant to an indenture containing certain
covenants for the benefit of the holders of the notes, including, among other
things, covenants limiting the incurrence of indebtedness, restricted payments,
liens, payment restrictions affecting certain subsidiaries and joint ventures,
transactions with affiliates, assets sales and mergers. The notes are redeemable
in whole or part, at our option at any time on or after August 15, 2002 at a
price ranging from 105.75% to 100.0% of the principal amount.
A portion of the notes are also redeemable at any time or from time to time
prior to August 15, 2000 at a redemption price equal to 111.5% of the principal
amount of the 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 us of at least $75.0 million, provided, however, that following
such redemption at least two-thirds of the principal amount of the original
notes remains outstanding. In the event of a change of control of GTS Europe,
the holders of the notes have the right to require us to purchase such holder's
notes at a price equal to 101% of the aggregate principal amount plus accrued
and unpaid interest thereon to the date of repurchase.
GTS EUROPE 10 3/8% SENIOR NOTES DUE 2006 AND 10 3/8% SENIOR NOTES DUE 2009
In January 1999, we sold $200.0 million aggregate principal amount of U.S.
dollar notes and E85 million aggregate principal amount of Euro denominated
notes. The U.S. dollar notes have a ten year maturity and the Euro denominated
notes have a seven year maturity. The notes are unsecured, senior obligations of
GTS Europe. The notes were issued pursuant to two indentures between GTS Europe
and The Bank of New York as trustee, both dated January 4, 1999, which are
substantially similar to the indenture governing the Senior Notes due 2007. Both
indentures dated January 4, 1999, contain certain covenants made by us for the
benefit of the holders of the notes, including, among other things, covenants
limiting the incurrence of indebtedness, restricted payments, liens, payment
restrictions affecting certain subsidiaries, transactions with affiliates, asset
sales and mergers. The U.S. dollar notes are redeemable in whole or in part, at
our option at any time on or after January 15, 2004 at a price ranging from
105.188% to 100.0% of the principal amount. The Euro denominated notes are
redeemable in whole or in part, at our option at any time on or after January
15, 2003 at a price ranging from 105.188% to 100.0% of the principal amount.
A portion of the notes are also redeemable at any time prior to or from
time to time prior to January 15, 2002 at a redemption price equal to 110.375%
of the principal amount of the 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
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<PAGE> 81
equity offerings or strategic equity investments resulting in aggregate gross
cash proceeds to us of at least $75.0 million, provided, however, that following
such redemption at least two-thirds of the principal amount of the original U.S.
dollar notes and two-thirds of the principal amount of the Euro notes remain
outstanding. In the event of a change of control of GTS Europe, the holders of
the notes have the right to require us to purchase such holder's notes at a
price equal to 101% of the aggregate principal amount plus accrued and unpaid
interest thereon to the date of repurchase.
74
<PAGE> 82
DESCRIPTION OF THE EXCHANGE NOTES
The Outstanding Notes due 2006 were issued under an Indenture (the "Notes
due 2006 Indenture"), and the Outstanding Notes due 2009 were issued under an
Indenture (the "Notes due 2009 Indenture," and, together with the Notes due 2006
Indenture, the "Indentures"), each dated as of November 24, 1999 between the
Company and United States Trust Company 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 Agreement. 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 Agreement 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
Agreement, 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 Agreement 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 Global Telesystems Europe B.V. and not any of its Subsidiaries.
GENERAL
The Outstanding Notes have been issued only in registered form, without
coupons, in denominations of E1,000 and integral multiples of E1,000. The
Company has initially appointed Deutsche Bank AG, London branch to serve as
principal paying agent under the Indentures at its offices at Winchester House,
1 Great Winchester Street, London, EC2N 2DB, England and the Trustee to serve as
New York paying agent and registrar under the Indentures at its offices at 114
West 47th Street, New York, New York 10036-1532. 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.
In the event that definitive Notes are issued to the Holders, transfers of
the Notes may be made by presenting definitive Notes at the offices of the
Transfer Agents in Luxembourg during the term of the Notes. Where not all the
Notes represented by a definitive Note are the subject of a transfer, a new
definitive Note in respect of the principal amount of the Notes that have not
been so transferred will be issued to the transferor, and will be available at
the office of the Trustee in New York City or at the offices of the Transfer
Agents in Luxembourg, as applicable. As soon as reasonably practicable after
surrender of a definitive Note in accordance with the previous sentence, the
Trustee will register the transfer and deliver a new definitive Note in a
principal amount equal to the principal amount of the definitive Notes so
transferred to the transferee at the office of the Trustee in New York City or
at the offices of the Transfer Agents in Luxembourg, as the case may be.
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
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<PAGE> 83
governing such Indebtedness, expressly subordinated in right of payment to the
Notes and pari passu 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, 10 3/8% Senior Notes due
2009 and 10 3/8% Senior Notes due 2006 (collectively, the "Existing Notes").
The Company is a holding company with limited assets and operates 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, 1999 on a pro forma basis, the Company would
have had total long-term debt (including long-term portion of capital leases) of
$1,058.3 million (including the Notes and the Existing Notes), and the Company's
Subsidiaries would have had total liabilities of $454.3 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 Outstanding Notes due 2006 will be limited to E225 million aggregate
principal amount and will mature on December 1, 2006. The Outstanding Notes due
2009 will be limited to E275 million aggregate principal amount and will mature
on December 1, 2009. 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 prospectus and will be
payable semi-annually in arrears on each June 1 and December 1, commencing June
1, 2000, to the holders of record of Notes (the "Holders") at the close of
business on May 15 and November 15, 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 the date of original issuance of the Notes. 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 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 London or Luxembourg, as
applicable. Payments of such principal and premium, if any, including any
Additional Amounts pursuant to an optional redemption or pursuant to a
redemption following the occurrence of a Change of Control or otherwise will be
made against surrender of Certificated Notes at the corporate trust office of
the Paying Agent in New York City or, subject to any applicable laws and
regulations, at the offices of the Paying Agent in London or Luxembourg, as
applicable, by Euro denominated check drawn on, or wire transfer to a Euro
currency account maintained by the holder with, a bank located in New York City
or London. Payments of any installment of interest on Certificated Notes will be
made by a Euro denominated 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 Euro account
maintained by the holder with a bank in New York City. 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.
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<PAGE> 84
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. If
the Company wishes to make any modifications or amendments to the terms and
provisions of the Indentures or if the Company wishes to have compliance with
any provisions of the Indentures waived, the Company shall request the holders
of the Notes to consent to such modifications, amendments or waivers, as
applicable, as required by the terms and procedures set forth in the Indentures.
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 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, however, 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 respect to the
Notes.
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<PAGE> 85
OPTIONAL REDEMPTION
OPTIONAL REDEMPTION OF NOTES DUE 2006
Except as set forth under "-- Redemption for Changes in Withholding Taxes"
below, the Notes due 2006 will not be redeemable at the option of the Company at
any time prior to their maturity.
OPTIONAL REDEMPTION OF NOTES DUE 2009
The Notes due 2009 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 December 1, 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 Notes due 2009, 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 December 1 of
the years indicated below:
<TABLE>
<CAPTION>
EURO NOTES
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2004....................................................... 105.500%
2005....................................................... 103.667%
2006....................................................... 101.833%
2007 and thereafter........................................ 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 OF NOTES DUE 2009 UPON PUBLIC EQUITY OFFERING OR STRATEGIC EQUITY
INVESTMENT
At any time, or from time to time, prior to December 1, 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 Notes due 2009, the Company may redeem up
to 35% of the principal amount of Notes due 2009 at a redemption price equal to
111% of the principal amount of the Notes due 2009 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 65% of the principal amount of Notes
due 2009 originally issued would remain outstanding immediately after giving
effect to any such redemption (excluding any Notes due 2009 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).
REDEMPTION FOR CHANGES IN WITHHOLDING TAXES
The Company may, at its option, redeem all (but not less than all) of the
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.
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SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes due 2009 are to be redeemed at
any time pursuant to an optional redemption, selection of such Notes due 2009
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 due
2009 are listed or, if the Notes due 2009 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 due
2009 of a principal amount of E1,000 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 due 2009 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 Euroclear and Cedelbank), 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 due 2009 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 due 2009 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 due 2009 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 due 2009. On and after the
date of redemption, interest will cease to accrue on Notes due 2009 or portions
thereof called for redemption so long as the Company has deposited with the
Paying Agents in London and Luxembourg for the Notes due 2009 funds in
satisfaction of the redemption price pursuant to the Indenture governing such
Notes due 2009.
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 -- 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 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
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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 January 4, 1999 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
(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
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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; 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 and any Restricted
Subsidiary may Incur Indebtedness (including Acquired Indebtedness) if, at the
time of such Incurrence, both (i) the Debt to Annualized Operating Cash Flow
Ratio would be less than or equal to 6.0 to 1.0 and (ii) in the case of the
Incurrence of Indebtedness by a Restricted Subsidiary, the Subsidiary Debt to
Annualized Operating Cash Flow Ratio would be less than or equal to 4.0 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, engineering, construction,
acquisition, installation, or integration or improvement) of
Telecommunications Assets acquired by the Company or a Restricted
Subsidiary after the Issue Date or to finance or support working capital
or capital expenditures for a Telecommunications Business, and Permitted
Refinancings thereof;
(iv) (1) Indebtedness (including Acquired 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 in connection with the development, expansion or
operation of a Telecommunications Business or is used to finance (or is
incurred as Acquired Indebtedness in the consummation of) a
Telecommunications Acquisition, or working capital for, or to finance
the
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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; provided, however, that in the case of
Currency Agreements which relate to Indebtedness, 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;
(ix) Indebtedness of the Company so long as the sum of (1) the
aggregate amount of Indebtedness Incurred and outstanding by the Company
pursuant to this clause (ix) and (2) the product of 2.0 and the
aggregate amount of Indebtedness Incurred and outstanding by the
Restricted Subsidiaries (collectively) pursuant to this clause (ix) does
not exceed the product of 2.0 and (A) 100% of the Net Proceeds received
by the Company after the Issue Date from contributions of capital or the
issuance and sale of its Qualified Equity Interests to any Person (other
than any Restricted Subsidiary) and (B) 80% of the Net Proceeds of
property other than cash received by the Company after the Issue Date
from contributions of capital or the issuance and sale of its Qualified
Equity Interests to any Person (other than any Restricted Subsidiary),
in each case (A) and (B) only to the extent that such Net Proceeds have
not been used pursuant to clause (c)(2) of the first paragraph of
"-- Limitation on Restricted Payments" above to make a Restricted
Payment; provided, however, that no such Indebtedness may be incurred
pursuant to this clause (ix) to the extent that such contributions to
capital or issuance and sale of Qualified Equity Interests were
previously included in the determination of Share Capital for purposes
of Incurring Indebtedness under clause (iv) above of this paragraph (b)
of this covenant;
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(x) guarantees by the Company or any of its Restricted Subsidiaries
of Indebtedness of the Company or any Restricted Subsidiary of the
Company that is permitted to be incurred under the Indentures; and
(xi) in addition to the items referred to in clauses (i) through
(x) above, Indebtedness of the Company or Qualified Subsidiary
Indebtedness in an aggregate amount not to exceed $25.0 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 "-- 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 encumbrances or restrictions
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, renewed,
supplemented, restated or replaced but only if such encumbrances or restrictions
are no more restrictive, taken as a whole, 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 that restrict the subletting or
assignment of any lease governing any leasehold interest of any Restricted
Subsidiary or that are contained in any agreement entered into in the ordinary
course of business; (e) covenants in purchase money obligations for property
acquired in the ordinary course of business restricting transfer of such
property; (f) covenants in security, pledge and similar 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; (h) contained in any agreement entered into after the Issue Date,
so long as such encumbrances or restrictions are not materially more
disadvantageous, taken as a whole, to the Holders than the encumbrances and
restrictions in existence at the Issue Date; (i) encumbrances or restrictions
contained in any agreement entered into after the Issue Date for Indebtedness so
long as (a) such encumbrances or restrictions, taken as a whole, are not more
restrictive than those which are customary in comparable financing agreements
and
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(b) management of the Company determines that such encumbrances or restrictions
will not materially impair the Company's ability to make payments when due on
the Notes; or (j) customary limitations on the disposition or distribution of
assets or property in joint venture agreements entered into in the ordinary
course of business; provided, however, that such encumbrance or restriction is
applicable only to such Restricted Subsidiary constituting such joint venture.
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 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.
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 securing Indebtedness or trade payables 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.
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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, (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 and (z)
Indebtedness of any Restricted Subsidiary that is no longer a Restricted
Subsidiary as a result of such Asset Sale, if the Company and all of its
Restricted Subsidiaries immediately are released from all guarantees of payment
of such Indebtedness and such Indebtedness is no longer the liability of the
Company or any of its Restricted Subsidiaries shall be deemed to be cash 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. Pending final application of any such Net Cash Proceeds, the
Company or any Restricted Subsidiary that is a borrower under Qualified
Subsidiary Indebtedness may temporarily reduce revolving credit borrowings or
otherwise invest such Net Cash Proceeds in any manner that is not prohibited by
the Indenture.
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 aggregate 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.
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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 $20.0 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 or arrangements in effect on the Issue Date, as such
agreements or arrangements 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, however, 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; (viii) Restricted Payments
permitted under the covenant described under "-- Limitation on Restricted
Payments;"and (ix) the issuance and sale by the Company for cash of Qualified
Equity Interests.
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
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"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 passu with, 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.
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 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 Agreement 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
Agreement.
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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.
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 Notes due 2006 or 25% in aggregate principal amount of the
outstanding Notes due 2009, 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 Notes due 2006 or 25% in
aggregate principal amount of the outstanding Notes due 2009, as the case may
be, by notice in writing to the Company and the Trustee, if applicable, may
declare the unpaid principal of and accrued interest to the date of acceleration
on all outstanding Notes of such series to be due and payable immediately and,
upon any such
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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
a declaration of such acceleration, but before a judgment or decree based on
acceleration, the Holders of not less than a majority in aggregate principal
amount of outstanding Notes of such series may, under certain circumstances,
rescind such acceleration and its consequences if all existing Events of
Default, other than the nonpayment of accelerated principal of and interest on
such Notes which has become due solely by virtue of such acceleration, have been
cured or waived as provided in the Indenture governing such Notes and if the
recission would not conflict with any judgment or decree. 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
an Indenture or pursue 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 Notes due 2006 outstanding or 25% in
aggregate principal amount of the outstanding Notes due 2009, 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 Notes due 2006 or Notes due 2009, as the
case may be, a direction which, in the opinion of the Trustee, is 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 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 within 120 days
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
Notes due 2006 or the Notes due 2009 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
certain 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, cash in
Euros, Euro Government Obligations or a combination thereof sufficient 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
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obligations; and (iii) 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 Notes due 2006 or the Notes due 2009 (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, cash in Euros, Euro
Government Obligations or a combination thereof sufficient 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; and (iii)
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,
when authorized by a resolution of its Board of Directors, and the Trustee with
the consent of the Holders of a majority in aggregate principal amount of the
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 the consent
of the Holder of each 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; or (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
Notes due 2006 or Notes due 2009, 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 Notes due 2006 or Notes due 2009, 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.
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GOVERNING LAW
The Indentures and the Notes will be 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 or use 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.
LISTING
The Notes are listed on the Luxembourg Stock Exchange. The Exchange Notes
are expected to be listed on the Luxembourg Stock Exchange upon the expiration
of the Exchange Offer. The legal notice relating to the issuance of the Notes
and the Articles of Association of the Company are registered 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
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 Bankers Trust Luxembourg S.A. and Banque Internationale a
Luxembourg S.A. as its agents 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.
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"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 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; (c)
any transaction consummated in compliance with "-- Certain
Covenants -- Limitation on Restricted Payments" or that constitutes a Permitted
Investment; and (d) any sale, lease, transfer, conveyance or other disposition
in the ordinary course of business of capacity on any fiber optic or cable
system controlled or operated by the Company or any Restricted Subsidiary or of
telecommunications capacity, transmission rights, conduit or rights-of-way
acquired by the Company or any Restricted Subsidiary for use in a
Telecommunications Business of the Company or any Restricted Subsidiary. 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 Managing Directors and its Board of Supervisory
Directors, collectively).
"Board of Managing Directors" means, with respect to the Company, its
executive board.
"Board of Supervisory Directors" means, with respect to the Company, its
supervisory board.
"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.
"Capacity Swaps" means the exchange by the Company or any Restricted
Subsidiary of capacity on the Company's or such Restricted Subsidiary's network
(including without limitation through the transfer of indefeasible rights of use
or multiple investment units and/or the sale or lease of dark fibers or
wavelengths thereon) for Equity Interests in any Permitted ISP.
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"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 or Euros; (b) securities (i)
issued or directly and fully guaranteed or insured by the U.S. government or any
agency or instrumentality thereof or (ii) which are denominated in Euros and are
issued by or directly and fully guaranteed or insured by a member of the
European Union, or any agency or instrumentality thereof, in each case having
maturities of not more than twelve months from the date of acquisition; (c)
certificates of deposit and time deposits with maturities of twelve months or
less from the date of acquisition, bankers' acceptances with maturities not
exceeding twelve 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;
(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 twelve months after the date of acquisition; and (f)
any money market accounts or funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (a) through (e)
above.
"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 (other than a Permitted Holder, or an Investment Grade
Person) 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 (other
than an Investment Grade Person) 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 (other
than an Investment Grade 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 an Investment Grade Person), or any Person (other than
an Investment Grade 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; provided, however, that sales, transfers,
conveyances or other dispositions in the ordinary course of business of capacity
on fiber optic or cable systems owned, controlled or operated by the Company or
any Restricted Subsidiary or of telecommunications capacity or transmission
rights, rights-of-way or conduit acquired by the Company or any Restricted
Subsidiary for use in the Telecommunications Business of the Company or a
Restricted Subsidiary, including, without limitation, for sale, lease, transfer,
conveyance or other disposition to any customer of the Company or any Restricted
Subsidiary shall not be deemed a disposition of assets for purposes of this
clause (c); (d) GTS consolidates with, or merges with or into, another Person
(other than an Investment Grade 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 an
Investment Grade Person), or any Person (other than an Investment Grade 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
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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 Supervisory Directors of the Company (together
with any new directors elected or nominated for election to the Board of
Supervisory Directors by the stockholders of the Company with the approval or
consent 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 or consented to) 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
Managing 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."
"Common Depositary" means, with respect to the Securities issued in the
form of one or more Global Securities, the Person designated as the common
depositary by Euroclear or Cedelbank, which shall initially be Bankers Trust
Company.
"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
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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 January 4, 1999 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 and not for speculative purposes.
"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. For purposes of the
Indentures, a member of the Board of Directors of the Company shall not be
deemed to have any material direct or indirect financial interest in or with
respect to the transaction being considered solely by virtue of also being a
director or officer of GTS.
"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.
"Euro Government Obligations" means Euro-denominated direct non-callable
obligations of, or obligations guaranteed by, a member state of the European
Union for the payment of which guarantee or obligations the full faith and
credit of such member state is pledged.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC thereunder.
"Existing Notes" means, collectively, the Company's 11 1/2% Senior Notes
due 2007, 10 3/8% Senior Notes due 2009 and 10 3/8% Senior Notes due 2006.
"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
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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.
"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 or guarantees 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
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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.
"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.
"Investment Grade Person" means a corporation, partnership, limited
liability company or limited liability partnership (i) whose outstanding
unsecured debt securities are assigned ratings by both Rating Agencies equal to
or higher than "A", or the equivalents thereof, (ii) with a total market
capitalization at such time of at least $10 billion and (iii) that is primarily
engaged in a Telecommunications Business.
"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.
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"Non-Recourse Debt" means Indebtedness:
(1) as to which neither the Company nor any of its Restricted Subsidiaries (a)
provides credit support of any kind (including any undertaking, agreement or
instrument that would constitute Indebtedness), (b) is directly or
indirectly liable as a guarantor or otherwise, or (c) constitutes the
lender; and
(2) no default with respect to which (including any rights that the holders
thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or both any holder of
any other Indebtedness (other than Indebtedness incurred under clause (i) of
the definition of Qualified Subsidiary Indebtedness) of the Company or any
of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior
to its stated maturity.
"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 Notes due 2006 or the Notes due
2009, 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
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 Notes due 2006
or Notes due 2009 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 E1,000
aggregate principal amount of Notes due 2006 accepted for payment or for
each E1,000 aggregate principal amount of Notes due 2009 accepted for
payment (as specified pursuant to the applicable Indenture) (the "Purchase
Price");
(5) that the holder may tender all or any portion of Notes due 2006 or
Notes due 2009 registered in the name of such holder and that any portion
of a Note tendered must be tendered in an integral multiple of E1,000
aggregate principal amount;
(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;
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(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 any of its Paying Agents) 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 E1,000 aggregate
principal amount 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 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
$10,000,000 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; (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; (l) Investments in
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Permitted ISPs made after the date of the Indentures pursuant to Capacity Swaps
if the Board of Directors determines prior thereto that such Investment is on
terms that are fair and reasonable to the Company; provided, however, that the
amount of network capacity contributed or transferred to any Permitted ISP in
connection with all Capacity Swaps in effect on any date of determination shall
not exceed 25% of the Company's aggregate network capacity on such date
(determined on the basis of the dense wavelength division multiplexing and other
equipment then in use on the Company's network and without giving effect to
anticipated upgrades or replacements thereof); (m) Permitted Project Finance
Investments; and (n) an Investment in any Person the primary business of which
is a Telecommunications Business in an amount outstanding at any one time not to
exceed 25% of the Company's Cumulative Operating Cash Flow.
"Permitted ISP" means any Person engaged in the provision or sale of
Internet services, as determined in good faith by the Board of Directors (whose
determination shall be conclusive if evidenced by a Board Resolution).
"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 and Liens securing Acquired Indebtedness; provided,
however, that such Liens were in existence prior to the contemplation of such
merger or consolidation or Incurrence of such Acquired Indebtedness 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 or Incurrence of such Acquired Indebtedness; (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
Telecommunications 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 or guarantees 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 Person (other than a Restricted Subsidiary) securing any
Indebtedness of such Person; provided, however, that the Investment in such
Person constitutes a Permitted Investment; (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 Notes (whether
or not the Existing Notes are also so secured); (i) Liens securing surety,
appeal and performance bonds; (j) Liens securing Qualified Subsidiary
Indebtedness or facilities which upon drawing will constitute Qualified
Subsidiary Indebtedness, to the extent permitted to be Incurred under
"-- Certain Covenants -- Limitation on Incurrence of Indebtedness"; and
(k) 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".
"Permitted Project Financing Investment" means an Investment by the Company
or any Restricted Subsidiary in any Unrestricted Subsidiary for the purpose of
facilitating the incurrence by such Unrestricted Subsidiary of Non-Recourse Debt
for the purpose of financing a portion of the cost of design, construction,
engineering, acquisition, installation, development by such Unrestricted
Subsidiary of the telecommunications network of the Company; provided, however,
that the amount of any such Investment shall not exceed 60% of the total initial
capitalization of any such Unrestricted Subsidiary.
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"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) if
the Indebtedness being Refinanced is Indebtedness of the Company, the
Refinancing Indebtedness is incurred 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).
"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 or senior guarantees of any
such agreements or facilities 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 $100.0 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
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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 plus any amount pursuant to an acquisition that otherwise would have
been considered as additional paid-in-capital except for the Company's decision
to record such acquisition as a "pooling of interests," 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 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.
"Subsidiary Debt to Annualized Operating Cash Flow Ratio" means the ratio
of (a) the Total Consolidated Subsidiary Indebtedness as of the Determination
Date to (b) two times the Consolidated Operating Cash Flow for the Measurement
Period. The Subsidiary Debt to Annualized Operating Cash Flow Ratio shall
otherwise be calculated in the same manner as the Debt to Annualized Operating
Cash Flow Ratio.
"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.
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"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 Assets" means all assets, rights, (contractual or
otherwise) and properties, whether tangible or intangible, used or intended for
use in connection with a Telecommunications Business and the Equity Interests of
a person engaged principally in a Telecommunications Business.
"Telecommunications Business" means the business of (i) transmitting, or
providing services relating to the transmission of, voice, video or data through
owned or leased transmission facilities, (ii) constructing, creating, developing
or marketing communications related network equipment, products, software,
services and other devices for use in a communications business, and (iii)
evaluating, participating in or pursuing any other activity or opportunity that
is a reasonably related, ancillary or complementary to the activities identified
in clause (i) or (ii) above.
"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.
"Total Consolidated Subsidiary Indebtedness" means, as at any date of
determination, an amount equal to the aggregate amount of all Indebtedness of
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.
"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.
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, offers 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 which are identical to the
Outstanding Notes due 2006 and the Outstanding Notes due 2009 (the "Exchange
Securities") (and which are entitled to the benefits of the Indentures governing
such Outstanding 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,
(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 Notes validly
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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 its intention to commence
the Exchange Offer and will also notify the Luxembourg Stock Exchange of the
results of the Exchange Offer. In the event that definitive Notes are issued to
the Holders, copies of the Exchange Offer documentation will be available to the
Holders at the specified offices of the applicable Paying and Transfer Agent in
Luxembourg. Furthermore, in the event that definitive Notes are issued to the
Holders, the Company will appoint an exchange agent in Luxembourg where the
holders of the definitive Notes will be able to tender for exchange their
definitive Notes. Any such Exchange Offer will be conducted in accordance with
the terms and procedures set forth in the corresponding Exchange Offer
documentation to be provided to the Holders of the Notes at the time of such
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 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 the Registration
Statement (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 180th day after the Issue Date, (iv) any Holder
of Private Exchange Securities (as defined in the Registration Rights Agreement)
so requests or (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 (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 Notes and the Trustee
notice thereof (a "Shelf Notice") and shall thereafter file an Initial Shelf
Registration Statement pursuant to the terms of the 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. In the event of an
Exchange Offer, the Company will prepare a new Offering Memorandum. The
Luxembourg Stock Exchange will be notified in the case of any increase in the
rate of interest on the Notes, and a notice regarding any increase in the rate
of interest on the Notes will be published in a daily newspaper of general
circulation in Luxembourg (which is expected to be the Luxemburger Wort).
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
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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 Notes or Exchange Securities 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 Notes or Exchange
Securities (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 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 Notes has not been filed
on or prior to the Filing Date (unless, with respect to the Exchange Offer
Registration Statement, a Shelf 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
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 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
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
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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) at a rate 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 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 due 2006 or Notes due 2009 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 Outstanding Notes due 2006
or Outstanding Notes due 2009 (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 150th 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 150th 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.
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 90th 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.
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.
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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 relevant to the acquisition, ownership and disposition
of Notes to initial U.S. Holders (as defined below). 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 the acquisition, ownership and disposition of 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 November 1, 1999. 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, 5% or more of any class of shares of GTS Europe. 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 GTS Europe 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 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 GTS Europe or if he/she holds
an option to buy at least 5% in any class of shares in the capital of GTS
Europe.
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 5%
of any class of shares of the Company, or if the Notes form part of a permanent
establishment of the holder in The Netherlands, or a fixed base available to the
holder in the Netherlands for the purpose of performing independent personal
services.
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THE UNITED STATES
The following is a summary of the principal U.S. federal income tax
considerations relevant to the purchase, ownership and disposition of the 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 in this
summary, this summary deals only with 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 Notes as part of a hedging
transaction, "straddle," conversion transaction, or other integrated
transaction, traders that elect mark to market treatment, 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 Notes through partnerships or other passthrough
entities.
Persons considering the purchase of the 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 a 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 or other entity 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 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 interest income at the time the interest accrues or is 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 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 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.
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
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
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simple average of the spot 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 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 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."
The Notes are not expected to be issued with original issue discount for
U.S. federal income tax purposes.
EXCHANGE OFFER; LIQUIDATED DAMAGES; OPTIONAL REDEMPTION
Pursuant to the Exchange Offer contemplated by the Company described
herein, an exchange of 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 holder had in the Notes.
The Company will be required to pay Additional Amounts if, within the time
periods prescribed under "Description of Exchange Notes -- Exchange Offer;
Registration Rights; Additional Interest" the Company does not either file or
cause to be declared effective a registration statement or consummate the
Exchange Offer. See "Description of Exchange Notes -- Exchange Offer;
Registration Rights; Additional Interest." According to the Treasury
Regulations, the possibility of additional payments in respect of the Notes will
not affect their yield (and, accordingly, will not affect the inclusion of
interest in income) if the likelihood of such payments, as of the date the Notes
are issued, is remote. The Company believes that the likelihood that it will
make payments of Additional Amounts is remote, and therefore, does not intend to
treat the possibility of Additional Amounts as affecting the yield to maturity
of any Note. If, however, Additional Amounts are required to be made on the
Notes, then, solely for the purposes of determining the yield to maturity of a
Note, the Note could be treated as reissued with "original issue discount,"
which could result in a U.S. holder having to include amounts in income prior to
the receipt of payments in respect thereof.
The Notes may be redeemed prior to their stated maturity at the option of
the Company. For purposes of computing the yield of the Notes, the Company will
be deemed to exercise or not exercise its option to redeem the Notes in a manner
that minimizes the yield on the Notes. It is not anticipated that the Company's
ability to redeem prior to stated maturity will affect the yield to maturity of
the Notes.
MARKET DISCOUNT AND PREMIUM
If a U.S. holder purchases a Note for an amount that is less than its
principal amount, the amount of the difference (determined in Euro) 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, a
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 a Note until the maturity of the 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
Note and upon the receipt of certain cash payments and regarding the deferral of
interest deductions.
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 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 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 a Note for an amount that is greater than the
sum of all amounts (other than payments of stated interest) payable on the Note
after its acquisition (computed in Euro), such U.S. holder will be considered to
have purchased such 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 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 Note. The amount of
amortizable premium is determined using the exchange conventions applicable to
payments of interest. See "-- Interest" above. Exchange gain or loss may be
recognized, based on the difference between the spot rate on the date the
premium is paid to acquire the Note and the spot rate on the date the premium is
returned in the form of stated interest.
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 a 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 a 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
Note). A U.S. holder's tax basis in such Note generally will be the U.S. dollar
value of the purchase price of such Euro 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 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 Note. For these purposes, the amount realized on the sale,
exchange or retirement of a 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 such loss should generally be treated as U.S. source
loss.
Gain or loss recognized by a U.S. holder on the sale, exchange or
retirement of a bond 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 loss is recognized on the sale or retirement
of a 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 Notes.
Prospective
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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
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 Note with previously owned Euro will 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 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 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 a
Note and to the proceeds of the sale of a Note made to U.S. holders other than
certain exempt recipients (such as corporations). A 31% backup withholding tax
will apply to such payments if the U.S. holder fails to provide a taxpayer
identification number or certification of other exempt status or fails to report
in full dividend and interest income.
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.
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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, we believe 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 ours within the meaning of Rule 405 under the
Securities Act, (ii) a broker-dealer who acquired Exchange Notes directly from
us, or (iii) broker-dealers who acquired Exchange 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 Agreement, we have 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. We have agreed that, for a period of 180 days
after the Exchange Offer has been consummated, we 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 us 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.
We will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the Exchange Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers 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.
We have 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 Agreement.
LEGAL MATTERS
Dutch company law matters in connection with the validity of the Exchange
Notes will be passed upon by Allen & Overy, Amsterdam, the Netherlands. Certain
legal matters in connection with the validity of the Exchange Notes offered
hereby and the U.S. federal income tax consequences of the Exchange Offer will
be passed upon for the Company by Shearman & Sterling, New York, New York.
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EXPERTS
The financial statements of Hermes Europe Railtel B.V. (which was the name
of our company prior to our name change to Global TeleSystems Europe B.V.) as of
December 31, 1998 and 1997, and for each of the three years in the period ended
December 31, 1998 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 in the prospectus and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
GENERAL LISTING INFORMATION
LISTING
The Notes are listed on the Luxembourg Stock Exchange. The Exchange Notes
are expected to be listed on the Luxembourg Stock Exchange upon the expiration
of the Exchange Offer. The Articles of Association of the Company and the legal
notice relating to the issue of the Exchange Notes will be deposited prior to
the listing of the Exchange Notes 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
We have obtained all necessary consents, approvals and authorizations in
connection with the issue of the Exchange Notes. The issue of the Notes and the
Exchange Notes was authorized by resolutions of the Board of Supervisory
Directors of the Company passed on November 18, 1999.
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, 1999 and no material adverse change in the financial position or prospects
of the Company and its subsidiaries since September 30, 1999.
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 as of December 31, 1998 and 1997
and for the three years ended December 31, 1998 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, 1999 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.
DOCUMENTS
Copies of the following documents may be inspected at the specified offices
of the Paying and Transfer Agents in Luxembourg.
- Articles of Association of the Company;
- the Purchase Agreement and Registration Rights Agreement relating to the
Exchange Notes; and
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- the Indentures relating to the Exchange Notes (which include the forms of
the respective Exchange 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 offices of the Paying and Transfer Agents 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 Exchange 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 Cedelbank. Relevant trading information is set forth
below.
<TABLE>
<CAPTION>
ISIN COMMON CODE
------------ -----------
<S> <C> <C>
Notes due 2006
144A......................................... XS0104704555 010470455
Regulation S................................. XS0104703821 010470382
Notes due 2009
144A......................................... XS0104706766 010470676
Regulation S................................. XS0104705446 010470544
</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 Exchange
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 Exchange 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.
116
<PAGE> 124
GLOSSARY
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.
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.
City Enterprise Network. Name given to our intracity fiber optic networks,
connecting different points of presence in such city, including, points of
presence of our network in such city, points of presence of our affiliates in
such city, telehouses, Internet protocol exchange points and, where economically
feasible, points of presence of our existing customers in such city.
Co-location. When an end-user or competing local telecommunications
service provider locates network equipment at the building that houses switches
belonging to another telephone carrier, the user or competitor provider in said
to be "co-located" with the other telephone carrier. The advantage for the co-
locating party is that it can make a direct connection to local and long
distance facilities and substantially reduce access costs.
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.
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 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.
Incumbent Telecommunications Operator. A licensed telecommunications
common carrier.
Interconnect. Connection of a telecommunications device or service to the
public switched telecommunications network.
117
<PAGE> 125
Internet protocol. Refers to network protocols that allow computers with
different architectures and operating system software to communicate with other
computers on the Internet.
Internet Service Providers. Companies formed to provide access to the
Internet to consumers and business customers via local networks.
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.
Multiplexing. An electronic or optical process that combines a large
number of lower speed transmission lines into one high speed line by splitting
the total available bandwidth into narrower bands (frequency division), or by
allotting a common channel to several different transmitting devices one at a
time in sequence (time division).
Nodes. Locations within the network housing electronic equipment and/or
switches which serve as intermediate connection points to send and receive
transmission signals.
Points of Presence. 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.
STM-16. Data transmission rate of approximately 2,488 megabits per second.
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.
Trunk. A telephone circuit with a switch at both ends.
118
<PAGE> 126
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, 1998 and
1997................................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996....................... F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996....................... F-5
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1998, 1997 and 1996........... F-6
Notes to Consolidated Financial Statements.................. F-7
THIRD QUARTER FINANCIAL STATEMENTS (UNAUDITED)
Condensed, Consolidated Balance Sheets as of September 30,
1999 and December 31, 1998................................ F-19
Condensed, Consolidated Statements of Operations for the
three and nine months ended September 30, 1999 and 1998... F-20
Condensed, Consolidated Statements of Cash Flows for the
three and nine months ended September 30, 1999 and 1998... F-21
Notes to the Condensed, Consolidated Financial Statements... F-22
</TABLE>
F-1
<PAGE> 127
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, 1998 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, 1998. 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, 1998 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, 1998, in conformity with generally accepted accounting principles
in the United States.
Ernst & Young Reviseurs d'Entreprises S.C.C.
Represented by
M. Guns
Partner
Brussels, Belgium
February 26, 1999, except for Notes 1 and 2 as to which the date is November 1,
1999
F-2
<PAGE> 128
HERMES EUROPE RAILTEL B.V.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
--------- --------
<S> <C> <C>
Current assets
Cash and cash equivalents................................. $ 130,081 $204,327
Restricted cash........................................... 30,062 29,539
Accounts receivable, net of allowance for doubtful account
of $887 at December 31, 1998........................... 48,034 2,129
Due from affiliated companies............................. 2,164 49
Other assets.............................................. 29,810 13,281
--------- --------
Total current assets.............................. 240,151 249,325
Property and equipment, net................................. 438,984 204,944
Goodwill and intangible assets, net of accumulated
amortization of $10,645 and $3,320 at December 31, 1998
and 1997, respectively.................................... 50,519 22,128
Restricted cash............................................. -- 28,271
Other non-current assets.................................... 14,456 --
--------- --------
TOTAL ASSETS...................................... $ 744,110 $504,668
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses..................... $ 84,047 $ 37,457
Due to affiliated companies............................... 15,976 1,311
Deferred income........................................... 32,255 1,436
Current portion of capital lease obligations.............. 37,135 21,540
--------- --------
Total current liabilities......................... 169,413 61,744
Long-term debt.............................................. 265,353 265,383
Long-term capital leases.................................... 190,378 117,645
Deferred income............................................. 34,000 --
Other non-current liabilities............................... 29,259 236
--------- --------
TOTAL LIABILITIES................................. 688,403 445,008
Commitments and contingencies
Minority interest........................................... 27,759 --
SHAREHOLDERS' EQUITY
Common stock, 1000 guilders par value; 297,000 shares
authorized; 196,716 and 190,468 shares issued and
outstanding at December 31, 1998 and 1997, respectively... 100,110 96,757
Additional paid-in capital.................................. 33,334 21,829
Accumulated other comprehensive loss........................ (1,300) (3,665)
Accumulated deficit......................................... (104,196) (55,261)
--------- --------
TOTAL SHAREHOLDERS' EQUITY........................ 27,948 59,660
--------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $ 744,110 $504,668
========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 129
HERMES EUROPE RAILTEL B.V.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1998 1997 1996
-------- -------- ------------
<S> <C> <C> <C>
Revenues.................................................. $ 85,251 $ 5,373 $ 48
-------- -------- ------------
Operating costs and expenses:
Telecommunication Services.............................. 41,848 6,842 4,694
Selling, general and administrative..................... 28,273 17,868 9,894
Depreciation and amortization........................... 28,638 5,229 1,266
-------- -------- ------------
98,759 29,939 15,854
-------- -------- ------------
Loss from operations...................................... (13,508) (24,566) (15,806)
Other income/(expense):
Interest expense........................................ (30,852) (12,826) (153)
Foreign currency losses................................. (11,308) (367) (1,126)
Other, net.............................................. 9,076 6,596 508
-------- -------- ------------
(33,084) (6,597) (771)
-------- -------- ------------
Net loss before income taxes.............................. (46,592) (31,163) (16,577)
Income taxes.............................................. 2,343 -- --
-------- -------- ------------
Net loss.................................................. $(48,935) $(31,163) $ (16,577)
======== ======== ============
Net loss per share........................................ $(255.15) $(346.42) $(207,212.50)
======== ======== ============
Weighted average common shares outstanding................ 191,790 89,957 80
======== ======== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 130
HERMES EUROPE RAILTEL B.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
--------- --------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss................................................... $ (48,935) $ (31,163) $(16,577)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization............................ 29,921 5,731 1,291
Fair value adjustment for foreign currency instruments... 28,650 -- --
Other.................................................... 2,362 2,651 130
Changes in assets and liabilities:
Accounts receivable................................... (37,543) (2,116) (87)
Deposits.............................................. 5,537 (9,807) (627)
Accounts payable and accrued expenses................. 28,737 30,991 4,336
Other changes in assets and liabilities............... 36,228 (704) (6)
--------- --------- --------
Net cash provided by (used in) operating
activities..................................... 44,957 (4,417) (11,540)
INVESTING ACTIVITIES
Purchases of property and equipment...................... (131,866) (51,830) (16,807)
Acquisitions -- cash acquired............................ 13,352 -- --
Restricted cash.......................................... 27,774 (55,636) (3,974)
Other investing activities............................... (2,018) -- --
--------- --------- --------
Net cash used in investing activities............ (92,758) (107,466) (20,781)
FINANCING ACTIVITIES
Proceeds from debt......................................... -- 268,678 564
Repayments of debt......................................... (32,523) -- --
Payment of debt issue costs................................ (825) (14,139) --
Net proceeds from exercise of stock options and issuance of
common stock............................................. 600 50,993 --
Proceeds from shareholders' loans.......................... -- 13,205 27,358
Due to affiliated companies, net........................... 11,285 (1,237) 1,002
--------- --------- --------
Net cash (used in) provided by financing
activities..................................... (21,463) 317,500 28,924
Effect of exchange rate changes on cash and cash
equivalents.............................................. (4,982) (3,303) (374)
--------- --------- --------
Net (decrease) increase in cash and cash equivalents....... (74,246) 202,314 (3,771)
Cash and cash equivalents at beginning of year............. 204,327 2,013 5,784
--------- --------- --------
Cash and cash equivalents at end of year................... $ 130,081 $ 204,327 $ 2,013
========= ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 131
HERMES EUROPE RAILTEL B.V.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER TOTAL
------------------ PAID-IN COMPREHENSIVE ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT CAPITAL LOSS DEFICIT EQUITY
------- -------- ---------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31,
1995..................... 80 $ 45 $ 5,926 $ (254) $ (7,521) $ (1,804)
Translation adjustment... -- -- -- 570 -- 570
Net loss................. -- -- -- -- (16,577) (16,577)
------- -------- ------- ------- --------- --------
Comprehensive loss....... (16,007)
--------
BALANCE AT DECEMBER 31,
1996................... 80 $ 45 $ 5,926 $ 316 $ (24,098) $(17,811)
Recapitalization, net of
tax.................... 190,388 96,712 4,633 -- -- 101,345
Compensatory stock
options................ -- -- 2,613 -- -- 2,613
Pushdown accounting
adjustment............. -- -- 8,657 -- -- 8,657
Translation adjustment... -- -- -- (3,981) -- (3,981)
Net loss................. -- -- -- -- (31,163) (31,163)
------- -------- ------- ------- --------- --------
Comprehensive loss....... (35,144)
--------
BALANCE AT DECEMBER 31,
1997................... 190,468 $ 96,757 $21,829 $(3,665) $ (55,261) $ 59,660
Proceeds from exercise of
stock options.......... 6,248 3,353 (2,753) -- -- 600
Compensatory stock
options................ -- -- 1,060 -- -- 1,060
Pushdown accounting
adjustment............. -- -- 13,198 -- -- 13,198
Translation adjustment... -- -- -- 2,365 -- 2,365
Net loss................. -- -- -- -- (48,935) (48,935)
------- -------- ------- ------- --------- --------
Comprehensive loss....... (46,570)
--------
BALANCE AT DECEMBER 31,
1998................... 196,716 $100,110 $33,334 $(1,300) $(104,196) $ 27,948
======= ======== ======= ======= ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 132
HERMES EUROPE RAILTEL B.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: NATURE OF BUSINESS OPERATIONS
Hermes Europe Railtel B.V. ("the Company") is a provider of centrally
managed telecommunications transmission capacity across national borders in
Europe and to the United States 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. The Company began commercial operations in
November 1996 and as of December 31, 1998 operated in Belgium, the Netherlands,
the United Kingdom, France, Germany, Switzerland, Italy, Denmark and Sweden. As
of December 31, 1998 the high capacity fiber optic network ("the Network")
linked the cities of Brussels, Antwerp, Rotterdam, Amsterdam, London, Paris,
Frankfurt, Strasbourg, Zurich, Geneva, Stuttgart, Dusseldorf, Munich, Milan,
Berlin, Copenhagen and Stockholm. 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 was formed on July 6, 1993 and is 89.9% owned by GTS Carrier
Services, Inc. (formerly GTS-Hermes, Inc.), a wholly owned subsidiary of Global
TeleSystems Group, Inc. ("GTS"), a leading independent provider of
telecommunications services to businesses, other high usage customers and
telecommunications carriers in Europe, Russia and the Commonwealth of
Independent States.
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). See
Note 11, "Acquisition."
Subsequent to year-end, the Company issued aggregate principal amount $200
million of 10.375% senior notes due 2009 and Euro 85 million (approximately $100
million) of 10.375% senior notes due 2006 (together, the "New Senior Notes").
See Note 13, "Subsequent Events."
A notarial deed amending the Company's Articles of Association to change
the Company's name to Global TeleSystems Europe B.V. was executed on October 22,
1999. The change in the Company's legal name will become effective upon the
issuance by the Dutch Ministry of Justice of a declaration of non-objection,
which is expected on or about November 18, 1999.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Hermes Europe
Railtel B.V., all wholly-owned subsidiaries and its majority-owned subsidiary
where the Company has unilateral operating and financial control. All
significant intercompany accounts and transactions are eliminated upon
consolidation.
For financial reporting purposes, the Company has reflected the accounting
acquisition effect of the incremental purchases by GTS Carrier Services, Inc.,
from 1993 through 1998, of the Company's common shares, that were held by
non-affiliated entities of GTS. Accordingly, the Company's consolidated
financial statements have been retroactively restated for all periods presented
to reflect the acquisition accounting effect, a process generally referred to as
"push down" accounting. The cumulative effect, through December 31, 1998, of the
allocation of the purchase price paid by GTS Carrier Services, Inc. has resulted
in goodwill of approximately $24.9 million, which is being amortized on a
straight line basis over five years. In June and October 1999, GTS Carrier
Services, Inc. entered into two additional incremental purchases which resulted
in additional goodwill of approximately $203.9 million. Goodwill resulting from
the 1999 transactions will be amortized over a period of twenty years.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1997 and 1996 consolidated
financial statements in order to conform to the 1998 presentation.
F-7
<PAGE> 133
HERMES EUROPE RAILTEL B.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CASH AND CASH EQUIVALENTS
The Company classifies cash on hand and deposits in banks, including
commercial paper, money market accounts and any other investments with an
original maturity of three months or less, that the Company may hold from time
to time, as cash and cash equivalents. The Company had $30.1 million and $57.8
million of restricted cash at December 31, 1998 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 property and equipment balance is construction in
process, which is currently related to the configuration and buildout of the
network. 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 capitalizes material
interest costs associated with the construction of capital assets for business
operations and amortizes the costs over the assets' useful lives. The Company
capitalized $4.9 million of interest costs in 1998. The Company did not
capitalize any interest in 1997.
GOODWILL AND INTANGIBLE ASSETS
Goodwill represents the excess of acquisition costs over the fair market
value of the net assets of acquired businesses and is being amortized on a
straight-line basis over the estimated useful life of five years. Effective
January 1, 1999, all newly created goodwill will be amortized over a period of
20 years. Intangible assets, primarily deferred financing costs and licenses are
amortized on a straight-line basis over the lesser of their estimated useful
lives or their contractual term, generally three to 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, 1998 and 1997, the Company determined that there
was not an impairment of its long-lived assets.
F-8
<PAGE> 134
HERMES EUROPE RAILTEL B.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 Company follows a translation policy in accordance with SFAS No. 52,
"Foreign Currency Translation," (as amended by SFAS No. 130, "Reporting
Comprehensive Income"). The functional currency for the Company has been
determined to be the Belgian franc. In most instances, either the local currency
or the ECU is considered the functional currency for the Company's subsidiaries.
The accounting records of the subsidiaries are remeasured into Belgian franc
equivalents, consolidated and then translated into U.S. dollars for the purpose
of preparing the accompanying financial statements in accordance with accounting
principles generally accepted in the United States. 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 accumulated other
comprehensive loss, a separate component of shareholders' equity. Gains and
losses from foreign currency transactions are included in operations.
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
Basic and diluted loss per share is calculated in accordance with SFAS No.
128, "Earnings Per Share." 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 (see Note 5, "Employee Benefits")
have been excluded from the net loss per share calculation because their effect
would be anti-dilutive.
The net loss per share data presented in the consolidated statements of
operations reflect the restatement of the Company's net loss per share amounts
that were disclosed in the financial statements of the Company's previous
filings. This restatement is necessary to correct an error in our previously
reported amounts.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts for cash, accounts receivable, accounts payable, and
accrued liabilities approximate their fair value. The fair value of the
long-term debt is determined based on quoted market rates. At December 31, 1998,
the fair value of the $265.0 million 11.5% Senior Notes, due 2007, was $285.5
million.
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, 1998 and 1997, the Company maintained most of its
cash and cash equivalents in high quality U.S. and European 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.
F-9
<PAGE> 135
HERMES EUROPE RAILTEL B.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DERIVATIVE FINANCIAL INSTRUMENTS
The Company has developed risk management policies that establish
guidelines for managing foreign exchange risk and periodically evaluates the
materiality of foreign exchange exposures in different countries and the
financial instruments available to mitigate this exposure. The Company finds it
impractical to hedge all foreign currency exposures and as a result, will
continue to experience foreign currency gains and losses.
The Company currently accounts for its existing derivative under SFAS No.
52, "Foreign Currency Translation." In June 1998, the FASB issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The Company
expects to adopt the new statement effective January 1, 2000. The statement will
require the Company to recognize all derivatives on the balance sheet at fair
value. The Company does not anticipate that the adoption of the statement will
have a significant effect on its results of operations or financial position.
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> 136
HERMES EUROPE RAILTEL B.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3: SUPPLEMENTAL BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Other assets consists of:
VAT receivable............................................ $ 15,841 $ 1,184
Deposit................................................... 4,858 9,577
Other assets.............................................. 9,111 2,520
-------- --------
Total other assets.......................................... $ 29,810 $ 13,281
======== ========
Property and equipment, net consists of:
Telecommunications equipment in service................... $374,959 $198,723
Furniture, fixtures and equipment......................... 7,085 3,409
Leasehold improvements.................................... 1,319 840
Construction in process................................... 84,168 6,255
-------- --------
467,531 209,227
Less: accumulated depreciation....................... 28,547 4,283
-------- --------
Total property and equipment, net................. $438,984 $204,944
======== ========
Accounts payable and accrued expenses consists of:
Trade accounts payable.................................... $ 57,587 $ 19,678
Accrued interest.......................................... 11,435 11,621
Other accrued expenses.................................... 15,025 6,158
-------- --------
Total accounts payable and accrued expenses....... $ 84,047 $ 37,457
======== ========
</TABLE>
NOTE 4: DEBT OBLIGATIONS
Company debt consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Senior notes, due August 15, 2007 at 11.5% interest payable
semiannually................................................ $265,000 $265,000
Other financing agreements.................................. 410 433
-------- --------
Total debt outstanding...................................... 265,410 265,433
Less: debt maturing within one year......................... 57 50
-------- --------
Total long-term debt.............................. $265,353 $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.
F-11
<PAGE> 137
HERMES EUROPE RAILTEL B.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Aggregate maturities of long-term debt, as of December 31, 1998, are as
follows: 1999 -- $0.06 million, 2000 -- $0.06 million, 2001 -- $0.06 million,
2002 -- $0.07 million, 2003 -- $0.07 million, and $265.1 million thereafter.
NOTE 5: EMPLOYEE BENEFITS
The Company established a defined benefit 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
investment contract, with an insurance company for the provision of a group
insurance policy ("the Policy"). 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. The Company's pension
costs for 1998, 1997 and 1996 were $1.0 million, $0.7 million and $0.4 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 will be approximately 13%. As a result
of issuing options under the Stock Option Plan, the Company incurred a non-cash
charge of approximately $3.7 million, of which $2.6 million was recorded during
the fourth quarter of 1997 and the remaining $1.1 million was recognized over
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, 1998 and 1997, respectively would have been
approximately $49.1 million and $31.4 million. The fair value of options granted
during 1997 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,
-------------------------------------
1998 1997
----------------- -----------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
------ -------- ------ --------
<S> <C> <C> <C> <C>
Outstanding at beginning of year................. 10,166 $379.92 -- $ --
Options granted.................................. -- -- 10,166 379.92
Options exercised................................ (6,248) 107.20 -- --
Options canceled or expired...................... -- -- -- --
------ ------
Outstanding at end of year....................... 3,918 815.68 10,166 379.92
====== ======
Options exercisable at year end.................. 2,967 $421.01 6,244 $107.20
</TABLE>
F-12
<PAGE> 138
HERMES EUROPE RAILTEL B.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information about stock options outstanding:
<TABLE>
<CAPTION>
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE PRICE AT NUMBER CONTRACTUAL LIFE EXERCISE NUMBER EXERCISE
DECEMBER 31, 1998: OUTSTANDING (IN YEARS) PRICE EXERCISABLE PRICE
- ------------------ ----------- ---------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$83.12............................ 1,603 7 $ 83.12 1,603 $ 83.12
$100.00 to $191.31................ 729 7 117.64 729 117.64
$378.43 to $2,887.62.............. 1,586 8 1,876.21 635 1,622.55
----- -----
3,918 7 $ 815.68 2,967 $ 421.01
===== =====
</TABLE>
In June 1998, certain employees of the Company received an aggregated
restricted stock award of 30,000 shares of GTS common stock, which vest annually
over two years. The Company will incur a non-cash charge of $1.3 million based
on the market price of the GTS common stock of $43.50 at date of grant, of which
$0.4 million was recognized in 1998 and the remaining $0.9 million will be
recognized in 1999 and 2000.
During the fourth quarter of 1998, the Company established the Ebone Value
Creation Plan (the "Ebone Plan"), in order to allow the employees of Ebone to
benefit from any increase in the fair value of Ebone. Under terms of the Ebone
Plan, an aggregate 15,000 units, whose maximum value is $1,000 per unit, may be
allocated to the employees over the term of the plan, which is through July 1,
2001. The units will be valued on July 1, 1999, 2000 and 2001 based on the fair
value of Ebone as determined by a third-party investment bank. Payout to the
employees will be made in two equal payments within sixty days of July 1, 2001
and July 1, 2002 and will either be in cash or in shares of GTS common stock at
the discretion of the Company and with the approval of GTS. As of December 31,
1998, 1,375 units had been allocated to the employees and a compensation charge
of $1.0 million was recognized for the year ended December 31, 1998.
NOTE 6: INCOME TAXES
The components of loss before income taxes were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Pretax loss:
Domestic (the Netherlands)......................... $(32,617) $ (8,628) $ (1,216)
Foreign............................................ (13,054) (22,535) (15,361)
-------- -------- --------
$(45,671) $(31,163) $(16,577)
======== ======== ========
</TABLE>
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,
-------------------
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 32,600 $ 16,918
-------- --------
Total deferred tax asset.......................... 32,600 16,918
Less: valuation allowance................................. (32,600) (16,918)
-------- --------
Total............................................. $ -- $ --
======== ========
</TABLE>
F-13
<PAGE> 139
HERMES EUROPE RAILTEL B.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of December 31, 1998, the Company had net operating loss carry forwards
for Belgian, Dutch and Irish income tax purposes of approximately $117.4
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 years ended December 31, 1998 and 1997, respectively:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1998 1997
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Capitalization of leases.................................... $120,556 $139,135
Transfer of shareholders' loans to equity................... -- 48,491
Contribution of fiber optic cable lease..................... -- 1,989
</TABLE>
There were no significant non-cash activities in 1996.
The Company paid interest of $36.0 million, $1.2 million and $0.01 million
in 1998, 1997 and 1996, respectively. The Company paid income taxes of $2.8
million in 1998. The Company did not pay taxes in 1997 and 1996.
NOTE 8: COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company has various operating leases for office space, equipment and
car rental. The obligations extend through 2022. Beginning in 2002, certain of
the leases have options to cancel upon payment of certain penalties.
Rental expense aggregated approximately $2.0 million, $1.0 million and $0.7
million for the years ended December 31, 1998, 1997 and 1996, respectively.
CAPITAL LEASES
Assets and liabilities under capital leases are included in the
consolidated balance sheets as follows :
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Telecommunications equipment in service..................... $271,343 $150,787
Less: accumulated amortization.............................. 9,837 482
-------- --------
$261,506 $150,305
======== ========
</TABLE>
F-14
<PAGE> 140
HERMES EUROPE RAILTEL B.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, 1998 were as follows :
<TABLE>
<CAPTION>
CAPITAL LEASES OPERATING LEASES
-------------- ----------------
(IN THOUSANDS)
<S> <C> <C>
December 31, 1999....................................... $ 51,907 $ 2,981
2000.................................... 25,836 3,713
2001.................................... 27,077 3,394
2002.................................... 27,253 3,058
2003.................................... 27,231 1,870
Thereafter.............................................. 230,618 9,012
-------- -------
Total minimum lease payments............................ 389,922 $24,028
=======
Less amount representing interest....................... 162,409
--------
Present value of net minimum lease payments............. 227,513
Less current portion of capital lease obligations....... 37,135
--------
Long-term portion of capital lease obligations.......... $190,378
========
</TABLE>
MAJOR CUSTOMERS
In 1998 the Company had two major customers, representing $9.5 million and
$9.3 million or 11.1% and 10.9% of revenue, respectively. 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 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 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
On October 31, 1998, GTS Carrier Services, 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 Carriers Services, 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 Carrier
Services, Inc. to purchase their respective ownership interest in the Company.
For the year ended December 31, 1998, the Company, through Ebone, earned
$6.8 million from and incurred $5.1 million of costs to individual members of
the association that owns the minority interest in Ebone (see note 11,
"Acquisition").
NOTE 10: FOREIGN CURRENCY TRANSACTIONS
On April 19, 1998, the Company entered into a foreign currency swap
transaction agreement (the "Swap") with Rabobank International in order to
minimize the foreign currency exposure resulting from issuance in August 1997 of
the Senior Notes (see Note 4, "Debt Obligations"). The Company has marked the
Swap to its fair value as of December 31, 1998 and the resulting adverse change
in the fair value of $27.8 million has been recorded as an Other Non-Current
Liability on the balance sheet and recognized as a
F-15
<PAGE> 141
HERMES EUROPE RAILTEL B.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
foreign currency loss in the statement of operations. The foreign currency loss
recognized on marking the Swap to its fair value has been offset in the
statement of operations by a $15.3 million gain on the remeasurement of the
Senior Notes.
NOTE 11: ACQUISITION
On June 24, 1998, the Company completed the acquisition for ECU 90 million
(approximately $99.5 million) of a 75% interest in 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, principally serving 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
$19.7 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 acquisition.
The following summarized unaudited pro forma financial information assumes
the acquisition had occurred on January 1 of each year:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------
1998 1997
---------- ----------
(IN THOUSANDS,
EXCEPT LOSS PER SHARE)
<S> <C> <C>
Revenues.................................................... $ 95,634 $ 26,504
Net loss.................................................... (47,940) (32,301)
Net loss per share.......................................... (249.96) (359.07)
</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 necessarily
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.
NOTE 12: CERTAIN GEOGRAPHICAL DATA
The Company has adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", effective for fiscal years beginning after
December 31, 1997. SFAS No. 131 supersedes SFAS No. 14, "Financial Reporting for
Segments of a Business Enterprise" SFAS No. 131 changes current practice under
SFAS No. 14 by establishing a new framework on which to base segment reporting
and also requires interim reporting of segment information.
The Company operates in one segment, Carrier Services, which is used by
management to measure profitability of the business. The Company markets its
services to telecommunications companies throughout Europe and in the United
States.
F-16
<PAGE> 142
HERMES EUROPE RAILTEL B.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes revenue and gross long-lived asset
information by geographic area.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-------------------
1998 1997
-------- --------
(IN)THOUSANDS
<S> <C> <C>
Revenue
United Kingdom............................................ $ 19,619 $ 739
The Netherlands........................................... 17,065 3,947
Switzerland............................................... 11,555 --
Belgium................................................... 8,609 314
Other..................................................... 28,403 373
-------- --------
Total............................................. $ 85,251 $ 5,373
======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------
1998 1997
-------- --------
(IN)THOUSANDS
<S> <C> <C>
Long-lived assets
France.................................................... $ 94,609 $ 41,393
Germany................................................... 89,177 46,966
Switzerland............................................... 49,678 42,588
Belgium................................................... 40,995 21,090
Other..................................................... 193,072 57,190
-------- --------
Total............................................. $467,531 $209,227
======== ========
</TABLE>
Revenue was attributed to individual countries based on customer billing
location.
NOTE 13: SUBSEQUENT EVENTS
In January, 1999 the Company issued, through a private placement, the New
Senior Notes comprised of aggregate principal amount $200 million of senior
notes due January 15, 2009 (the "Dollar Notes") and E85 million (approximately
$100 million) of senior notes due January 15, 2006 (the "Euro Notes"). The New
Senior Notes are general unsecured obligations of the Company, with interest
payable semiannually at a rate of 10.375%. The Company may redeem the Dollar
Notes in whole or in part, any time on or after January 15, 2004 at specific
redemption prices. The Company may redeem the Euro Notes, in whole or in part,
any time on or after January 15, 2003 at specific redemption prices. The Company
may also redeem the Dollar Notes and the Euro Notes at a price equal to 110.375%
of the principal amounts prior to January 15, 2002 with net cash proceeds of a
public equity offering with gross proceeds of at least $75 million or in certain
other circumstances specified in the indentures for the Dollar Notes and the
Euro Notes provided, however that at least two-third of the principal amount of
the Dollar Notes and the Euro Notes originally issued remain outstanding after
each such redemption. Net proceeds from the issuance of the New Senior Notes was
approximately $289.7 million. The Company 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 New Senior Notes, for the New Senior
Notes, which became effective in February 1999.
On a pro-forma basis, assuming the New Senior Notes had been outstanding as
of January 1, 1998, the Company's net loss would have been $81.3 million for
1998, as a result of interest expense of $31.1 million and amortization expense
of $1.2 million related to amortizing $10.1 million of deferred financing fees
over the terms of the New Senior Notes.
F-17
<PAGE> 143
HERMES EUROPE RAILTEL B.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Subsequent to December 31, 1998, the Company further entered into
contractual commitments to lease fibre 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 $32.4 million. The commitments have expected lease terms
of ten to fifteen years.
On March 4, 1999, GTS acquired substantially all of the outstanding
ordinary shares and American Depository Shares of Esprit Telecom Group plc
("Esprit"). In conjunction with this business combination the Company may incur
significant charges resulting from shutdowns due to duplication in the capacity
requirements of the combined networks of the Company and Esprit.
On January 1, 1999, the Company adopted the Euro as its functional
currency.
F-18
<PAGE> 144
HERMES EUROPE RAILTEL B.V.
CONDENSED, CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Current assets
Cash and cash equivalents................................. $ 309,590 $130,081
Restricted cash........................................... -- 30,062
Accounts receivable, net.................................. 78,744 48,034
Due from affiliated companies............................. 30,950 2,164
Other assets.............................................. 56,889 29,810
---------- --------
Total current assets.............................. 476,173 240,151
Property and equipment, net................................. 528,487 438,984
Goodwill and intangible assets, net......................... 126,438 50,519
Other non-current assets.................................... 11,705 14,456
---------- --------
TOTAL ASSETS...................................... $1,142,803 $744,110
========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses..................... $ 69,724 $ 84,047
Due to affiliated companies............................... 23,661 15,976
Deferred income........................................... 63,090 32,255
Current portion of capital lease obligations.............. 20,333 37,135
---------- --------
Total current liabilities......................... 176,808 169,413
Long-term debt............................................ 555,780 265,353
Long term capital leases.................................. 187,898 190,378
Deferred income........................................... 100,907 34,000
Other non-current liabilities............................. 1,405 29,259
---------- --------
TOTAL LIABILITIES................................. 1,022,798 688,403
Commitments and contingencies...............................
Minority interest........................................... -- 27,759
SHAREHOLDERS' EQUITY
Common stock, 1000 guilders par value (297,000 shares
authorized; 199,683 and 196,716 shares issued and
outstanding at September 30, 1999 and December 31, 1998
respectively........................................... 101,518 100,110
Additional paid-in capital................................ 104,180 33,334
Accumulated other comprehensive loss...................... (3,559) (1,300)
Accumulated deficit....................................... (82,134) (104,196)
---------- --------
TOTAL SHAREHOLDERS' EQUITY........................ 120,005 27,948
---------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $1,142,803 $744,110
========== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE> 145
HERMES EUROPE RAILTEL B.V.
CONDENSED, CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues.......................................... $ 90,143 $ 26,997 $213,012 $ 42,933
-------- -------- -------- ---------
Operating costs and expenses:
Telecommunications services..................... 26,149 13,227 64,913 22,259
Selling, general and administrative............. 14,536 6,655 35,940 16,747
Depreciation and amortization................... 18,781 8,725 45,152 18,642
-------- -------- -------- ---------
59,466 28,607 146,005 57,648
-------- -------- -------- ---------
Income (loss) from operations..................... 30,677 (1,610) 67,007 (14,715)
Other income/(expense):
Interest expense................................ (20,195) (7,898) (54,181) (23,419)
Foreign currency losses......................... (653) (2,561) (1,183) (5,227)
Other, net...................................... 7,536 1,368 15,068 7,240
-------- -------- -------- ---------
(13,312) (9,091) (40,296) (21,406)
-------- -------- -------- ---------
Net income (loss) before income taxes............. 17,365 (10,701) 26,711 (36,121)
Income taxes...................................... 979 1,819 4,649 1,819
-------- -------- -------- ---------
Net income (loss)................................. $ 16,386 $(12,520) $ 22,062 $ (37,940)
======== ======== ======== =========
Net income (loss) per share:
Basic........................................... $ 82.06 $ (65.73) $ 111.47 $ (199.19)
======== ======== ======== =========
Diluted......................................... $ 81.75 $ (65.73) $ 110.12 $ (199.19)
======== ======== ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE> 146
HERMES EUROPE RAILTEL B.V.
CONDENSED, CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- --------------------
1999 1998 1999 1998
-------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)............................... $ 16,386 $(12,520) $ 22,062 $(37,940)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization................ 19,394 9,128 47,888 19,666
Change in value of foreign currency
instruments................................ 7,485 18,016 (25,351) 21,240
Minority interest............................ -- 564 468 604
Non-cash compensation........................ 468 214 996
Changes in assets and liabilities:
Accounts receivable........................ (3,570) (3,647) (68,179) (15,477)
Deposits................................... (2,729) (2,644) (5,108) (2,831)
Accounts payable and accrued expenses...... (10,067) 26,817 (10,576) 28,815
Other changes in assets and liabilities.... (7,854) (2,646) 57,809 5,454
-------- -------- --------- --------
Net cash provided by operating
activities............................ 19,045 33,536 19,227 20,527
INVESTING ACTIVITIES
Purchases of property and equipment............. (48,304) (45,102) (111,443) (75,946)
Acquisition, net of cash acquired............... -- -- (15,667) 13,352
Other investing activities...................... -- (314) (446) (314)
Restricted cash................................. 15,078 14,755 30,751 28,367
-------- -------- --------- --------
Net cash used in investing activities... (33,226) (30,661) (96,805) (34,541)
FINANCING ACTIVITIES
Proceeds from debt.............................. -- -- 302,450 --
Repayments of debt.............................. (9,630) (2,231) (26,106) (12,952)
Payment of debt issue costs..................... -- -- (10,164) (825)
Net Proceeds from issuance of common stock...... -- -- 1,249 --
Due to affiliated companies, net.................. (3,794) 14,769 (21,576) 14,270
-------- -------- --------- --------
Net cash (used in) provided by financing
activities............................ (13,424) 12,538 245,853 493
Effect of exchange rate changes on cash and cash
equivalents..................................... (4,623) (5,713) 11,234 (5,772)
-------- -------- --------- --------
Net (decrease) increase in cash and cash
equivalents..................................... (32,228) 9,700 179,509 (19,293)
Cash and cash equivalents at beginning of
period.......................................... 341,818 175,334 130,081 204,327
-------- -------- --------- --------
Cash and cash equivalents at end of period........ $309,590 $185,034 $ 309,590 $185,034
======== ======== ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE> 147
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 account
transactions have been eliminated. 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 1998 audited consolidated financial statements
and the notes related thereto. The results of operations for the three and nine
months ended September 30, 1999 may not be indicative of the operating results
for the full year.
The Company is one of the leading European providers of managed bandwidth
services and related telecommunications services to telecommunications carriers,
Internet service providers and other bandwidth-intensive customers. As of
September 30, 1999, the Company operates a centrally managed fiber optic network
(the "Network") in Europe over approximately 15,300 kilometers connecting 24
cities in 10 European countries, with service to the United States provided
through capacity leased on transatlantic cables. In addition, the Company
operates a Tier 1 Internet backbone network that connects European service
providers to the Internet.
The Company was formed on July 6, 1993 and as of September 30, 1999 was
95.4% owned by GTS Carrier Services, Inc., a wholly owned subsidiary of Global
TeleSystems Group, Inc. ("GTS"), a leading independent provider of
telecommunications services to businesses, other high usage customers and
telecommunications carriers in Europe, Russia and the Commonwealth of
Independent States.
For financial reporting purposes, the Company has reflected the accounting
acquisition effect of the incremental purchases, by GTS Carrier Services, Inc.,
from 1993 through 1999, of the Company's common shares, that were held by
nonaffiliated entities of GTS. Accordingly, the Company's consolidated financial
statements have been retroactively restated for all periods presented to reflect
the acquisition accounting effect, a process generally referred to as "push
down" accounting. The cumulative effect, through September 30, 1999, of the
allocation of the purchase price paid by GTS Carrier Services, Inc. has resulted
in goodwill of approximately $95.8 million, which is being amortized on a
straight line basis. Goodwill resulting from transactions occurring prior to
December 31, 1998, of $24.9 million, is being amortized over five years.
Goodwill resulting from transactions occurring in 1999, of $70.9 million, is
being amortized over twenty years.
2. POLICIES AND PROCEDURES
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
130, "Reporting Comprehensive Income", comprehensive income was $16.6 million
and $19.8 million for the three and nine months ended September 30, 1999,
respectively, and was comprised of net income of $16.4 million and $22.1 million
and a foreign currency translation gain and loss of $0.2 million and $2.3
million, respectively, for the three and nine months ended September 30, 1999,
respectively. Comprehensive loss was $10.7 million and $36.7 million for the
three and nine months ended September 30, 1998, respectively, and was comprised
of net losses of $12.5 million and $37.9 million and foreign currency
translation income of $1.8 million and $1.2 million for the three and nine
months ended September 30, 1998, respectively.
The Company's net income (loss) per share calculation (basic and diluted)
is based upon the weighted average common shares issued. There are no
reconciling items in the numerator of the Company's net income
F-22
<PAGE> 148
HERMES EUROPE RAILTEL B.V.
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(loss) per share calculation. The following is a reconciliation of the
denominator of the Company's net income (loss) per share calculation:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Weighted Average Shares Outstanding................ 199,683 190,468 197,911 190,468
Common Stock Equivalents........................... 747 -- 2,436 --
-------- -------- -------- --------
Diluted Shares Outstanding......................... 200,430 190,468 200,347 190,468
======== ======== ======== ========
</TABLE>
As of January 1, 1999, the Company adopted the Euro as its functional
currency.
Certain reclassifications have been made to the September 1998 condensed,
consolidated financial statements in order to conform to the 1999 presentation.
3. ACQUISITION OF MINORITY INTEREST IN SUBSIDIARY
On May 25, 1999, the Company purchased the remaining 25% minority interest
in Ebone A/S ("Ebone") from the Ebone Holding Association ("EHA") for a purchase
price of Euro 35 million. The purchase price was comprised of cash of Euro 15
million and the issuance to EHA of capacity rights on the Network valued at Euro
20 million (the "Rights"). Rights may be applied by members of EHA, in lieu of
cash, to the payment of future invoices related to services provided by the
Company or Ebone on contracts for services entered into through May 31, 2003.
EHA assigned these Rights among its members by October 1, 1999 and once
assigned, the Rights are non-transferable.
The excess of the purchase price over the fair value of the assets acquired
of $9.2 million was allocated to goodwill and is being amortized over twenty
years.
4. DEBT OBLIGATIONS
In January, 1999 the Company issued, through a private placement, aggregate
principal amount $200 million of senior notes due January 15, 2009 (the "Dollar
Notes") and Euro 85 million (approximately $100 million) of senior notes due
January 15, 2006 (the "Euro Notes" and together with the Dollar Notes, the "New
Senior Notes"). The New Senior Notes are general unsecured obligations of the
Company, with interest payable semiannually at a rate of 10.375%. The Company
may redeem the Dollar Notes in whole or in part, any time on or after January
15, 2004 at specific redemption prices. The Company may redeem the Euro Notes,
in whole or in part, any time on or after January 15, 2003 at specific
redemption prices. The Company may also redeem the Dollar Notes and the Euro
Notes at a price equal to 110.375% of the principal amounts prior to January 15,
2002 with net cash proceeds of a public equity offering with gross proceeds of
at least $75 million or in certain other circumstances specified in the
indentures for the Dollar Notes and the Euro Notes provided, however that at
least two-thirds of the principal amount of the Dollar Notes and the Euro Notes
originally issued remain outstanding after each such redemption. Net proceeds
from the issuance of the New Senior Notes was approximately $289.3 million. The
Company 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 New Senior Notes, for the New Senior Notes, which registration
statement became effective in February 1999. The exchange of registered notes
for the New Senior Notes was completed on March 24, 1999.
5. CAPITAL LEASE OBLIGATIONS
During the nine months ended September 30, 1999, in order to expand the
Network, the Company entered into contractual commitments to lease fiber pairs,
including facilities and maintenance. Based on the
F-23
<PAGE> 149
HERMES EUROPE RAILTEL B.V.
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
contract provisions, these commitments are currently estimated to aggregate
approximately $51.1 million. The commitments have expected lease terms of ten to
eighteen years.
6. RELATED PARTY TRANSACTIONS
Included in revenues for the three and nine months ended September 30,
1999, respectively, is $12.9 million and $15.4 million of revenue from GTS
affiliates. Included in revenues for the three and nine months ended September
30, 1998, respectively, is $0.2 million and $0.5 million of revenue from GTS
affiliates.
7. SUBSEQUENT EVENTS
On October 15, 1999, GTS entered into an exchange agreement with all of the
minority interest holders of the Company's common shares and grantees of stock
options to purchase common shares of the Company that provides for the
acquisition by GTS of their equity interest in the Company. Specifically, the
agreement provides that GTS will acquire the respective minority interest
holders' common shares in the Company that have been held by them for a period
greater than six months based on the current fair market value of the Company on
the date of the exchange, as determined by a globally-recognized investment
banking firm that is mutually acceptable to the parties to the agreement. The
agreement also provides that GTS would issue its common shares to the Company's
minority interest holders based on the fair market value, as defined in the
exchange agreement, of GTS common shares on the date of the exchange.
Pursuant to this agreement and effective October 15, 1999, GTS exchanged
5,985,930 of its common shares for 6,565 of the Company's common shares. This
transaction resulted in aggregate purchase consideration of approximately $134.2
million and as a result the Company will reflect incremental goodwill of
approximately $133.0 million in the fourth quarter of 1999.
Further, minority interest holders of the Company have additional
beneficial ownership rights in the Company's common shares and stock options to
purchase common shares, totaling 3,601 common shares. As stated previously, GTS
intends to acquire these Company common shares in the future; however, future
acquisitions will be based on future market values of the Company and GTS.
The Company is currently negotiating a Euro 35 million credit facility with
a bank (the "Facility"). The Facility would be structured in three tranches with
varying maturities of up to five years. Advances under the Facility would be
used to finance the purchase of network assets and equipment and for the
issuance of performance or payment guarantees in the ordinary course of
business.
The Company is engaged in an offering to issue approximately Euro 300
million of general unsecured senior notes pursuant to Rule 144A and Regulation S
of the Securities Act of 1933. GTS is making a $50.0 million capital
contribution to the Company in connection with this offering. The net proceeds
of this offering, together with the $50.0 million capital contribution from GTS
and existing cash balances, will be applied to purchase a dedicated fiber pair
on the FLAG Atlantic-1 transatlantic cable system and related equipment to
upgrade its transmission capacity, build intracity fiber networks and data- and
Web-hosting centers, expand our network, pursue business development
opportunities and for other general corporate purposes.
A notarial deed amending the Company's articles of association to change
the Company's name to Global TeleSystems Europe B.V. was executed on October 22,
1999. The change in the Company's legal name will become effective upon the
issuance by the Dutch Ministry of Justice of a declaration of non-objection,
which is expected on or about November 18, 1999.
F-24
<PAGE> 150
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[GLOBAL TELESYSTEMS EUROPE LOGO]
GLOBAL TELESYSTEMS EUROPE
Offer To Exchange
10 1/2% Senior Notes due 2006
for all Outstanding
10 1/2% Senior Notes due 2006
and
11% Senior Notes due 2009
for all Outstanding
11% Senior Notes due 2009
--------------------
PROSPECTUS
--------------------
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations in connection with this Exchange
Offer other than those contained in this prospectus, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company. This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any security other than those to which it
relates, nor does it constitute an offer to sell or a solicitation of an offer
to buy the notes in any jurisdiction where, or to any person to whom, it is
unlawful to make such an offer or solicitation. Neither the delivery of this
prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that the information contained herein is correct as of any time
subsequent to the date hereof.
, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 151
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Netherlands law, there are no statutory provisions or case law with
regard to the validity and enforceability of indemnities by a corporation,
whether contained in the articles or in a contract between the corporation and
the director. Indemnity clauses are rare because of their limited effectiveness.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S>
3.1 -- Deed of Incorporation and Articles of Association of the
Company (incorporated by reference to Exhibit 3.1 to our
Registration Statement on Form S-4 (File No. 333-37719),
filed on October 10, 1997)
3.2 -- Amendment to Articles of Association executed on October
22, 1999
4.1 -- Form of Outstanding Note for the Registrant's 10 1/2%
Senior Notes due 2006 (contained in Indenture filed as
Exhibit 4.5)
4.2 -- Form of Outstanding Note for the Registrant's 11% Senior
Notes due 2009 (contained in Indenture filed as Exhibit
4.6)
4.3 -- Form of Exchange Note for the Registrant's 10 1/2% Senior
Notes due 2006 (contained in Indenture filed as Exhibit
4.5)
4.4 -- Form of Exchange Note for the Registrant's 11% Senior
Notes due 2009 (contained in Indenture filed as Exhibit
4.6)
4.5 -- Indenture relating to the 10 1/2% Senior Notes due 2006,
dated as of November 24, 1999, between the Company and
United States Trust Company of New York, as Trustee
4.6 -- Indenture relating to the 11% Senior Notes due 2009,
dated as of November 24, 1999, between the Company and
United States Trust Company of New York, as Trustee
4.7 -- Registration Rights Agreement, dated as of November 24,
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 Allen & Overy 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 (incorporated by
reference to Exhibit 4.3 to our Registration Statement on
Form S-4 (File No. 333-37719), filed on October 10, 1997)
10.2** -- Dollar Indenture, dated as of January 4, 1999, between
Hermes Europe Railtel B.V., as Issuer, and The Bank of
New York, as Trustee, relating to the 10 3/8% Senior
Notes due 2009 (incorporated by reference to Exhibit 4.5
to our Registration Statement on Form S-4 (File No.
333-70723), filed on January 15, 1999)
10.3** -- Euro Indenture, dated as of January 4, 1999, between
Hermes Europe Railtel B.V., as Issuer, and The Bank of
New York, as Trustee, relating to the 10 3/8% Senior
Notes due 2006 (incorporated by reference to Exhibit 4.6
to our Registration Statement on Form S-4 (File No.
333-70723), filed on January 15, 1999)
10.4 -- Employment Agreement, dated as of September 26, 1995,
between the Company and J.A. Shearing (incorporated by
reference to Exhibit 10.6 to our Registration Statement
on Form S-4 (File No. 333-77719), filed on October 10,
1997)
</TABLE>
II-1
<PAGE> 152
<TABLE>
<S> <C>
10.5 -- Employment Agreement, dated as of February 10, 1998, between the Company and Jan De
Wispelaere
10.6* -- Agreement relating to purchase of fiber pairs, dated April 1, 1997, between Eastern
Group Telecoms Limited and the Company (incorporated by reference to Exhibit 10.11 to
our Registration Statement on Form S-4 (File No. 333-37719), filed on October 10, 1997)
10.7 -- Fiber Agreement, dated January 16, 1997, between SNCB/NMBS and the Company
(incorporated by reference to Exhibit 10.12 to our Registration Statement on Form S-4
(File No. 333-37719), filed on October 10, 1997)
10.8 -- Agreement relating to purchase of black optical fibers, dated February 3, 1997, between
SANEF and the Company (incorporated by reference to Exhibit 10.13 to our Registration
Statement on Form S-4 (File No. 333-37719), filed on October 10, 1997)
10.9 -- Agreement, dated November 24, 1997, between COLT and the Company (incorporated by
reference to Exhibit 10.15 to our Registration Statement on Form S-4 (File No.
333-70723), filed on January 15, 1999)
10.10 -- Agreement, dated November 3, 1998, between Cable & Wireless and the Company
(incorporated by reference to Exhibit 10.18 to our Registration Statement on Form S-4
(File No. 333-70723), filed on January 15, 1999)
10.11 -- License, dated December 18, 1996, granted by the Secretary of State for Trade and
Industry relating to the United Kingdom (incorporated by reference to Exhibit 10.7 to
our Registration Statement on Form S-4 (File No. 333-37719), filed on October 10, 1997)
10.12 -- Registration, dated July 26, 1996, granted by IBPT relating to Belgium (incorporated by
reference to Exhibit 10.8 to our Registration Statement on Form S-4 (File No.
333-37719), filed on October 10, 1997)
10.13 -- Authorization Letter, dated August 1, 1996, granted by Hoofdirectie Telecommunicate &
Post relating to the Netherlands (incorporated by reference to Exhibit 10.9 to our
Registration Statement on Form S-4 (File No. 333-37719), filed on October 10, 1997)
10.14 -- License, dated May 28, 1997, granted by BMPT relating to Germany (incorporated by
reference to Exhibit 10.10 to our Registration Statement on Form S-4 (File No.
333-37719), filed on October 10, 1997)
10.15 -- License, dated October 22, 1997, granted by Secretary of State of Industry relating to
France (incorporated by reference to Exhibit 10.13 to our Registration Statement on
Form S-4 (File No. 333-70723), filed on January 15, 1999)
10.16 -- Authorization Letter, dated March 16, 1998, granted by the Deputy Director of Federal
Communication Office relating to Switzerland (incorporated by reference to Exhibit
10.16 to our Registration Statement on Form S-4 (File No. 333-70723), filed on January
15, 1999)
10.17 -- Global 214 License to provide global facilities-based and global resale reservices,
granted on October 23, 1998 by the U.S. Federal Communications Commission
10.18 -- 214 authorization by public notice to operate as a facilities-based carrier and to
provide service between the United States and Hungary, Poland, Czech Republic, Romania,
Monaco, Ukraine, Kazakhstan, Uzbekistan, Azerbaijan, China and India, granted on
October 13, 1999 by the U.S. Federal Communications Commission
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 Allen & Overy (included as part of Exhibit 5.2)
24.1 -- Power of Attorney (included on the signature pages of this Registration Statement)
</TABLE>
II-2
<PAGE> 153
<TABLE>
<S> <C>
25.1 -- Statement of Eligibility of United States Trust Company of New York, Trustee
27.1 -- Financial Data Schedule for the fiscal year ended December 31, 1998 (incorporated by
reference to Exhibit 27.1 to our annual report on Form 10-K (File No. 333-37719), filed
on March 31, 1999)
27.2 -- Financial Data Schedule for the nine months ended September 30, 1999 (incorporated by
reference to Exhibit 27.1 to our quarterly report on Form 10-Q (File No. 333-37719),
filed on November 3, 1999)
</TABLE>
- ---------------
* Incorporated by reference to the corresponding exhibit to our Registration
Statement on Form S-4 (File No. 333-37719), filed on October 10, 1997.
** Incorporated by reference to the corresponding exhibit to our Registration
Statement on Form S-4 (File No. 333-70723), filed on January 15, 1999.
*** To be filed by amendment.
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.
II-3
<PAGE> 154
(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 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> 155
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 Amsterdam, The Netherlands, on the ____ day of
January, 2000.
GLOBAL TELESYSTEMS EUROPE B.V.
By: /s/ JIM REYNOLDS
----------------------------------
Jim Reynolds
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 ____ day of January, 2000. Each person whose
signature appears below hereby authorizes Jim Reynolds and Mikel Williams, 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 Jim Reynolds
and Mikel Williams, 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/ JIM REYNOLDS President and Managing Director (principal
- ----------------------------------------------------- executive officer)
Jim Reynolds
/s/ MIKEL WILLIAMS Acting Vice President -- Chief Financial
- ----------------------------------------------------- Officer (principal financial and accounting
Mikel Williams officer) and Supervisory Director
/s/ ROBERT AMMAN Supervisory Director
- -----------------------------------------------------
Robert Amman
/s/ GERARD J. CACCAPPOLO Managing Director
- -----------------------------------------------------
Gerard J. Caccappolo
</TABLE>
II-5
<PAGE> 156
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
3.1 -- Deed of Incorporation and Articles of Association of the
Company (incorporated by reference to Exhibit 3.1 to our
Registration Statement on Form S-4 (File No. 333-37719),
filed on October 10, 1997)
3.2 -- Amendment to Articles of Association executed on October
22, 1999
4.1 -- Form of Outstanding Note for the Registrant's 10 1/2%
Senior Notes due 2006 (contained in Indenture filed as
Exhibit 4.5)
4.2 -- Form of Outstanding Note for the Registrant's 11% Senior
Notes due 2009 (contained in Indenture filed as Exhibit
4.6)
4.3 -- Form of Exchange Note for the Registrant's 10 1/2% Senior
Notes due 2006 (contained in Indenture filed as Exhibit
4.5)
4.4 -- Form of Exchange Note for the Registrant's 11% Senior
Notes due 2009 (contained in Indenture filed as Exhibit
4.6)
4.5 -- Indenture relating to the 10 1/2% Senior Notes due 2006,
dated as of November 24, 1999, between the Company and
United States Trust Company of New York, as Trustee
4.6 -- Indenture relating to the 11% Senior Notes due 2009,
dated as of November 24, 1999, between the Company and
United States Trust Company of New York, as Trustee
4.7 -- Registration Rights Agreement, dated as of November 24,
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 Allen & Overy 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 (incorporated by
reference to Exhibit 4.3 to our Registration Statement on
Form S-4 (File No. 333-37719), filed on October 10, 1997)
10.2** -- Dollar Indenture, dated as of January 4, 1999, between
Hermes Europe Railtel B.V., as Issuer, and The Bank of
New York, as Trustee, relating to the 10 3/8% Senior
Notes due 2009 (incorporated by reference to Exhibit 4.5
to our Registration Statement on Form S-4 (File No.
333-70723), filed on January 15, 1999)
10.3** -- Euro Indenture, dated as of January 4, 1999, between
Hermes Europe Railtel B.V., as Issuer, and The Bank of
New York, as Trustee, relating to the 10 3/8% Senior
Notes due 2006 (incorporated by reference to Exhibit 4.6
to our Registration Statement on Form S-4 (File No.
333-70723), filed on January 15, 1999)
10.4 -- Employment Agreement, dated as of September 26, 1995,
between the Company and J.A. Shearing (incorporated by
reference to Exhibit 10.6 to our Registration Statement
on Form S-4 (File No. 333-77719), filed on October 10,
1997)
10.5 -- Employment Agreement, dated as of February 10, 1998,
between the Company and Jan De Wispelaere
</TABLE>
<PAGE> 157
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.6* -- Agreement relating to purchase of fiber pairs, dated
April 1, 1997, between Eastern Group Telecoms Limited and
the Company (incorporated by reference to Exhibit 10.11
to our Registration Statement on Form S-4 (File No.
333-37719), filed on October 10, 1997)
10.7 -- Fiber Agreement, dated January 16, 1997, between
SNCB/NMBS and the Company (incorporated by reference to
Exhibit 10.12 to our Registration Statement on Form S-4
(File No. 333-37719), filed on October 10, 1997)
10.8 -- Agreement relating to purchase of black optical fibers,
dated February 3, 1997, between SANEF and the Company
(incorporated by reference to Exhibit 10.13 to our
Registration Statement on Form S-4 (File No. 333-37719),
filed on October 10, 1997)
10.9 -- Agreement, dated November 24, 1997, between COLT and the
Company (incorporated by reference to Exhibit 10.15 to
our Registration Statement on Form S-4 (File No.
333-70723), filed on January 15, 1999)
10.10 -- Agreement, dated November 3, 1998, between Cable &
Wireless and the Company (incorporated by reference to
Exhibit 10.18 to our Registration Statement on Form S-4
(File No. 333-70723), filed on January 15, 1999)
10.11 -- License, dated December 18, 1996, granted by the
Secretary of State for Trade and Industry relating to the
United Kingdom (incorporated by reference to Exhibit 10.7
to our Registration Statement on Form S-4 (File No.
333-37719), filed on October 10, 1997)
10.12 -- Registration, dated July 26, 1996, granted by IBPT
relating to Belgium (incorporated by reference to Exhibit
10.8 to our Registration Statement on Form S-4 (File No.
333-37719), filed on October 10, 1997)
10.13 -- Authorization Letter, dated August 1, 1996, granted by
Hoofdirectie Telecommunicate & Post relating to the
Netherlands (incorporated by reference to Exhibit 10.9 to
our Registration Statement on Form S-4 (File No.
333-37719), filed on October 10, 1997)
10.14 -- License, dated May 28, 1997, granted by BMPT relating to
Germany (incorporated by reference to Exhibit 10.10 to
our Registration Statement on Form S-4 (File No.
333-37719), filed on October 10, 1997)
10.15 -- License, dated October 22, 1997, granted by Secretary of
State of Industry relating to France (incorporated by
reference to Exhibit 10.13 to our Registration Statement
on Form S-4 (File No. 333-70723), filed on January 15,
1999)
10.16 -- Authorization Letter, dated March 16, 1998, granted by
the Deputy Director of Federal Communication Office
relating to Switzerland (incorporated by reference to
Exhibit 10.16 to our Registration Statement on Form S-4
(File No. 333-70723), filed on January 15, 1999)
10.17 -- Global 214 License to provide global facilities-based and
global resale reservices, granted on October 23, 1998 by
the U.S. Federal Communications Commission
10.18 -- 214 authorization by public notice to operate as a
facilities-based carrier and to provide service between
the United States and Hungary, Poland, Czech Republic,
Romania, Monaco, Ukraine, Kazakhstan, Uzbekistan,
Azerbaijan, China and India, granted on October 13, 1999
by the U.S. Federal Communications Commission
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)
</TABLE>
<PAGE> 158
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
23.2 -- Consent of Ernst & Young Reviseurs d'Entreprises S.C.C.,
Independent Auditors
23.3*** -- Consent of Allen & Overy (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 United States Trust Company
of New York, Trustee
27.1 -- Financial Data Schedule for the fiscal year ended
December 31, 1998 (incorporated by reference to Exhibit
27.1 our annual report on Form 10-K (File No. 333-37719),
filed on March 31, 1999)
27.2 -- Financial Data Schedule for the nine months ended
September 30, 1999 (incorporated by reference to Exhibit
27.1 to our quarterly report on Form 10-Q (File No.
333-37719), filed on November 3, 1999)
</TABLE>
- ---------------
* Incorporated by reference to the corresponding exhibit to our Registration
Statement on Form S-4 (File No. 333-37719), filed on October 10, 1997.
** Incorporated by reference to the corresponding exhibit to our Registration
Statement on Form S-4 (File No. 333-70723), filed on January 15, 1999.
*** To be filed by amendment.
<PAGE> 1
EXHIBIT 3.2
LOEFF CLAEYS VERBEKE
TRUE COPY OF THE DEED OF AMENDMENT OF THE
ARTICLES OF ASSOCIATION OF:
GLOBAL TELESYSTEMS EUROPE B.V.
(formerly known as: Hermes Europe Railtel B.V.),
having its seat in Amsterdam,
executed on 22 October 1999,
before Mr. A.D.G. Heering,
civil-law notary in Amsterdam,
including a fair English translation and
the integral text of the articles of association.
<PAGE> 2
LOEFF CLAEYS VERBEKE
The undersigned,
Aart Daniel Gerard Heering, civil-law notary, officiating in Amsterdam;
certifies that the attached document is a fair English translation of the deed
of amendment of the articles of association of:
GLOBAL TELESYSTEMS EUROPE B.V.
(formerly named: Hermes Europe Railtel B.V.)
with registered office in Amsterdam.
In this translation an attempt has been made to be as literal as possible
without jeopardizing the overall continuity. Inevitably, differences may occur
in this translation, and if so the Dutch text will by law govern.
Amsterdam, 15 November 1999
[SEAL]
<PAGE> 3
LOEFF CLAEYS VERBEKE
EFR.ea.991.4958
In this translation an attempt has been made to be as literal as possible
without jeopardizing the overall continuity. Inevitably, differences may occur
in translation, and if so, the Dutch text will by law govern.
AMENDMENT OF THE ARTICLES OF ASSOCIATION OF A PRIVATE COMPANY WITH LIMITED
LIABILITY.
(Hermes Europe Railtel B.V.)
On the twenty-second day of October nineteen hundred and ninety-nine appeared
before me, Aart Daniel Gerard Heering, civil law notary officiating in
Amsterdam: ____________________________________________________________
Mr. Edwin Foeke Renes, with office address at 1077 AB Amsterdam. Apollolaan 15,
born in Amsterdam on the twenty-second day of May nineteen hundred sixty-nine.
______________________________________________________________________________
The appearer has declared that the general meeting of shareholders of the
private company with limited liability: _______________________________________
HERMES EUROPE RAILTEL B.V., with registered seat in Amsterdam and with offices
at 1077 XX Amsterdam, Strawinskylaan 425, filed with the Trade Register at the
Chamber of Commerce under file number: 33267935, has resolved on the
twenty-second day of October nineteen hundred and ninety-nine to partially
amend the articles of association of the company as stated hereinafter as well
as to authorize the appearer to execute this deed of amendment of the articles
of association of which resolutions appear from the shareholder's resolution
attached to this deed. ________________________________________________________
The appearer has also declared that the articles of association of the above
mentioned company were amended lately on the fifteenth day of January nineteen
hundred ninety-nine by notarial deed of amendment executed before a deputy of
A.D.G. Heering, aforementioned, on which deed the ministerial declaration of no
objections was granted on the twenty-ninth day of December nineteen hundred
ninety-eight under number B.V. 458.569. _______________________________________
The articles of association have not been amended since. ______________________
In order to execute said resolution to amend the articles of association, the
appearer has declared to amend the articles 1 and 12, paragraph 1, of the
articles of association as follows: ___________________________________________
<PAGE> 4
L O E F F C L A E Y S V E R B E K E
2
Name and seat.-----------------------------------------------------------------
Article 1.---------------------------------------------------------------------
The company's name is: Global TeleSystems Europe B.V. and the company shall
have its seat in Amsterdam.----------------------------------------------------
Boards.------------------------------------------------------------------------
Article 12.--------------------------------------------------------------------
1. The company shall have a Board of Managing Directors and a Board of
Supervisory Directors, the members of which shall be appointed by the
general meeting which may at all times suspend or remove them from office.
The number of Supervisory Directors, to be determined by the general
meeting, shall be at least two. The number of Managing Directors, also to
be determined by the general meeting, shall be at least one.--------------
On a true copy of this deed the ministerial declaration of no objections shall
be applied for under number B.V.458.569. This amendment of the articles of
association shall gain full legal effect no earlier then the day the Ministry
of Justice grants the declaration of no objections.----------------------------
The appearer is known to me, civil law notary.---------------------------------
This deed----------------------------------------------------------------------
drawn up to be kept in the civil law notary's custody was executed in Amsterdam
on the date first above written.-----------------------------------------------
Before reading out, a concise summary of the contents of this instrument was
given to the appearer and elucidated.------------------------------------------
He then declared that he had noted the contents, agreed with the contents and
did not want a full reading thereof. Thereupon, after limited reading, this
instrument was signed by the appearer and by me, civil law notary.-------------
(Signed: E.F. Renes, A.D.G. Heering).------------------------------------------
<PAGE> 5
INTEGRAL TEXT OF THE
ARTICLES OF ASSOCIATION OF GLOBAL TELESYSTEMS EUROPE B.V.:
(formerly named: Hermes Europe Railtel B.V.)
with seat in Amsterdam.
ARTICLES OF ASSOCIATION
OF GLOBAL TELESYSTEMS EUROPE B.V.
(FORMERLY KNOWN AS HERMES EUROPE RAILTEL B.V.)
The articles of association of the company have recently been amended by deed of
amendment of the articles of association executed on 22 October 1999
Mr. A.D.G. Heering, civil law notary, officiating in Amsterdam, on which deed
the ministerial declaration of no objections has been granted 8 November 1999,
by decree number B.V. 458.569.
Name and Seat.
Article 1.
The Company's name is Global TeleSystems Europe B.V. and the company shall have
its seat in Amsterdam.
Objects.
Article 2.
1. The objects of the Company are:
a. to promote, develop, implement and turn to account digital
communication networks and systems, particularly in the area of
and/or, inter alia, departing from railway infrastructure;
b. to participate in, to administer and/or manage and finance other
enterprises and to have an interest, in whatever way, in other
enterprises, as well as to guarantee the debts of third parties;
c. all that is related or conducive to the objects, mentioned under a.
and b.
2. When performing activities in the general course of affairs in the
company, the working language is the English language.
Duration.
Article 3.
The Company has been established for an indefinite period of time.
Capital.
Article 4.
1. The authorized capital of the Company amounts to two hundred ninety seven
million Dutch guilders (NLG 297,000,000), and is divided into two hundred
and ninety seven thousand (297,000) shares with a nominal value of one
thousand Dutch guilders (NLG 1,000) each.
2. Upon issuance of new shares, the full nominal amount of each share must
be paid in. The board of supervisory directors can stipulate that a part
which should not exceed three quarters (3/4) of the nominal value, need
only to be paid after the company has called it in. The board of
supervisory directors has the authority to resolve that further payments
on the shares - which do not exceed the full nominal amount - have to be
called in.
Prior to each single issuance the right of pre-emption may be limited or
excluded in a general meeting of shareholders in which the entire issued
capital is represented.
Payment in foreign currency on shares, which are issued after
incorporation of the company can be made only after the approval by the
Company.
3. Shareholders shall have a pre-emption right to the shares to be issued and
options on shares to be issued in proportion to the total nominal value of
the shares held by each of them.
<PAGE> 6
However, individual shareholders shall not have a pre-emption right to
shares, issued to employees of the Company or of a group company in virtue
of a resolution of the general meeting or to shares.
4. Issue of shares with a pre-emption right and the term, during which it may
be exercised, shall be notified in writing by the Company to all
shareholders. A pre-emption right can be exercised during at least four
weeks after the day the notice was received by all shareholders.
If a shareholder has not complied with his obligation to pay the shares in
time, he cannot execute the rights to meet and to vote in respect of his
shares as long as he is default, and his right to dividends is deferred.
5. In order to subscribe or acquire shares in its capital or certificates of
beneficial ownership thereof, the Company may only grant loans not
exceeding the amount of the payable reserves and provided that the general
meeting has granted its approval; the Company shall then keep a
non-payable reserve to the amount of the outstanding loans.
6. The Company shall not cooperate in the issue of depositary receipts of
shares in the Company.
7. Shares not yet issued shall be issued pursuant to a resolution of the
Board of Supervisory Directors setting out all the terms of such issue.
Shares.
Article 5.
1. All shares shall be registered and shall be numbered consecutively from 1
on.
2. Neither share-certificates nor bearer certificates of beneficial ownership
shall be issued in respect of shares.
Register of shareholders.
Article 6.
1. The Board of Managing Directors shall keep a register into which the names
and addresses of all the holders of shares are entered together with the
nominal amount paid on every share, and the quantity and the numbers of
the shares, held by every shareholder.
2. The register shall likewise contain the names and addresses of those who
have a right of usufruct or a pledge with regard to such shares, stating
to which rights attached to the shares they are entitled pursuant to
paragraphs 7 and 8 of this article.
3. Every shareholder, usufructuary and pledgee, shall have the obligation to
take care that his address is known to the Company.
4. The register should be kept up regularly.
Any entry in the register and any extract, as referred to in paragraph 5,
shall be signed by the managing director.
5. Upon request, the Board of Managing Directors shall provide a shareholder,
usufructuary or pledgee with a free extract from the register concerning
his rights with respect to the shares.
<PAGE> 7
In case a right of usufruct or a pledge is established on a share, the register
shall indicate who shall be entitled to the rights referred to in paragraphs 7
and 8 of this article.
6. The Board of Managing Directors shall deposit the register at the office
of the Company for inspection by shareholders as well as by usufructuaries
and pledges.
7. The shares may be encumbered with usufruct and a pledge. The voting right
in respect of the shares shall, however, remain vested in the shareholder.
8. The usufructuary and the pledgee shall not have the rights conferred by
law to the holders of depositary receipts of shares issued with the
cooperation of the Company.
9. Rights ensuing from a share and aiming at the acquisition of shares, shall
belong to the shareholder, provided that he shall compensate the
usufructuary for the value thereof as far as the latter is entitled to
such compensation pursuant to his right of usufruct.
Article 7.
If a share is held jointly by more than one person, the Company may require that
the joint holders shall grant one person a written power of attorney to
represent them in their relations to the Company.
Transfer and transition of shares (Blocking rules).
Article 8.
1. Every transfer of one or more shares by a shareholder may only be
effectuated in the way and with due observance of the provisions of this
article and article 9. These provisions need not to be observed, if within
a period of thirty days after the shareholder who wants to transfer, has
requested for the permission, all shareholders have granted written
permission for the transfer and, moreover, the transfer is effected within
three months after the approval has been granted by all shareholders.
2. A shareholder intending to alienate one or more of his shares shall give
notice thereof to the Board of Managing Directors and to the Board of
Supervisory Directors, which notice shall be considered to be an offer for
sale.
3. As soon as possible but no later than five working days after receipt of
that notice, the Board of Managing Directors shall give relevant notice to
all shareholders.
4. Within one month after the date of the notice to the shareholders, the
shareholders shall inform the Board of Managing Directors, if they wish to
take over either all the shares offered or part thereof.
5. If shareholders apply for a number of shares exceeding the number that is
available, shares shall be allocated by the Board of Managing Directors as
far as possible in proportion to the total nominal amount of shares held
by each applicant and, insofar proportional distribution is impossible,
to several applicants jointly.
<PAGE> 8
6. As soon as it becomes clear that not all the shares offered are taken over
by other shareholders, the offeror shall have the rights as hereinafter
referred to in paragraph 13.
Without the offeror being bound thereto in whatever way, within thirty
days after receipt of the notice referred to in paragraph 2 the Board of
Managing Directors may apply for the shares that are not taken over, on
behalf of the Company.
If the offeror wishes to accept, he may do so on the condition that the
price to be paid be increased by the additional income tax due he has to
pay as compared with the income tax to be paid in case of a sale to a
third party.
7. Within thirty days after receipt of the notice referred to in paragraph 2,
the Board of Managing Directors shall inform the offeror whether or not
application was made for the shares and in the affirmative, inform him of
the name(s) of the applicant(s) and the number of shares he/they wish(es)
to buy, while at the same time the Board of Managing Directors shall
inform the applicant(s) of the number of shares, allocated to him/them for
the time being, pursuant to paragraph 5.
8. The price at which shares are to be transferred shall be fixed by the
offeror and the applicant(s) by common agreement.
If they fail to reach an agreement on the price within one month after the
date of the informing notice referred to in the preceding paragraph, the
price shall be the value of the offered shares as determined by an
independent expert, to be appointed by the Chairman of the Chamber of
Commerce and Industry of the district in which the Company has its
principal office, upon request of the most diligent party. The expert so
appointed shall take into account any bona fide offer made by a third
party to purchase the shares, including the price and any other conditions
of such offer.
9. The costs of valuation shall be paid by the Company, except in case the
price determined by the expert is equal to or more than the price
originally offered by the offeror, in which case the costs shall be borne
by the party requesting the independent valuation.
If the right referred to in paragraph 12 of the present article is made
use of, half of the valuation costs shall be paid by the person who
withdraws.
The Company is obliged to provide the expert(s) with all the data relevant
for the valuation, upon first request and without any delay, including the
price and the conditions of the offer of a bona fide third party.
10. The expert shall inform the Board of Managing Directors of his decision.
Within five working days after receipt of that decision, the Board of
Managing Directors shall notify the same to the offeror and to the
applicant(s).
11. After the price of all the shares has been determined, the offeror may
demand that each of the applicants, provides security - by means of an
irrevocable bank guarantee or otherwise - for the payment of the purchase
price within a reasonable period of time.
<PAGE> 9
12. The offeror shall always be entitled to withdraw his offer, provided he
does so within one month after having been informed of the applicant(s) to
whom he may transfer all the shares offered and at which price. Shares
should be transferred within one month after the expiration of the term
within which the offeror may withdraw, against payment of the purchase
price.
13. If not all the shares offered are taken over or the above mentioned
security, demanded by the offeror for the payment to him of the purchase
price of all his shares, has not been granted, the offeror shall be
entitled to withdraw in respect of all the shares offered, he may consider
the purchase agreements and any transfer with respect to part of the
shares as cancelled and he shall be free to transfer all the shares
offered to whatever party he wishes, within three months after having been
informed of the fact that there are no or not sufficient applicants or
after it appeared that the security referred to above was not granted
within the term fixed, provided that the transfer price is not lower than
the price for which the shares were originally offered; in the event that
the transfer price is lower, the shares shall be offered to the other
shareholders first, in accordance with the rules as mentioned in this
article and in article 9.
14. In case the offeror fails to co-operate with the transfer, notwithstanding
payment or security for payment of the purchase price, the Company shall
be irrevocably authorized to effectuate the transfer and to record the
transfer in the register of shareholders.
15. All notices and communications referred to in this article shall be made
by registered mail with postal receipt or by means of service of a writ.
16. The Board of Managing Directors is obliged to keep the Board of
Supervisory Directors informed of the progress and the results of the
actions meant in the present article.
Article 9.
1. The shares of a shareholder, being a legal entity, which is dissolved,
adjudicated bankrupt or has obtained a provisional official moratorium,
and the shares being part of any community which is dissolved, shall be
offered for sale by the person or persons entitled to transfer, within two
months after the decease or dissolution referred to above or after any of
the other events referred to above is irrevocably established,
respectively after expiry of the term of two years referred to in
paragraph 4 without the allotment mentioned therein being effectuated.
As long as the transfer has not been effectuated, all the rights in
respect of the shares involved may not be exercised.
<PAGE> 10
2. The relevant provisions of article 8 - including paragraph 1 of that
article - shall be applicable to the offer referred to above and the
subsequent effectuation thereof, on the understanding however, that the
offeror shall not be entitled to withdraw as mentioned in paragraph 12 of
article 8 and in case no offer is made the Company shall also be
irrevocably authorized to make an offer and to effectuate the transfer.
If not all the shares thus offered are taken over, the shareholder shall
be bound, however, to keep his shares and he shall be deprived of the
right, provided for in paragraph 13 of article 8, to alienate the shares
to whomever he wishes.
3. The obligation to make an offer shall not apply in case of allotment to
the person who contributed the share or the shares to the community which
has been dissolved.
4. The allotment referred to in the preceding paragraph shall be effectuated
within two years after the dissolution and the Company shall be informed
of the allotment within one month.
5. If, owing to the same legal fact, several persons are bound to offer, they
shall be entitled to offer the shares concerned as one package.
Transfer of shares.
Article 10.
1. The transfer of shares shall be effected in accordance with the applicable
statutory regulations.
2. In case of allotment of shares as a result of a division of a community
and in case of establishment and transfer of a right of usufruct or pledge
on shares, paragraph 1 shall apply accordingly.
3. The provisions of this article can be only applied with regard to a
transfer and allotment of shares and division of any community, if the
provisions of article 8 and 9 have been observed.
Acquisition and possession of shares by the Company.
Article 11.
1. Unless the Company acquires shares for no value or under an universal
title, the Company may, subject to prior authorization of the Board of
Supervisory Directors and pursuant to a resolution of the general meeting,
only acquire fully paid-up shares in its own capital, if:
a. the shareholders' equity of the Company, decreased with the
acquisition price, is not less than the paid-up and claimed part of
the capital, increased with the reserves to be kept in accordance
with the law or the Articles of Association;
b. the nominal amount of the shares to be acquired and those already
held by the Company and its subsidiaries jointly, amounts to no more
than half of the issued share capital;
c. in the event that the current financial year has ended more than six
months ago - the annual accounts of the preceding year have been
adopted. In this paragraph shares also include depositary receipts
of shares.
<PAGE> 11
A subsidiary of the Company may not subscribe or cause the
subscription for shares in the Company's capital for its own
account. A subsidiary of the Company may only acquire such shares
for its own account and on a particular basis of title insofar as
the Company itself may acquire shares in its own capital pursuant to
the provisions of this paragraph.
2. The Company cannot exercise voting rights in respect of shares, held by
the Company itself, or of which it has a right of usufruct or a pledge.
Such shares shall not be taken into consideration when calculating the
distribution of profits or liquidation balance, unless a right of usufruct
or a pledge has been established on those shares in favour of another
person than the Company.
The provision of the first sentence of this paragraph is accordingly
applicable to shares held by subsidiaries of the Company or on which
subsidiaries have a right of usufruct or a pledge.
3. Cancellation of shares held by the Company in its capital and cancellation
after refunding of shares drawn by lot after drawing, is possible;
resolutions with respect to cancellation shall be adopted in a general
meeting of shareholders, convened with notification of the purpose of the
cancellation and its procedure. A cancellation is not allowed to result in
a paid and claimed part of the capital being lower than one/fifth part of
the authorized capital or than the minimal capital prescribed by law at
the moment of the resolution.
4. Shares held by the Company itself can only be alienated in the manner
prescribed for issue of snares not yet issued.
The articles 8 and 9 do not apply to this alienation.
Boards.
Article 12.
1. The Company shall have a Board of Managing Directors and a Board of
Supervisory Directors, the members of which shall be appointed by the
general meeting which may at all times suspend or remove them from office.
The number of Supervisory Directors, to be determined by the general
meeting, shall be at least two. The number of Managing Directors, also to
be determined by the general meeting, shall be at least one.
The general meeting shall determine the conditions of employment of the
managing director and the remuneration of the managing director. The
remuneration and/or compensation of Supervisory Directors shall also be
determined by the general meeting.
A legal entity can be a managing director but cannot be a Supervisory
Director.
2. A person who has reached the age of seventy-two, cannot be appointed
Supervisory Director. A Supervisory Director shall retire at the latest on
the moment of the closing of the annual general meeting, held in the
financial year, in which he will be seventy-two years old.
<PAGE> 12
3. The nomination or recommendation or the appointment of a Supervisory
Director shall comply with the legal requirements.
Board of Managing Directors; representation.
Article 13.
1. The Board of Managing Directors shall be charged with the management of
the Company in accordance with the Business Plan of the Company.
2. Each of the Managing Directors shall be fully qualified to represent the
Company in court and otherwise.
3. The Company may grant one or more persons a limited or unlimited mandate
to represent it.
4. The Board of Managing Directors needs the prior approval of the Board of
Supervisory Directors for resolutions/actions:
a. to adopt and amend the Business Plan of the Company;
b. to adopt and amend the annual budget of the Company;
c. to incur expenses in excess of the adopted or amended annual budget;
d. to take up loans to the charge of the Company outside the ordinary
business activities, with the exception of drawings on the Company's
account with a bank designated by the Board of Supervisory
Directors, as a result of which the account is overdrawn to a sum
not exceeding the amount previously determined by the Board of
Supervisory Directors and communicated by it to that bank;
e. to lend money outside the ordinary business activities, insofar as
in consequence thereof any one debtor becomes indebted to the
Company on account of money borrowed for a sum exceeding an amount
to be determined by the Board or Supervisory Directors;
f. to commit the Company for debts of third parties, under a guaranty
or otherwise outside the ordinary business activities;
g. to extend the Company's business by a new line of business and to
discontinue - including the transfer of ownership or enjoyment of -
the business of the Company or any part thereof;
h. to alienate a considerable part of the assets of the Company, which
for the purposes hereof shall include the alienation, in each
individual case, except as part of the ordinary business activities,
of assets which individually or jointly represent a value from time
to time to be determined by the Board of Supervisory Directors;
Article 14.
1. If a managing director is absent or prevented from acting, the remaining
managing directors or the other managing director, shall be temporarily
entrusted with the management of the Company. If all managing directors
are, or the sole member managing director is, absent or prevented from
acting, the management of the Company shall be temporarily entrusted with
the Board of Supervisory Directors, with the authorization to assign
temporarily the representation to one or more Supervisory Directors.
<PAGE> 13
2. Save insofar as the employment conditions of the managing director are
concerned, the Company may not enter into agreements with the managing
director in his private capacity or with his (personal) relatives; for the
purposes hereof, relatives shall include: the person with whom the
managing director cohabits, whether or not in matrimony, and blood
relations and relations by marriage of the managing director or those with
whom he cohabits up to four times removed.
3. Transactions of the Company vis-a-vis the holder of all shares in the
capital of the Company, or vis-a-vis a co-owner of a community of
matrimonial property to which all shares in the capital of the Company
belong, in which the Company is represented by that shareholder or by one
of the joint owners shall be recorded in writing; shares held by the
Company or its subsidiaries shall not be taken into account.
This paragraph shall not apply to transactions which under the agreed
terms thereof are part of the normal course of business of the Company.
Board of Supervisory Directors.
Article 15.
1. The Board of Supervisory Directors shall supervise the management of the
Board of Managing Directors and the general course of affairs in the
Company and the Company's business.
It shall assist the Board of Managing Directors and the general meeting on
an advisory basis. When fulfilling their tasks the Supervisory Directors
shall conform to the Company's interest and business.
2. One or more Supervisory Directors, to be appointed thereto by the Board of
Supervisory Directors, shall always have access to the offices and
premises of the Company and shall be entitled to inspect all its books and
documents; the Board of Managing Directors is obliged to furnish the Board
of Supervisory Directors with all data and information desired.
The Board of Managing Directors shall timely furnish the Board of
Supervisory Directors all information necessary to fulfil its task.
3. Unless the general meeting of shareholders has provided for it, the Board
of Supervisory Directors shall charge an auditor - at the expense of the
Company - with the auditing of the annual accounts, which auditor shall
report the result of his audit in a statement and further shall inform the
Board of Supervisory Directors and the Board of Managing Directors about
his audit.
4. The Board of Supervisory Directors shall elect a chairman from among its
members. The election as chairman shall be for one year.
5. The Board of Supervisory Directors shall meet twice a year at the office
of the Company, unless the Board of Supervisory Directors should decide to
meet elsewhere. The Board shall furthermore meet at the request of the
chairman or at the request of the Board of Managing Directors.
<PAGE> 14
Meetings shall be called by the chairman of the Board of Supervisory
Directors while enclosing an agenda in the English language. The two
obligatory meetings shall be called at least four weeks in advance; other
meetings shall be called within a reasonable term.
The costs of the meetings and the transportation and subsistence costs of
the Supervisory Directors incurred in connection with these meetings shall
be reimbursed by the Company.
6. Proposals to be dealt with by the Board of Supervisory Directors may be
submitted to the chairman by every Supervisory Director and by the Board
of Management.
7. The Board of Supervisory Directors shall adopt resolutions at meetings by
an absolute majority of votes in a meeting in which a majority of the
Supervisory Directors is present or represented, but in the event that
there are less than seven Supervisory Directors, the quorum shall be at
least four Supervisory Directors, unless these Articles of Association
require or allow a different form of decision-making; for the purposes
hereof "meeting" shall include meeting by telephone or by video, provided
the decision-making is recorded in writing before the resolution is
implemented. Resolutions may be adopted outside meetings only if it has
been shown that all the Supervisory Directors have stated to be in favour
of the proposal concerned in writing; for the purposes hereof "in writing"
shall also mean a message by telefax, telegram or any other means of
communication, capable of transmitting written texts.
8. In case of one or more vacancy/vacancies in the Board of Supervisory
Directors, the general meeting shall promptly fill such vacancy/vacancies.
General meetings.
Article 16.
1. General meetings must be held in the municipality where the Company has
its principal office or in the municipalities of Amsterdam or
Haarlemmermeer; resolutions adopted in a general meeting, held in another
municipality, can only be adopted validly, if the entire issued share
capital is represented.
2. The annual meeting shall be held ultimately within six months after expiry
of the financial year. In the annual meeting shall be adopted inter alia:
the balance sheet and the profit and loss account with explanatory notes -
hereinafter to be called jointly: the annual accounts -, covering the past
financial year, and the distribution of profits, while the general meeting
shall also deal with the written business report of the Board of Managing
Directors on the past financial year, to be presented to it by that board,
unless section 403, Volume 2 of the Civil Code is applicable.
<PAGE> 15
3. Extraordinary general meetings shall be held as often as the Board of
Managing Directors or the Board of Supervisory Directors desires, or upon
written request of one or more shareholders, together representing at
least one/tenth part of the issued capital, addressed to the Board of
Managing Directors and the Board of Supervisory Directors and stating
exactly the subjects to be dealt with. In that case the Board of Managing
Directors or the Board of Supervisory Directors' shall be obliged to call
a general meeting to be held within six weeks after receipt of this
request. If no calling notification is sent within three weeks after
receipt of the request, each requesting party may send a notification
himself with due observance of the provisions of the law and this article.
4. If the annual meeting is not called, each shareholder may do so himself,
likewise with due observance of the provisions of the law and this
article.
5. Without prejudice to the provisions of the paragraphs 3. and 4., the
notification, convening a general meeting, shall be sent by registered
mail by the Board of Managing Directors to the addresses of the
shareholders, as mentioned in the shareholders' register, at least fifteen
days before the meeting is to be held. The day of mailing shall be
regarded as the day of notification.
Notifications shall contain the agenda.
The receipt issued by the post office shall serve as evidence that the
notification has been mailed.
6. Meetings shall be presided by the chairman of the Supervisory Board.
7. Unless a notarial report of the business of the meeting is drawn up,
minutes shall be drawn up of the business, transacted in each meeting by a
secretary appointed by the chairman, who does not have to be a
shareholder.
The minutes shall be confirmed at the same or at the next meeting and are
to be signed by the chairman and the secretary in office.
The chairman of the meeting and each managing director or each of
shareholder Supervisory Director can order at any time that a notarial
report of the meeting shall be made for account of the Company.
8. The minute book shall be available at the offices of the Company for
inspection by the shareholders. A copy of or an extract from the minutes
of any meeting shall be supplied to each of them upon request and at a
charge not exceeding cost.
9. Shareholders may also adopt resolutions without holding a meeting,
provided the resolutions are adopted unanimously and votes are cast in
writing by all shareholders. A resolution adopted in this way shall be
deemed to be a resolution of the general meeting.
In this paragraph votes cast by telefax, telegram or any other means of
communication capable of transmitting written texts, shall likewise be
considered as votes cast in writing.
<PAGE> 16
Article 17.
1. Shareholders may only be represented at meetings by proxy, duly authorized
in writing.
2. With respect to the adopting of resolutions whereby the Company will grant
rights or a release from obligations to particular persons, otherwise than
in their capacity of shareholder or member of a body of the Company, valid
votes on such resolutions may be cast by said persons, their spouses and
their blood relatives in the direct line.
Article 18.
1. Every share shall represent the right to cast one vote. Blank and invalid
votes shall be deemed not to be cast. When determining to what extent
shareholders vote, are present or represented, or to what extent the share
capital is furnished or represented, shares, in respect of which the
Articles of Association prescribe that in respect of those shares no vote
can be cast, are not taken into account.
2. Voting in respect of business shall be verbally, voting in respect of
persons by unsigned ballots, unless the meeting determines a different way
of voting. Voting by acclamation shall be allowed as long as nobody is
opposed thereto.
3. All resolutions shall be adopted by a two/third majority of votes in a
meeting in which at least two/thirds of the shareholders is present or
represented, unless the law or the Articles of Association prescribe a
larger majority. If two/thirds of the shareholders is not represented in
such meeting, a second meeting of shareholders will be called on a date
which is at least five business days and no more than four weeks after the
date of the first meeting of shareholders; in such second meeting
resolutions on the subjects put before the first meeting of shareholders
can be adopted with majority irrespective of the number of shareholders
attending such second meeting.
4. In case votes are equally divided with regard to a proposal, on which a
resolution may be adopted by a majority, the following rules shall apply:
a. Within two weeks after the meeting referred to under (b) was held,
the Board of Managing Directors of the Company shall be bound -
unless the proposal hereinafter stated under (b) is adopted - to
request the President of the Chamber of Commerce and Industry,
within the jurisdiction of which the Company is situated, to appoint
a committee of three experts which shall decide whether the proposal
on which votes were equally divided, shall be adopted or rejected.
b. As soon as there is an equal division of votes during a general
meeting, the chairman of the meeting shall be obliged to bring up
for discussion a new proposal aiming at not submitting the proposal,
in respect of which during the discussions the votes were equally
divided, to the committee of experts referred to under (a).
<PAGE> 17
In case such new proposal is adopted, the proposal on which the
votes were equally divided, shall be rejected and, therefore, shall
not be submitted to the committee of experts referred to above for
decision;
in case votes are equally divided on the new proposal, made by the
chairman, that proposal shall be deemed to be rejected and the Board
of Managing Directors of the Company shall therefore have the
obligation referred to under (a).
c. When taking its decision the committee shall first of all take into
account the interests of the Company.
d. Its fees shall be paid entirely by the Company.
e. After being appointed the committee shall render its decision as
soon as possible and shall inform every shareholder and the Company
of its decision in writing.
The committee shall not take a decision before having heard all
parties involved in the relevant proposal or at least before having
summoned them properly.
The members of the committee of experts shall render their decision
as good men in equity. They shall establish proceeding rules
themselves and may extend the term of their mandate. They may take
advice from third parties. The members of the committee of experts
shall have access to the offices and to other rooms of the Company
and they shall be entitled to inspect all books, registers and other
documents of the Company; moreover, the Board of Managing Directors
is obliged to provide the members of the committee with every
information they ask.
f. The decision of the committee of experts shall be recorded in the
minute book of the Company.
A decision taken in the way described above, shall be considered as
a resolution of the general meeting.
Financial year, annual account and annual report.
Article 19.
1. The financial year of the Company coincides with the calendar year.
2. The Board of Managing Directors shall submit a budget for each financial
year to the Board of Supervisory Directors for its approval.
3. Within five months after the expiration of each financial year, except in
case of extension of this term by no more than six months by the general
meeting based on extraordinary circumstances, the Board of Managing
Directors shall draw up the annual accounts, and shall submit the same -
provided with an advice thereto it took from the Board of Supervisory
Directors - and the annual report to the general meeting within that,
possibly extended, term.
<PAGE> 18
4. The annual report and the annual accounts, signed by all managing
directors and all Supervisory Directors, together with, in any case,
besides other information prescribed by the law:
a. the statement of the auditor;
b. a statement on the distribution of the profits or the assimilation
of the losses, or as long as not yet determined, the proposal
thereto, shall be available at the offices of the Company for
inspection by all shareholders as from the day on which the annual
meeting was called.
Shareholders may obtain free copies of these documents.
5. The provisions of the paragraphs 3 and 4 of this article concerning the
annual report and the information prescribed in virtue of the law, are not
applicable, if section 403, Volume 2 of the Civil Code applies to the
Company.
6. In case a signature of a managing director or a Supervisory Director is
missing on the annual accounts, the reason thereof shall be mentioned in
that document.
7. Unconditional adoption of the annual accounts shall discharge the Board of
Managing Directors in respect or its acts in the past financial year and
shall discharge the Board of Supervisory Directors in respect of the
fulfillment of its task.
Profits and distribution of profits.
Article 20.
1. Profits shall be established in accordance with generally accepted
accounting standards.
2. The Board of Supervisory Directors shall determine whether profits made in
any financial year shall be paid out partly or wholly, or added to the
reserves.
3. The Board of Supervisory Directors can only resolve to pay out profits
and/or reserves and the Company may only make payments out of profits
and/or reserves open to payment, as far as the shareholders' equity of the
Company exceeds the amount of the paid-up and claimed part of the
capital, increased with reserves, to be kept according to the law;
4. Dividends shall be made payable within one month after the adoption of the
annual account. The general meeting may determine that dividends shall be
paid, wholly or partly, otherwise than in cash.
5. The Board of Supervisory Directors or, subject to approval of the Board of
Supervisory Directors, the Board of Managing Directors is authorized to
decide to make interim payments out of profits and/or reserves with due
observance of the provisions of paragraph 3.
6. The claim to pay dividend shall lapse five years after the dividend was
made payable.
Special Resolutions
Article 21.
1. Resolutions to amend the Articles of Association, to merge the Company or
to liquidate the Company require prior approval of the Supervisory Board.
<PAGE> 19
2. When a proposal to amend the Articles of Association, to merge the Company
or to dissolve the Company is made to the general meeting, this must be
mentioned in the notification of the general meeting.
3. As regards an amendment of the Articles of Association, a copy of the
proposal including the text of the proposed amendment must at the same
time be deposited at the Company's offices for inspection by the
shareholders and held until the end of that meeting.
Liquidation.
Article 22.
1. In case of dissolution of the Company the liquidation shall be executed by
the Board of Managing Directors, unless the general meeting decides
otherwise.
2. The remuneration, which shall be granted to liquidator(s) and persons
lending assistance, if any, shall be determined simultaneously.
3. During the liquidation the provisions of the present Articles of
Association shall exist in force as much as possible. The relevant
provisions in respect of the Board of Managing Directors are then
applicable to the liquidator(s) and the provisions in respect of
Supervisory Directors are applicable to the persons lending assistance.
4. Any assets of the Company remaining after the liabilities of the Company
have been satisfied shall be transferred to the shareholders in such a way
that, as far as possible, first the nominal amount paid on each share
shall be paid on that share to a maximum of the nominal value of that
share, and any surplus then remaining shall be paid to the shareholders in
proportion to the amount paid up by each of them in respect of the shares.
5. After the liquidation the books and other documents of the Company shall
be kept by the person, thereto appointed by the liquidator(s), for the
term, determined by law.
Final provision.
Article 23.
In all cases not provided for in the present Articles of Association and/or the
law, the general meeting shall decide.
<PAGE> 1
EXHIBIT 4.5
================================================================================
INDENTURE
DATED AS OF NOVEMBER 24, 1999
BETWEEN
GLOBAL TELESYSTEMS EUROPE B.V., AS ISSUER
AND
UNITED STATES TRUST COMPANY OF NEW YORK, AS TRUSTEE
--------------------
Euro 225,000,000
10 1/2% SENIOR NOTES DUE 2006
10 1/2% 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>
- -------------------------
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.....................................................................1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act..............................19
SECTION 1.03. Rules of Construction..........................................................20
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating................................................................20
SECTION 2.02. Execution and Authentication...................................................21
SECTION 2.03. Registrar and Paying Agent.....................................................21
SECTION 2.04. Paying Agent To Hold Assets in Trust...........................................22
SECTION 2.05. Securityholder Lists...........................................................22
SECTION 2.06. Transfer and Exchange..........................................................22
SECTION 2.07. Replacement Securities.........................................................23
SECTION 2.08. Outstanding Securities.........................................................23
SECTION 2.09. Treasury Securities............................................................24
SECTION 2.10. Temporary Securities...........................................................24
SECTION 2.11. Cancellation...................................................................24
SECTION 2.12. Defaulted Interest.............................................................24
SECTION 2.13. Common Number..................................................................24
SECTION 2.14. Deposit of Moneys..............................................................24
SECTION 2.15. Book-Entry Provisions for Global Securities....................................25
SECTION 2.16. Registration of Transfers and Exchanges........................................25
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.............................................................29
SECTION 3.02. Notice of Redemption...........................................................29
SECTION 3.03. Effect of Notice of Redemption.................................................30
SECTION 3.04. Deposit of Redemption Price....................................................30
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities..........................................................30
SECTION 4.02. Maintenance of Office or Agency................................................31
SECTION 4.03. Corporate Existence............................................................31
SECTION 4.04. Payment of Taxes and Other Claims..............................................31
SECTION 4.05. Notice of Defaults.............................................................31
SECTION 4.06. Maintenance of Properties and Insurance........................................32
</TABLE>
-i-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 4.07. Compliance Certificate.........................................................32
SECTION 4.08. Waiver of Stay, Extension or Usury Laws........................................32
SECTION 4.09. Provision of Financial Information.............................................33
SECTION 4.10. Change of Control..............................................................33
SECTION 4.11. Limitation on Restricted Payments..............................................34
SECTION 4.12. Limitation on Incurrence of Indebtedness.......................................36
SECTION 4.13. Limitations on Restrictions Affecting Restricted Subsidiaries..................38
SECTION 4.14. Designation of Unrestricted Subsidiaries.......................................39
SECTION 4.15. Limitation on Liens............................................................40
SECTION 4.16. Limitation on Asset Sales......................................................40
SECTION 4.17. Limitation on Transactions with Affiliates.....................................41
SECTION 4.18. Limitation on Issuances of Guarantees by Restricted Subsidiaries...............42
SECTION 4.19. Limitation on the Issuance and Sale of Capital Stock of Restricted
Subsidiaries.................................................................42
SECTION 4.20. Additional Amounts.............................................................42
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Sale of Assets, etc...................................................44
SECTION 5.02. Successor Corporation Substituted..............................................44
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default..............................................................44
SECTION 6.02. Acceleration...................................................................46
SECTION 6.03. Other Remedies.................................................................46
SECTION 6.04. Waiver of Past Default.........................................................47
SECTION 6.05. Control by Majority............................................................47
SECTION 6.06. Limitation on Suits............................................................47
SECTION 6.07. Rights of Holders To Receive Payment...........................................48
SECTION 6.08. Collection Suit by Trustee.....................................................48
SECTION 6.09. Trustee May File Proofs of Claim...............................................48
SECTION 6.10. Priorities.....................................................................49
SECTION 6.11. Undertaking for Costs..........................................................49
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee..............................................................49
SECTION 7.02. Rights of Trustee..............................................................50
SECTION 7.03. Individual Rights of Trustee...................................................51
SECTION 7.04. Trustee's Disclaimer...........................................................51
SECTION 7.05. Notice of Defaults.............................................................52
SECTION 7.06. Reports by Trustee to Holders..................................................52
SECTION 7.07. Compensation and Indemnity.....................................................52
SECTION 7.08. Replacement of Trustee.........................................................53
</TABLE>
-ii-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 7.09. Successor Trustee by Merger, etc...............................................54
SECTION 7.10. Eligibility; Disqualification..................................................54
SECTION 7.11. Preferential Collection of Claims Against Company..............................54
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations...........................................54
SECTION 8.02. Application of Trust Money.....................................................55
SECTION 8.03. Repayment to Company...........................................................55
SECTION 8.04. Reinstatement..................................................................56
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.....................................................56
SECTION 9.02. With Consent of Holders........................................................57
SECTION 9.03. Compliance with Trust Indenture Act............................................58
SECTION 9.04. Revocation and Effect of Consents..............................................58
SECTION 9.05. Notation on or Exchange of Securities..........................................58
SECTION 9.06. Trustee To Sign Amendments, etc................................................58
ARTICLE TEN
MISCELLANEOUS
SECTION 10.01. Trust Indenture Act Controls...................................................59
SECTION 10.02. Notices........................................................................59
SECTION 10.03. Communications by Holders with Other Holders...................................61
SECTION 10.04. Certificate and Opinion as to Conditions Precedent.............................61
SECTION 10.05. Statements Required in Certificate or Opinion..................................61
SECTION 10.06. Rules by Trustee, Paying Agent, Registrar......................................62
SECTION 10.07. Governing Law..................................................................62
SECTION 10.08. No Recourse Against Others.....................................................62
SECTION 10.09. Successors.....................................................................62
SECTION 10.10. Counterpart Originals..........................................................62
SECTION 10.11. Severability...................................................................62
SECTION 10.12. No Adverse Interpretation of Other Agreements..................................62
SECTION 10.13. Legal Holidays.................................................................62
SECTION 10.14. Agent for Service; Submission to Jurisdiction; Waiver of Immunities............62
SECTION 10.15. Judgment Currency..............................................................63
SECTION 10.16. Unclaimed Funds................................................................63
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>
-iii-
<PAGE> 6
INDENTURE dated as of November 24, 1999, between GLOBAL
TELESYSTEMS EUROPE B.V., a Netherlands limited company (the "Company") and
United States Trust Company 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 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
<PAGE> 7
-2-
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; (c)
any transaction consummated in compliance with Section 4.11 or that constitutes
a Permitted Investment; and (d) any sale, lease, transfer, conveyance or other
disposition in the ordinary course of business of capacity on any fiber optic or
cable system controlled or operated by the Company or any Restricted Subsidiary
or of telecommunications capacity, transmission rights, conduit or rights-of-way
acquired by the Company or any Restricted Subsidiary for use in a
Telecommunications Business of the Company or any Restricted Subsidiary. 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(c).
"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 Managing Directors and its Board
of Supervisory Directors, collectively).
"Board of Managing Directors" means, with respect to the
Company, its executive board.
"Board of Supervisory Directors" means, with respect to the
Company, its supervisory board.
"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.
"Capacity Swaps" means the exchange by the Company or any
Restricted Subsidiary of capacity on the Company's or such Restricted
Subsidiary's network (including without limitation through the transfer of
indefeasible rights of use or multiple investment units and/or the sale or lease
of dark fibers or wavelengths thereon) for Equity Interests in any Permitted
ISP.
<PAGE> 8
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"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 or Euros; (b)
securities (i) issued or directly and fully guaranteed or insured by the U.S.
government or any agency or instrumentality thereof or (ii) which are
denominated in Euros and are issued by or directly and fully guaranteed or
insured by a member of the European Union, or any agency or instrumentality
thereof, in each case having maturities of not more than twelve months from the
date of acquisition; (c) certificates of deposit and time deposits with
maturities of twelve months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding twelve 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; (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 twelve months
after the date of acquisition; and (f) any money market accounts or funds at
least 95% of the assets of which constitute Cash Equivalents of the kinds
described in clauses (a) through (e) above.
"Cedel" means Cedelbank.
"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 (other than a Permitted Holder or an
Investment Grade Person) 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 (other than an Investment Grade Person) 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 (other than an Investment Grade
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 an Investment Grade
Person), or any Person (other than an Investment Grade 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; provided, however, that
sales, transfers, conveyances or other dispositions in the ordinary course of
business of capacity on fiber optic or cable systems owned, controlled or
operated by the Company or any Restricted Subsidiary or of telecommunications
capacity or transmission rights, rights-of-way or conduit acquired by the
Company or any Restricted Subsidiary for use in the Telecommunications Business
of the Company or a Restricted Subsidiary, including, without limitation, for
sale, lease, transfer, conveyance or other disposition to any customer of the
Company or any Restricted Subsidiary shall not be deemed a disposition of assets
for purposes or this clause (c); (d) GTS consolidates with, or merges with or
into, another Person (other than an Investment Grade 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,
<PAGE> 9
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taken as a whole, to any Person (other than a wholly owned Subsidiary of GTS or
an Investment Grade Person), or any Person (other than an Investment Grade
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 Supervisory Directors of the Company (together with any
new directors elected or nominated for election to the Board of Supervisory
Directors by the stockholders of the Company with the approval or consent 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 or consented to) cease for any reason (other than by
action of the Permitted Holders) to constitute a majority of the Board of
Managing 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 Managing 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(a).
"Common Depository" means, with respect to the Securities
issued in the form of one or more Global Securities, the Person designated as
the common depository by Euroclear or Cedelbank, which shall initially be
Bankers Trust Company.
"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
<PAGE> 10
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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 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 January 4, 1999 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.
<PAGE> 11
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"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 and not for
speculative purposes.
"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.
"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. For
purposes of this Indenture, a member of the Board of Directors of the Company
shall not be deemed to have any material direct or indirect financial interest
in or with respect to the transaction being considered solely by virtue of also
being a director or officer of GTS.
<PAGE> 12
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"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.
"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 Government Obligations" means Euro-denominated direct
non-callable obligations of, or obligations guaranteed by, a member state of the
European Union for the payment of which guarantee or obligations the full faith
and credit of such member state is pledged.
"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.
"Exchange Securities" means the Series B Securities to be
issued by the Company in exchange for the Series A Securities.
"Existing Notes" means, collectively, the Company's 11 1/2%
Senior Notes due 2007, 10 3/8% Senior Notes due 2006 and 10 3/8% Senior Notes
due 2006.
"Expiration Date" has the meaning set forth in the definition
of "Offer to Purchase" below.
<PAGE> 13
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"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, 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
<PAGE> 14
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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, however, 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
or guarantees 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, Deutsche Bank AG London, Lehman
Brothers International (Europe) and Dresdner Bank AG London Branch.
"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 June 1 and December 1 of each year, commencing June 1, 2000.
"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 May 15 or November 15 (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
<PAGE> 15
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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.
"Investment Grade Person" means a corporation, partnership,
limited liability company or limited liability partnership (i) whose outstanding
unsecured debt securities are assigned ratings by both Rating Agencies equal to
or higher than "A", or the equivalents thereof, (ii) with a total market
capitalization at such time of at least $10 billion and (iii) that is primarily
engaged in a Telecommunications Business.
"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.
"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.
"Non-Recourse Debt" means Indebtedness:
<PAGE> 16
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(1) as to which neither the Company nor any of its Restricted
Subsidiaries (a) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable as a guarantor or
otherwise, or (c) constitutes the lender; and
(2) no default with respect to which (including any rights
that the holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit upon notice, lapse of time or
both any holder of any other Indebtedness (other that Indebtedness
incurred under clause (i) of the definition of Qualified Subsidiary
Indebtedness) of the Company or any of its Restricted Subsidiaries to
declare a default on such other Indebtedness or cause the payment or
cause the payment thereof to be accelerated or payable prior to its
stated maturity.
"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".
"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");
<PAGE> 17
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(5) that the holder may tender all or any portion of 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.
"Officer" means any managing director, the Chief Financial
Officer, or the Treasurer of the Company.
<PAGE> 18
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"Officer's Certificate" means a certificate signed by two
Officers 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 $10,000,000 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; (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; (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 this Indenture (l) Investments
in Permitted ISPs made after the date of this Indenture pursuant to Capacity
Swaps if the Board of Managing Directors determines prior thereto that such
Investment is on terms that are fair and reasonable to the Company; provided,
however, that the amount of network capacity contributed or transferred to any
Permitted ISP in connection with all Capacity Swaps in effect on any date of
determination shall not exceed 25% of the Company's aggregate network capacity
on such date (determined on the basis of the dense wavelength division
multiplexing and other equipment then in use on the Company's network and
without giving effect to anticipated upgrades or replacements thereof); (m)
Permitted Project Finance Investments; and (n) an Investment in any Person the
primary business of which is a Telecommunications Business in an amount
outstanding at any one time not to exceed 25% of the Company's Cumulative
Operating Cash Flow.
"Permitted ISP" means any Person engaged in the provision or
sale of Internet services, as determined in good faith by the Board of Directors
(whose determination shall be conclusive if evidenced by a Board Resolution).
<PAGE> 19
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"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 and Liens securing Acquired Indebtedness; provided,
however, that such Liens were in existence prior to the contemplation of such
merger or consolidation or Incurrence of such Acquired Indebtedness 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 or Incurrence of such Acquired Indebtedness; (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
Telecommunications 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 or guarantees 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 Person (other than a Restricted Subsidiary)
securing any Indebtedness of such Person; provided, however, that the
Investment in such Person constitutes a Permitted Investment; (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 Notes (whether or not the Existing Securities are also so secured); (i)
Liens securing surety, appeal and performance bonds; (j) Liens securing
Qualified Subsidiary Indebtedness or facilities which upon drawing will
constitute Qualified Subsidiary Indebtedness, to the extent permitted to be
Incurred under Section 4.12; and (k) Liens securing Indebtedness under Interest
Rate Protection Obligations or Indebtedness under Currency Agreements to the
extent permitted to be Incurred under Section 4.12.
"Permitted Project Financing Investment" means an Investment
by the Company or any Restricted Subsidiary in any Unrestricted Subsidiary for
the purpose of facilitating the incurrence by such Unrestricted Subsidiary of
Non-Recourse Debt for the purpose of financing a portion of the cost of design,
construction, engineering, acquisition, installation, development by such
Unrestricted Subsidiary of the telecommunications network of the Company;
provided, however, that the amount of any such Investment shall not exceed 60%of
the total initial capitalization of any such Unrestricted Subsidiary.
"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
<PAGE> 20
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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) if the Indebtedness being Refinanced is Indebtedness
of the Company, the Refinancing Indebtedness is incurred 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.
"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".
"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 or senior
guarantees of any such agreements or facilities 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 $100.0 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.
<PAGE> 21
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"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 November 24, 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.
"Relevant Taxing Jurisdiction" see Section 4.20.
"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.
<PAGE> 22
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"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 1/2% 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 1/2% 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 plus any amount pursuant to an acquisition that otherwise
would have been considered as additional paid-in-capital except for the
Company's decision to record such acquisition as a "pooling of interests," 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.
"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.
"Subsidiary Debt to Annualized Operating Cash Flow Ratio"
means the ratio of (a) the Total Consolidated Subsidiary Indebtedness as of the
Determination Date to (b) two times the Consolidated Operating Cash Flow for the
Measurement Period. The Subsidiary Debt to Annualized Operating Cash Flow Ratio
shall otherwise be calculated in the same manner as the Debt to Annualized
Operating Cash Flow Ratio.
<PAGE> 23
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"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 Assets" means all assets, rights
(contractual or otherwise) and properties, whether tangible or intangible, used
or intended for use in connection with a Telecommunications Business and the
Equity Interests of a person engaged principally in a Telecommunications
Business.
"Telecommunications Business" means the business of (i)
transmitting, or providing services relating to the transmission of, voice,
video or data through owned or leased transmission facilities, (ii)
constructing, creating, developing or marketing communications related network
equipment, products, software, services and other devices for use in a
communications business, and (iii) evaluating, participating in or pursuing any
other activity or opportunity that is a reasonably related, ancillary or
complementary to the activities identified in clause (i) or (ii) above.
"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.
"Total Consolidated Subsidiary Indebtedness" means, as at any
date of determination, an amount equal to the aggregate amount of all
Indebtedness of 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.
<PAGE> 24
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"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.
"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.
<PAGE> 25
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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 Common Depository, 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"). In the event of any transfer of a beneficial interest in a QIB
Global Security or a Regulation S Global Security to an Institutional Accredited
Investor in accordance with Section 2.16, the Company shall issue one or more
permanent Global Securities in registered form, substantially in the form set
forth in Exhibit A hereto, bearing the legend set forth in Exhibit C hereto for
interests held by Institutional Accredited Investors (an "Institutional
Accredited Investor Global Security"). The Company shall cause the QIB Global
Securities, Regulation S Global Securities and the Institutional Accredited
Investor Global Securities to have separate common numbers.
<PAGE> 26
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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 Cedelbank" and "Customer Handbook" of Cedel shall be
applicable to interests in the QIB Global Security and 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 Common Depository, 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 and the Depository, as hereinafter provided.
SECTION 2.02. Execution and Authentication.
An Officer (who shall, in case, not being a managing director,
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 an aggregate principal amount not to exceed Euro 225,000,000
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 225,000,000, 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
<PAGE> 27
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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 Deutsche Bank AG, London branch
as principal Paying Agent, until such time as Deutsche Bank AG, London branch
has resigned or a successor has been appointed. In addition, the Company
initially appoints Banque Internationale a Luxembourg S.A. as Paying Agent in
Luxembourg, Bankers Trust Luxembourg S.A. as Registrar and as Paying Agent in
Luxembourg and the Trustee as Paying Agent in New York City.
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 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 shall register the
<PAGE> 28
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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,
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 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 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 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 Agents hold 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.
<PAGE> 29
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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 deliver to the Company such cancelled Securities for
disposal.
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. Common Number.
The Company in issuing the Securities will use one or more
"common" numbers and the Trustee shall use the appropriate common 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 common 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 common 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 principal Paying Agent in immediately
available funds money sufficient to make cash payments, if any, due on such
Interest
<PAGE> 30
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Payment Date, Redemption Date, Purchase Date or Maturity Date, as the case may
be, in a timely manner which permits the principal 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 nominee of the Common Depository, as nominee of the Depository,
(ii) be delivered to the common depository, 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 Common
Depository, 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) a Default or 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 with a request:
(i) to register the transfer of the Physical Securities; or
<PAGE> 31
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(ii) to exchange such Physical Securities for an equal
principal amount of Physical Securities of other authorized
denominations,
the 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, duly
executed by the Holder thereof or his attorney duly authorized in
writing;
(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 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 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
(D) 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
(E) 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
(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, if such transfer is in respect of an
aggregate principal amount of Series A Securities
less than the equivalent of $250,000, 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 under any
circumstances.
<PAGE> 32
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(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 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 Institutional 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 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 only if (i) the Depositary is unwilling or unable to
continue as depositary for such Global Securities and the Company
thereupon fails to appoint a successor depositary within 90 days or
(ii) there shall have occurred and be continuing a Default or an Event
of Default with respect to the Securities. Under the circumstances
described in the preceding sentence, beneficial interests in a Global
Security may only be exchanged for interests in a Physical Security in
whole and not in part. Upon receipt by the 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 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
<PAGE> 33
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(D) 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
(E) 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
(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, if such transfer is in respect of an
aggregate principal amount of Series A Securities
less than the equivalent of $250,000, 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 will cause, in accordance with the standing
instructions and procedures existing between the Depository and the
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 in writing. The 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 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 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
<PAGE> 34
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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. 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.
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 Common 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; and
<PAGE> 35
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(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.
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 3.03. 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 3.04. 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 principal 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 principal 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.
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 Agents (other than the Company, a
Subsidiary or an Affiliate of the Company) hold 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.
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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, (ii) Banque Internationale a Luxembourg
S.A., at 69, route d'Esch, L-1470 Luxembourg and Bankers Trust Luxembourg S.A.,
as their offices or agencies in Luxembourg for such purposes and (iii) Deutsche
Bank AG, London branch 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 Managing 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 Managing 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.
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(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, 2000.
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.
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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 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 principal
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
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principal 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"):
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(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
January 4, 1999 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
(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
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(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; 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 and any Restricted Subsidiary may Incur
Indebtedness (including Acquired Indebtedness) if, at the time of such
Incurrence, both (i) the Debt to Annualized Operating Cash Flow Ratio would be
less than or equal to 6.0 to 1.0 and (ii) in the case of the Incurrence of
Indebtedness by a Restricted Subsidiary, the Subsidiary Debt to Annualized
Operating Cash Flow Ratio would be less than or equal to 4.0 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 Exchange Securities, 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, engineering,
construction, acquisition, installation, or integration or improvement)
of Telecommunication Assets acquired by the Company or a Restricted
Subsidiary after the Issue Date or to finance or support working
capital or capital expenditures for a Telecommunications Business, and
Permitted Refinancings thereof;
(iv) (1) Indebtedness (including Acquired 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 in connection with the development, expansion or
operation of a Telecommunications Business or is used to finance (or is
incurred as Acquired Indebtedness in consumation of) 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;
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(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; provided, however, that in the case of
Currency Agreements which relate to Indebtedness, 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;
(ix) Indebtedness of the Company so long as the sum of (1) the
aggregate amount of Indebtedness Incurred and outstanding by the
Company pursuant to this clause (ix) and (2) the product of 2.0 and the
aggregate amount of Indebtedness Incurred and outstanding by the
Restricted Subsidiaries (collectively) pursuant to this clause (ix)
does not exceed the product of 2.0 and (A) 100% of the Net Proceeds
received by the Company after the Issue Date from contributions of
capital or the issuance and sale of its Qualified Equity Interests to
any Person (other that any Restricted Subsidiary) and (B) 80% of the
Net Proceeds of property other than cash received by the Company after
the Issue Date from contributions of capital or the issuance and sale
of its Qualified Equity Interests to any Person (other than any
Restricted Subsidiary), in each case (A) and (B) only to the extent
that such Net Proceeds have not been used pursuant to clause (c)(2) of
the first paragraph of Section 4.11 to make a Restricted Payment;
provided, however, that no such indebtedness may be incurred pursuant
to this clause (ix) to the extent that such contributions to capital or
issuance and sale of Qualified Equity Interests were previously
included in the determination of Share Capital for purposes of
Incurring Indebtedness under clause (iv) above of this paragraph (b) of
this Section 4.12;
(x) guarantees by the Company or any of its Restricted
Subsidiaries of Indebtedness of the Company or any Restricted
Subsidiary of the Company that is permitted to be incurred hereunder;
and
(xi) in addition to the items referred to in clauses (i)
through (x) above, Indebtedness of the Company or Qualified Subsidiary
Indebtedness in an aggregate amount not to exceed $25.0 million at any
time outstanding.
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(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 encumbrances or
restrictions 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,
renewed, supplemented, restated or replaced but only if such encumbrances or
restrictions are no more restrictive, taken as a whole, 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 that restrict the subletting or
assignment of any lease governing any leasehold interest of any Restricted
Subsidiary or that are contained in any agreement entered into in the ordinary
course of business; (e) covenants in purchase money obligations for property
acquired in the ordinary course of business restricting transfer of such
property; (f) covenants in security, pledge and similar 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; (h)
contained in any agreement entered into after the Issue Date, so long as such
encumbrances or restrictions are not materially more disadvantageous, taken as a
whole, to the Holders than the encumbrances and restrictions in existence at the
Issue Date; (i) encumbrances or restrictions contained in any agreement entered
into after the Issue Date for Indebtedness so long as (a) such encumbrances or
restrictions, taken as a whole, are not more restrictive than those which are
customary in comparable financing agreements and (b) management of the Company
determines that such encumbrances or restrictions will not materially impair the
Company's ability to make payments when due on the Notes; or (j) customary
limitations on the disposition or distribution of assets or property in joint
venture agreements entered into in the ordinary course of business;
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provided, however, that such encumbrance or restriction is applicable only to
such Restricted Subsidiary constituting such joint venture.
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 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.
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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 securing Indebtedness or trade payables 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, (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 and (z)
Indebtedness of any Restricted Subsidiary that is no longer a Restricted
Subsidiary as a result of such Asset Sale, if the Company and all of its
Restricted Subsidiaries immediately are released from all guarantees of payment
of such Indebtedness is no longer the liability of the Company or any of its
Restricted Subsidiaries shall be deemed to be cash 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. Pending
final application of any such Net Cash Proceeds, the Company or any Restricted
Subsidiary that is a borrower under Qualified Subsidiary Indebtedness may
temporarily reduce revolving credit borrowings or otherwise invest such Net Cash
Proceeds in any manner that is not prohibited by the Indenture.
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 aggregate 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
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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 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 $20.0
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
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or arrangements in effect on the Issue Date, as such agreements or arrangements
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, however, 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; (viii) Restricted Payments permitted under Section 4.11;
and (ix) the issuance and sale by the Company for cash of Qualified Equity
Interests.
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.
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
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levied by or 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 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 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
Securities 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, however, 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 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. 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.
Whenever in this Indenture there is mentioned, in any context,
the payment of amounts based upon the principal amount of the Securities or of
principal, interest or of any other amount payable under or with respect to any
of the Securities, such mentioned 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 Securities or any other document or instrument referred to
therein, or the receipt of any payments with respect to the Securities,
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 Securities or any other such document or instrument following the occurrence
of any Event of Default with respect to the Securities.
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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
hereto, 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;
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(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) 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;
(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,
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(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 and the Trustee, if applicable, 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 accelerated 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.
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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.
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 institute any proceeding or 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;
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(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 and directed 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.
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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 its 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; provided,
however, in the case of any such certificates or opinions which by any
provision hereof are specifically required to be furnished to the
Trustee,
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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.
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(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.
(k) In the absence of written notice from the Company, the
Trustee is entitled to assume that no Additional Interest is due or
payable on the Securities.
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.
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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
an Event of Default in payment of principal of or interest on any Security or in
the case of a Default or an Event of Default with respect to Article Five
hereof, 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, 2000, 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.
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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 notice of redemption.
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.
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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
herein before 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, premium, if any, 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, cash in Euros, Euro Government
Obligations or a combination thereof sufficient to pay all remaining
indebtedness on the Securities 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
the Securities will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit and termination of
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obligations and (iii) 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, cash in Euros, Euro Government Obligations or a
combination thereof sufficient 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 and (iii) 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 Euros, Euro
Government Obligations or a combination thereof 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 Euros, Euro
Government Obligations or a combination thereof deposited with it pursuant to
Section 8.01, and shall apply the deposited money 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 Agents with respect to such
money shall thereupon cease.
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SECTION 8.04. Reinstatement.
If the Trustee is unable to apply any Euros, Euro Government
Obligations or a combination thereof 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
Euros, Euro Government Obligations or a combination thereof 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 Euros, Euro Government
Obligations or a combination thereof 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.
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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 aggregate principal amount of the outstanding Securities, including
consents obtained in connection with a tender offer or exchange offer for such
Securities. Subject to Section 6.07, the Holders of a majority in aggregate
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 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.
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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.
<PAGE> 64
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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 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:
Global TeleSystems Europe B.V.
World Trade Center
Strawinskylaan 425
1077 XX Amsterdam, The Netherlands
Attention: Chief Executive Officer
Facsimile: 31-20-575-2155
Telephone: 31-20-575-2160
with a copy to:
Global TeleSystems Group, Inc.
4121 Wilson Boulevard, 8th Floor
Arlington, Virginia 22203
Attention: Chief Executive Officer
Facsimile: (703) 236-3100
Telephone: (703) 236-3101
and
<PAGE> 65
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Shearman & Sterling
599 Lexington Avenue
New York, New York 10022-6069
Attention: David Beveridge
Facsimile: (44 171) 920-9020
Telephone: (44 171) 920-9005
if to the Trustee:
United States Trust Company of New York
114 W. 47th Street
New York, NY 10036-1532
Attention: Corporate Trust Administration
Facsimile: (212) 852-1626
Telephone: (212) 852-1000
if to the Principal Paying Agent:
Deutsche Bank AG, London branch
Winchester House, 1 Great Winchester Street
London, EC2N 2DB
England
Attention: Corporate Trust Administration
Facsimile: 44 171 207 5164
Telephone: 44 171 545 8000
if to the Luxembourg Paying and Transfer Agents:
Banque Internationale a Luxembourg
69, route d'Esch
L-1470 Luxembourg
Facsimile: (352) 4590-4227
Telephone: (352) 4590-3550
Bankers Trust Luxembourg S.A.
14 Boulevard F.D. Roosevelt
L-2450 Luxembourg
Facsimile: 00 352 473 136
Telephone: 00 352 460 241
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
<PAGE> 66
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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.
<PAGE> 67
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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 Agents or Registrar may make reasonable
rules for their 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. 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.
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. The waiver and release are part of the
consideration for issuance of the Securities.
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.
<PAGE> 68
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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 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.
SECTION 10.16. Unclaimed Funds.
If funds for the payment of principal or interest remain
unclaimed for two years, the Trustee and the Paying Agents 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> 69
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[Signature Page Follows]
<PAGE> 70
S-1
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first written above.
GLOBAL TELESYSTEMS EUROPE B.V.
By: /s/ JIM REYNOLDS
-------------------------------------
Name: Jim Reynolds
Title: Managing Director
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
By: /s/ SIROJNI DINDIAL
-------------------------------------
Name: Sirojni Dindial
Title: Assistant Vice President
<PAGE> 71
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.
NOTES MAY NOT BE OFFERED IN THE NETHERLANDS OR ELSEWHERE AS
PART OF THEIR INITIAL DISTRIBUTION, TO THE ACCOUNT
A-1
<PAGE> 72
OF ANY PERSON OR ENTITY OTHER THAN TO PERSONS OR ENTITIES WHO OR WHICH
TRADE OR INVEST IN SECURITIES 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.
A-2
<PAGE> 73
GLOBAL TELESYSTEMS EUROPE B.V.
10 1/2% Senior Note due 2006
Common No.:
No. Euro
GLOBAL TELESYSTEMS EUROPE 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 December 1, 2006.
Interest Payment Dates: June 1 and December 1, commencing June
1, 2000.
Interest Record Dates: May 15 and November 15.
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.
A-3
<PAGE> 74
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officer.
GLOBAL TELESYSTEMS EUROPE B.V.
By:
-------------------------------------
Name:
Title:
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 10 1/2% Senior Notes due 2006, described in
the within-mentioned Indenture.
Dated: November 24, 1999
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
By:
-------------------------------------
Authorized Signatory
A-4
<PAGE> 75
(REVERSE OF SECURITY)
GLOBAL TELESYSTEMS EUROPE B.V.
10 1/2% Senior Note due 2006
1. Interest.
GLOBAL TELESYSTEMS EUROPE 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 November 24, 1999. The Company will pay interest
semi-annually in arrears on each Interest Payment Date, commencing June 1, 2000.
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
principal 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, Deutsche Bank AG, London branch will act as Paying
Agent, the Trustee (as defined below) will act as Paying Agent in New York City,
Banque Internationale a Luxembourg S.A. will act as Paying Agent in Luxembourg
and Bankers Trust Luxembourg S.A. will act as Paying Agent in Luxembourg and
Registrar. 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 November 24, 1999 (the "Indenture"), between the Company and United States
Trust Company of New York, as trustee (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
A-5
<PAGE> 76
referred to in the Indenture are general obligations of the Company limited in
aggregate principal amount to Euro 225,000,000.
5. Optional Redemption.
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. The Company shall
cause a copy of such notice to be published in a daily newspaper with general
circulation in Luxembourg (which is expected to be the Luxembourger Wort). On
and after the Redemption Date, interest will cease to accrue on the Securities
so long as the Company has deposited with the applicable Paying Agent for the
Securities funds in satisfaction of the Redemption Price pursuant to the
Indenture.
7. Change of Control Offer.
Following the occurrence of a Change of Control, the Company
will be required to notify the Holders of such occurrence in the manner
prescribed by the Indentures and shall, within 30 days after the occurrence of
the Change of Control, make an 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.
A-6
<PAGE> 77
11. Unclaimed Funds.
If funds for the payment of principal or interest remain
unclaimed for two years, the Trustee and the Paying Agents 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 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.
A-7
<PAGE> 78
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. Common Numbers.
The Company has caused common 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.
A-8
<PAGE> 79
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> 80
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> 81
EXHIBIT B
(FORM OF SERIES B SECURITY)
GLOBAL TELESYSTEMS EUROPE B.V.
10 1/2% Senior Note due 2006, Series B
Common No.:
No. Euro
GLOBAL TELESYSTEMS EUROPE 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 December 1, 2006.
Interest Payment Dates: June 1 and December 1, commencing June
1, 2000.
Interest Record Dates: May 15 and November 15.
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.
B-1
<PAGE> 82
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officer.
GLOBAL TELESYSTEMS EUROPE B.V.
By:
------------------------------------
Name:
Title:
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 10 1/2% Senior Notes due 2006, Series B,
described in the within-mentioned Indenture.
Dated: November 24, 1999
UNITED STATES TRUST COMPANY OF NEW
YORK,
as Trustee
By:
------------------------------------
Authorized Signatory
B-2
<PAGE> 83
(REVERSE OF SECURITY)
GLOBAL TELESYSTEMS EUROPE B.V.
10 1/2% Senior Note due 2006, Series B
1. Interest.
GLOBAL TELESYSTEMS EUROPE 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 November 24, 1999. The Company will pay interest
semi-annually in arrears on each Interest Payment Date, commencing June 1, 2000.
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
principal 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, Deutsche Bank AG, London branch will act as Paying
Agent, the Trustee (as defined below) will act as Paying Agent in New York City,
Banque Internationale a Luxembourg S.A. will act as Paying Agent in Luxembourg
and Bankers Trust Luxembourg S.A. will act as Paying Agent in Luxembourg and
Registrar. 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 November 24, 1999 (the "Indenture"), among the Company and United States
Trust Company of New York, as trustee (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 B Securities referred to
in the Indenture. The Series A Securities and the Series B Securities
B-3
<PAGE> 84
referred to in the Indenture are general obligations of the Company limited in
aggregate principal amount to Euro 225,000,000.
5. Optional Redemption.
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. The Company shall
cause a copy of such notice to be published in a daily newspaper with general
circulation in Luxembourg (which is expected to be the Luxembourger Wort). On
and after the Redemption Date, interest will cease to accrue on the Securities
so long as the Company has deposited with the applicable Paying Agent for the
Securities funds in satisfaction of the Redemption Price pursuant to the
Indenture.
7. Change of Control Offer.
Following the occurrence of a Change of Control, the Company
will be required to notify the Holders of such occurrence in the manner
prescribed by the Indentures and shall, within 30 days after the occurrence of
the Change of Control, make an 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.
B-4
<PAGE> 85
11. Unclaimed Funds.
If funds for the payment of principal or interest remain
unclaimed for two years, the Trustee and the Paying Agents 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 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.
B-5
<PAGE> 86
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. Common Numbers.
The Company has caused common 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.
B-6
<PAGE> 87
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> 88
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: 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> 89
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.
C-1
<PAGE> 90
EXHIBIT D
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
United States Trust Company of New York
114 W. 47th Street
New York, New York 10036-1532
Attention: Corporate Trust Administration
Re: 10 1/2% Senior Notes due 2006
(the "Securities"), of Global TeleSystems Europe 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.
D-1
<PAGE> 91
[ ] 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.
D-2
<PAGE> 92
EXHIBIT E
Form of Certificate To Be
Delivered in Connection with
Transfers to Institutional Accredited Investors
---------------, ----
United States Trust Company of New York
114 W. 47th Street
New York, New York 10036-1532
Attention: Corporate Trust Administration
Re: Global TeleSystems Europe B.V. (the "Company")
Indenture (the "Indenture") relating to 10 1/2%
Senior Notes due 2006
Ladies and Gentlemen:
In connection with our proposed purchase of Euro
aggregate principal amount of 10 1/2% Senior Notes due 2006 (the "Notes") of
Global TeleSystems Europe 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
E-1
<PAGE> 93
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.
4. We understand that the Company, Donaldson, Lufkin &
Jenrette International, Merrill Lynch International, Deutsche Bank
AG London, Lehman Brothers International (Europe) and Dresdner Bank
AG London Branch, 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).
E-2
<PAGE> 94
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:
----------------------------------
E-3
<PAGE> 95
EXHIBIT F
Form of Certificate To Be
Delivered in Connection
with Regulation S Transfers
---------------, ----
United States Trust Company of New York
114 W. 47th Street
New York, NY 10036-1532
Attention: Corporate Trust Administration
Re: Global TeleSystems Europe B.V. (the "Company") 10 1/2%
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:
-------------------------------------
F-1
<PAGE> 1
EXHIBIT 4.6
================================================================================
INDENTURE
DATED AS OF NOVEMBER 24, 1999
BETWEEN
GLOBAL TELESYSTEMS EUROPE B.V., AS ISSUER
AND
UNITED STATES TRUST COMPANY OF NEW YORK, AS TRUSTEE
--------------------
Euro 275,000,000
11% SENIOR NOTES DUE 2009
11% SENIOR NOTES DUE 2009, 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>
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N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
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TABLE OF CONTENTS
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ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
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SECTION 1.01. Definitions...............................................................................1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act........................................19
SECTION 1.03. Rules of Construction....................................................................20
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating..........................................................................20
SECTION 2.02. Execution and Authentication.............................................................21
SECTION 2.03. Registrar and Paying Agent...............................................................22
SECTION 2.04. Paying Agent To Hold Assets in Trust.....................................................22
SECTION 2.05. Securityholder Lists.....................................................................22
SECTION 2.06. Transfer and Exchange....................................................................23
SECTION 2.07. Replacement Securities...................................................................23
SECTION 2.08. Outstanding Securities...................................................................23
SECTION 2.09. Treasury Securities......................................................................24
SECTION 2.10. Temporary Securities.....................................................................24
SECTION 2.11. Cancellation.............................................................................24
SECTION 2.12. Defaulted Interest.......................................................................24
SECTION 2.13. Common Number............................................................................24
SECTION 2.14. Deposit of Moneys........................................................................25
SECTION 2.15. Book-Entry Provisions for Global Securities..............................................25
SECTION 2.16. Registration of Transfers and Exchanges..................................................26
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.......................................................................29
SECTION 3.02. Selection of Securities To Be Redeemed...................................................29
SECTION 3.03. Notice of Redemption.....................................................................30
SECTION 3.04. Effect of Notice of Redemption...........................................................30
SECTION 3.05. Deposit of Redemption Price..............................................................31
SECTION 3.06. Securities Redeemed in Part..............................................................31
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities....................................................................31
SECTION 4.02. Maintenance of Office or Agency..........................................................31
SECTION 4.03. Corporate Existence......................................................................32
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SECTION 4.04. Payment of Taxes and Other Claims........................................................32
SECTION 4.05. Notice of Defaults.......................................................................32
SECTION 4.06. Maintenance of Properties and Insurance..................................................32
SECTION 4.07. Compliance Certificate...................................................................33
SECTION 4.08. Waiver of Stay, Extension or Usury Laws..................................................33
SECTION 4.09. Provision of Financial Information.......................................................33
SECTION 4.10. Change of Control........................................................................34
SECTION 4.11. Limitation on Restricted Payments........................................................35
SECTION 4.12. Limitation on Incurrence of Indebtedness.................................................37
SECTION 4.13. Limitations on Restrictions Affecting Restricted Subsidiaries............................39
SECTION 4.14. Designation of Unrestricted Subsidiaries.................................................39
SECTION 4.15. Limitation on Liens......................................................................40
SECTION 4.16. Limitation on Asset Sales................................................................41
SECTION 4.17. Limitation on Transactions with Affiliates...............................................42
SECTION 4.18. Limitation on Issuances of Guarantees by Restricted
Subsidiaries...........................................................................43
SECTION 4.19. Limitation on the Issuance and Sale of Capital Stock of
Restricted Subsidiaries................................................................43
SECTION 4.20. Additional Amounts.......................................................................43
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Sale of Assets, etc.............................................................44
SECTION 5.02. Successor Corporation Substituted........................................................45
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default........................................................................45
SECTION 6.02. Acceleration.............................................................................47
SECTION 6.03. Other Remedies...........................................................................47
SECTION 6.04. Waiver of Past Default...................................................................47
SECTION 6.05. Control by Majority......................................................................48
SECTION 6.06. Limitation on Suits......................................................................48
SECTION 6.07. Rights of Holders To Receive Payment.....................................................49
SECTION 6.08. Collection Suit by Trustee...............................................................49
SECTION 6.09. Trustee May File Proofs of Claim.........................................................49
SECTION 6.10. Priorities...............................................................................49
SECTION 6.11. Undertaking for Costs....................................................................50
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee........................................................................50
SECTION 7.02. Rights of Trustee........................................................................51
SECTION 7.03. Individual Rights of Trustee.............................................................52
SECTION 7.04. Trustee's Disclaimer.....................................................................52
SECTION 7.05. Notice of Defaults.......................................................................52
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SECTION 7.06. Reports by Trustee to Holders............................................................53
SECTION 7.07. Compensation and Indemnity...............................................................53
SECTION 7.08. Replacement of Trustee...................................................................54
SECTION 7.09. Successor Trustee by Merger, etc.........................................................54
SECTION 7.10. Eligibility; Disqualification............................................................55
SECTION 7.11. Preferential Collection of Claims Against Company........................................55
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations.....................................................55
SECTION 8.02. Application of Trust Money...............................................................56
SECTION 8.03. Repayment to Company.....................................................................56
SECTION 8.04. Reinstatement............................................................................56
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders...............................................................57
SECTION 9.02. With Consent of Holders..................................................................57
SECTION 9.03. Compliance with Trust Indenture Act......................................................58
SECTION 9.04. Revocation and Effect of Consents........................................................58
SECTION 9.05. Notation on or Exchange of Securities....................................................59
SECTION 9.06. Trustee To Sign Amendments, etc..........................................................59
ARTICLE TEN
MISCELLANEOUS
SECTION 10.01. Trust Indenture Act Controls.............................................................60
SECTION 10.02. Notices..................................................................................60
SECTION 10.03. Communications by Holders with Other Holders.............................................62
SECTION 10.04. Certificate and Opinion as to Conditions Precedent.......................................62
SECTION 10.05. Statements Required in Certificate or Opinion............................................62
SECTION 10.06. Rules by Trustee, Paying Agent, Registrar................................................63
SECTION 10.07. Governing Law............................................................................63
SECTION 10.08. No Recourse Against Others...............................................................63
SECTION 10.09. Successors...............................................................................63
SECTION 10.10. Counterpart Originals....................................................................63
SECTION 10.11. Severability.............................................................................63
SECTION 10.12. No Adverse Interpretation of Other Agreements............................................63
SECTION 10.13. Legal Holidays...........................................................................64
SECTION 10.14. Agent for Service; Submission to Jurisdiction; Waiver of
Immunities.............................................................................64
SECTION 10.15. Judgment Currency........................................................................64
SECTION 10.16. Unclaimed Funds..........................................................................65
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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
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<PAGE> 7
INDENTURE dated as of November 24, 1999, between GLOBAL
TELESYSTEMS EUROPE B.V., a Netherlands limited company (the "Company") and
United States Trust Company 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 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
<PAGE> 8
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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; (c)
any transaction consummated in compliance with Section 4.11 or that constitutes
a Permitted Investment; and (d) any sale, lease, transfer, conveyance or other
disposition in the ordinary course of business of capacity on any fiber optic or
cable system controlled or operated by the Company or any Restricted Subsidiary
or of telecommunications capacity, transmission rights, conduit or rights-of-way
acquired by the Company or any Restricted Subsidiary for use in a
Telecommunications Business of the Company or any Restricted Subsidiary. 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(c).
"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 Managing Directors and its Board
of Supervisory Directors, collectively).
"Board of Managing Directors" means, with respect to the
Company, its executive board.
"Board of Supervisory Directors" means, with respect to the
Company, its supervisory board.
"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.
"Capacity Swaps" means the exchange by the Company or any
Restricted Subsidiary of capacity on the Company's or such Restricted
Subsidiary's network (including without limitation through the transfer of
indefeasible rights of use or multiple investment units and/or the sale or lease
of dark fibers or wavelengths thereon) for Equity Interests in any Permitted
ISP.
<PAGE> 9
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"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 or Euros; (b)
securities (i) issued or directly and fully guaranteed or insured by the U.S.
government or any agency or instrumentality thereof or (ii) which are
denominated in Euros and are issued by or directly and fully guaranteed or
insured by a member of the European Union, or any agency or instrumentality
thereof, in each case having maturities of not more than twelve months from the
date of acquisition; (c) certificates of deposit and time deposits with
maturities of twelve months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding twelve 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; (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 twelve months
after the date of acquisition; and (f) any money market accounts or funds at
least 95% of the assets of which constitute Cash Equivalents of the kinds
described in clauses (a) through (e) above.
"Cedel" means Cedelbank.
"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 (other than a Permitted Holder or an
Investment Grade Person) 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 (other than an Investment Grade Person) 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 (other than an Investment Grade
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 an Investment Grade
Person), or any Person (other than an Investment Grade 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; provided, however, that
sales, transfers, conveyances or other dispositions in the ordinary course of
business of capacity on fiber optic or cable systems owned, controlled or
operated by the Company or any Restricted Subsidiary or of telecommunications
capacity or transmission rights, rights-of-way or conduit acquired by the
Company or any Restricted Subsidiary for use in the Telecommunications Business
of the Company or a Restricted Subsidiary, including, without limitation, for
sale, lease, transfer, conveyance or other disposition to any customer of the
Company or any Restricted Subsidiary shall not be deemed a disposition of assets
for purposes or this clause (c); (d) GTS consolidates with, or merges with or
into, another Person (other than an Investment Grade 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,
<PAGE> 10
-4-
taken as a whole, to any Person (other than a wholly owned Subsidiary of GTS or
an Investment Grade Person), or any Person (other than an Investment Grade
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 Supervisory Directors of the Company (together with any
new directors elected or nominated for election to the Board of Supervisory
Directors by the stockholders of the Company with the approval or consent 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 or consented to) cease for any reason (other than by
action of the Permitted Holders) to constitute a majority of the Board of
Managing 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 Managing 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(a).
"Common Depository" means, with respect to the Securities
issued in the form of one or more Global Securities, the Person designated as
the common depository by Euroclear or Cedelbank, which shall initially be
Bankers Trust Company.
"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
<PAGE> 11
-5-
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 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 January 4, 1999 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.
<PAGE> 12
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"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 and not for
speculative purposes.
"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.
"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. For
purposes of this Indenture, a member of the Board of Directors of the Company
shall not be deemed to have any material direct or indirect financial interest
in or with respect to the transaction being considered solely by virtue of also
being a director or officer of GTS.
<PAGE> 13
-7-
"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.
"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 Government Obligations" means Euro-denominated direct
non-callable obligations of, or obligations guaranteed by, a member state of the
European Union for the payment of which guarantee or obligations the full faith
and credit of such member state is pledged.
"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.
"Exchange Securities" means the Series B Securities to be
issued by the Company in exchange for the Series A Securities.
"Existing Notes" means, collectively, the Company's 11 1/2%
Senior Notes due 2007, 10 3/8% Senior Notes due 2009 and 10 3/8% Senior Notes
due 2006.
"Expiration Date" has the meaning set forth in the definition
of "Offer to Purchase" below.
<PAGE> 14
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"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, 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
<PAGE> 15
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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, however, 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
or guarantees 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, Deutsche Bank AG London, Lehman
Brothers International (Europe) and Dresdner Bank AG London Branch.
"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 June 1 and December 1 of each year, commencing June 1, 2000.
"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 May 15 or November 15 (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
<PAGE> 16
-10-
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.
"Investment Grade Person" means a corporation, partnership,
limited liability company or limited liability partnership (i) whose outstanding
unsecured debt securities are assigned ratings by both Rating Agencies equal to
or higher than "A", or the equivalents thereof, (ii) with a total market
capitalization at such time of at least $10 billion and (iii) that is primarily
engaged in a Telecommunications Business.
"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.
"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.
"Non-Recourse Debt" means Indebtedness:
<PAGE> 17
-11-
(1) as to which neither the Company nor any of its Restricted
Subsidiaries (a) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable as a guarantor or
otherwise, or (c) constitutes the lender; and
(2) no default with respect to which (including any rights
that the holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit upon notice, lapse of time or
both any holder of any other Indebtedness (other that Indebtedness
incurred under clause (i) of the definition of Qualified Subsidiary
Indebtedness) of the Company or any of its Restricted Subsidiaries to
declare a default on such other Indebtedness or cause the payment or
cause the payment thereof to be accelerated or payable prior to its
stated maturity.
"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".
"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 *
1,000 aggregate principal amount of Securities accepted for payment (as
specified pursuant to this Indenture) (the "Purchase Price");
<PAGE> 18
-12-
(5) that the holder may tender all or any portion of
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.
"Officer" means any managing director, the Chief Financial
Officer, or the Treasurer of the Company.
<PAGE> 19
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"Officer's Certificate" means a certificate signed by two
Officers 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 $10,000,000 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; (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; (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 this Indenture (l) Investments
in Permitted ISPs made after the date of this Indenture pursuant to Capacity
Swaps if the Board of Managing Directors determines prior thereto that such
Investment is on terms that are fair and reasonable to the Company; provided,
however, that the amount of network capacity contributed or transferred to any
Permitted ISP in connection with all Capacity Swaps in effect on any date of
determination shall not exceed 25% of the Company's aggregate network capacity
on such date (determined on the basis of the dense wavelength division
multiplexing and other equipment then in use on the Company's network and
without giving effect to anticipated upgrades or replacements thereof); (m)
Permitted Project Finance Investments; and (n) an Investment in any Person the
primary business of which is a Telecommunications Business in an amount
outstanding at any one time not to exceed 25% of the Company's Cumulative
Operating Cash Flow.
"Permitted ISP" means any Person engaged in the provision or
sale of Internet services, as determined in good faith by the Board of Directors
(whose determination shall be conclusive if evidenced by a Board Resolution).
<PAGE> 20
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"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 and Liens securing Acquired Indebtedness; provided,
however, that such Liens were in existence prior to the contemplation of such
merger or consolidation or Incurrence of such Acquired Indebtedness 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 or Incurrence of such Acquired Indebtedness; (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
Telecommunications 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 or guarantees 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 Person (other than a Restricted Subsidiary)
securing any Indebtedness of such Person; provided, however, that the
Investment in such Person constitutes a Permitted Investment; (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 Notes (whether or not the Existing Securities are also so secured); (i)
Liens securing surety, appeal and performance bonds; (j) Liens securing
Qualified Subsidiary Indebtedness or facilities which upon drawing will
constitute Qualified Subsidiary Indebtedness, to the extent permitted to be
Incurred under Section 4.12; and (k) Liens securing Indebtedness under Interest
Rate Protection Obligations or Indebtedness under Currency Agreements to the
extent permitted to be Incurred under Section 4.12.
"Permitted Project Financing Investment" means an Investment
by the Company or any Restricted Subsidiary in any Unrestricted Subsidiary for
the purpose of facilitating the incurrence by such Unrestricted Subsidiary of
Non-Recourse Debt for the purpose of financing a portion of the cost of design,
construction, engineering, acquisition, installation, development by such
Unrestricted Subsidiary of the telecommunications network of the Company;
provided, however, that the amount of any such Investment shall not exceed 60%of
the total initial capitalization of any such Unrestricted Subsidiary.
"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
<PAGE> 21
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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) if the Indebtedness being Refinanced is Indebtedness
of the Company, the Refinancing Indebtedness is incurred 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".
"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".
"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 or senior
guarantees of any such agreements or facilities 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 $100.0 million in
the aggregate at any time outstanding.
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"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 November 24, 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.
"Relevant Taxing Jurisdiction" see Section 4.20.
"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
<PAGE> 23
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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 11% Senior Notes due 2009 of
the Company issued pursuant to this Indenture and sold pursuant to the Purchase
Agreement.
"Series B Securities" means the 11% 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 plus any amount pursuant to an acquisition that otherwise
would have been considered as additional paid-in-capital except for the
Company's decision to record such acquisition as a "pooling of interests," 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.
<PAGE> 24
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"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.
"Subsidiary Debt to Annualized Operating Cash Flow Ratio"
means the ratio of (a) the Total Consolidated Subsidiary Indebtedness as of the
Determination Date to (b) two times the Consolidated Operating Cash Flow for the
Measurement Period. The Subsidiary Debt to Annualized Operating Cash Flow Ratio
shall otherwise be calculated in the same manner as the Debt to Annualized
Operating Cash Flow Ratio.
"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 Assets" means all assets, rights
(contractual or otherwise) and properties, whether tangible or intangible, used
or intended for use in connection with a Telecommunications Business and the
Equity Interests of a person engaged principally in a Telecommunications
Business.
"Telecommunications Business" means the business of (i)
transmitting, or providing services relating to the transmission of, voice,
video or data through owned or leased transmission facilities, (ii)
constructing, creating, developing or marketing communications related network
equipment, products, software, services and other devices for use in a
communications business, and (iii) evaluating, participating in or pursuing any
other activity or opportunity that is a reasonably related, ancillary or
complementary to the activities identified in clause (i) or (ii) above.
"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.
"Total Consolidated Subsidiary Indebtedness" means, as at any
date of determination, an amount equal to the aggregate amount of all
Indebtedness of 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.
<PAGE> 25
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"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.
"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.
<PAGE> 26
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"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 Common Depository, 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
<PAGE> 27
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Regulation S (a "Regulation S Global Security"). In the event of any transfer of
a beneficial interest in a QIB Global Security or a Regulation S Global Security
to an Institutional Accredited Investor in accordance with Section 2.16, the
Company shall issue one or more permanent Global Securities in registered form,
substantially in the form set forth in Exhibit A hereto, bearing the legend set
forth in Exhibit C hereto for interests held by Institutional Accredited
Investors (an "Institutional Accredited Investor Global Security"). The Company
shall cause the QIB Global Securities, Regulation S Global Securities and the
Institutional Accredited Investor Global Securities to have separate common
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 Cedelbank" and "Customer Handbook" of Cedel shall be
applicable to interests in the QIB Global Security and 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 Common Depository, 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 and the Depository, as hereinafter provided.
SECTION 2.02. Execution and Authentication.
An Officer (who shall, in case, not being a managing director,
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 an aggregate principal amount not to exceed Euro 275,000,000
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 275,000,000, 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.
<PAGE> 28
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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 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 Deutsche Bank AG, London branch
as principal Paying Agent, until such time as Deutsche Bank AG, London branch
has resigned or a successor has been appointed. In addition, the Company
initially appoints Banque Internationale a Luxembourg S.A. as Paying Agent in
Luxembourg, Bankers Trust Luxembourg S.A. as Registrar and as Paying Agent in
Luxembourg and the Trustee as Paying Agent in New York City.
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
<PAGE> 29
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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 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 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, 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 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 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 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.
<PAGE> 30
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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 Agents hold 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 deliver to the Company such cancelled Securities for
disposal.
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. Common Number.
The Company in issuing the Securities will use one or more
"common" numbers and the Trustee shall use the appropriate common 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
<PAGE> 31
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or accuracy of the common 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
common 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 principal 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 principal 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 nominee of the Common Depository, as nominee of the Depository,
(ii) be delivered to the common depository, 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 Common
Depository, 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) a Default or 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.
<PAGE> 32
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(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 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 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, duly
executed by the Holder thereof or his attorney duly authorized in
writing;
(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 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 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
(D) 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
(E) 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
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(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, if such transfer is in respect of an
aggregate principal amount of Series A Securities
less than the equivalent of $250,000, 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 under any
circumstances.
(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 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 Institutional 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 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 only if (i) the Depository is unwilling or unable to
continue as depositary for such Global Securities and the Company
thereupon fails to appoint a successor depositary within 90 days or
(ii) there shall have occurred and be continuing a Default or an Event
of Default with respect to the Securities. Under the circumstance
described in the preceding sentence, beneficial interests in a Global
Security may only be exchanged for interests in a Physical Security in
whole and not in part. Upon receipt by the 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
<PAGE> 34
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(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 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
(D) 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
(E) 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
(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, if such transfer is in respect of an
aggregate principal amount of Series A Securities
less than the equivalent of $250,000, 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 will cause, in accordance with the standing
instructions and procedures existing between the Depository and the
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 in writing. The 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 shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend,
<PAGE> 35
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the 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 by such method 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.
<PAGE> 36
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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 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 Common 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.
<PAGE> 37
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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 principal 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 principal 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 Agents (other than the Company, a
Subsidiary or an Affiliate of the Company) hold 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, (ii) Banque Internationale a Luxembourg
S.A., at 69, route d'Esch, L-1470 Luxembourg and Bankers Trust Luxembourg S.A.,
as their offices or agencies in Luxembourg for such purposes and
<PAGE> 38
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(iii) Deutsche Bank AG, London branch 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 Managing 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 Managing 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
<PAGE> 39
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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, 2000.
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
<PAGE> 40
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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 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 principal
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 principal 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.
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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
January 4, 1999 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
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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; 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.
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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 and any Restricted Subsidiary may Incur
Indebtedness (including Acquired Indebtedness) if, at the time of such
Incurrence, both (i) the Debt to Annualized Operating Cash Flow Ratio would be
less than or equal to 6.0 to 1.0 and (ii) in the case of the Incurrence of
Indebtedness by a Restricted Subsidiary, the Subsidiary Debt to Annualized
Operating Cash Flow Ratio would be less than or equal to 4.0 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 Exchange Securities, 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, engineering,
construction, acquisition, installation, or integration or improvement)
of Telecommunication Assets acquired by the Company or a Restricted
Subsidiary after the Issue Date or to finance or support working
capital or capital expenditures for a Telecommunications Business, and
Permitted Refinancings thereof;
(iv) (1) Indebtedness (including Acquired 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 in connection with the development, expansion or
operation of a Telecommunications Business or is used to finance (or is
incurred as Acquired Indebtedness in consumation of) 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;
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(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; provided, however, that in the case of
Currency Agreements which relate to Indebtedness, 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;
(ix) Indebtedness of the Company so long as the sum of (1) the
aggregate amount of Indebtedness Incurred and outstanding by the
Company pursuant to this clause (ix) and (2) the product of 2.0 and the
aggregate amount of Indebtedness Incurred and outstanding by the
Restricted Subsidiaries (collectively) pursuant to this clause (ix)
does not exceed the product of 2.0 and (A) 100% of the Net Proceeds
received by the Company after the Issue Date from contributions of
capital or the issuance and sale of its Qualified Equity Interests to
any Person (other that any Restricted Subsidiary) and (B) 80% of the
Net Proceeds of property other than cash received by the Company after
the Issue Date from contributions of capital or the issuance and sale
of its Qualified Equity Interests to any Person (other than any
Restricted Subsidiary), in each case (A) and (B) only to the extent
that such Net Proceeds have not been used pursuant to clause (c)(2) of
the first paragraph of Section 4.11 to make a Restricted Payment;
provided, however, that no such indebtedness may be incurred pursuant
to this clause (ix) to the extent that such contributions to capital or
issuance and sale of Qualified Equity Interests were previously
included in the determination of Share Capital for purposes of
Incurring Indebtedness under clause (iv) above of this paragraph (b) of
this Section 4.12;
(x) guarantees by the Company or any of its Restricted
Subsidiaries of Indebtedness of the Company or any Restricted
Subsidiary of the Company that is permitted to be incurred hereunder;
and
(xi) in addition to the items referred to in clauses (i)
through (x) above, Indebtedness of the Company or Qualified Subsidiary
Indebtedness in an aggregate amount not to exceed $25.0 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
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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 encumbrances or
restrictions 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,
renewed, supplemented, restated or replaced but only if such encumbrances or
restrictions are no more restrictive, taken as a whole, 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 that restrict the subletting or
assignment of any lease governing any leasehold interest of any Restricted
Subsidiary or that are contained in any agreement entered into in the ordinary
course of business; (e) covenants in purchase money obligations for property
acquired in the ordinary course of business restricting transfer of such
property; (f) covenants in security, pledge and similar 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; (h)
contained in any agreement entered into after the Issue Date, so long as such
encumbrances or restrictions are not materially more disadvantageous, taken as a
whole, to the Holders than the encumbrances and restrictions in existence at the
Issue Date; (i) encumbrances or restrictions contained in any agreement entered
into after the Issue Date for Indebtedness so long as (a) such encumbrances or
restrictions, taken as a whole, are not more restrictive than those which are
customary in comparable financing agreements and (b) management of the Company
determines that such encumbrances or restrictions will not materially impair the
Company's ability to make payments when due on the Notes; or (j) customary
limitations on the disposition or distribution of assets or property in joint
venture agreements entered into in the ordinary course of business; provided,
however, that such encumbrance or restriction is applicable only to such
Restricted Subsidiary constituting such joint venture.
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
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(ii) the Company would be permitted to make an 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 securing Indebtedness or trade payables 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.
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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, (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 and (z)
Indebtedness of any Restricted Subsidiary that is no longer a Restricted
Subsidiary as a result of such Asset Sale, if the Company and all of its
Restricted Subsidiaries immediately are released from all guarantees of payment
of such Indebtedness is no longer the liability of the Company or any of its
Restricted Subsidiaries shall be deemed to be cash 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. Pending
final application of any such Net Cash Proceeds, the Company or any Restricted
Subsidiary that is a borrower under Qualified Subsidiary Indebtedness may
temporarily reduce revolving credit borrowings or otherwise invest such Net Cash
Proceeds in any manner that is not prohibited by the Indenture.
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 aggregate 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
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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 $20.0
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 or arrangements in effect on the Issue Date,
as such agreements or arrangements 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, however,
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
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Unrestricted Subsidiaries to support the Indebtedness thereof; (viii) Restricted
Payments permitted under Section 4.11; and (ix) the issuance and sale by the
Company for cash of Qualified Equity Interests.
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.
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 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 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
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interest in, such Securities) 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 Securities 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, however, 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
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. 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.
Whenever in this Indenture there is mentioned, in any context,
the payment of amounts based upon the principal amount of the Securities or of
principal, interest or of any other amount payable under or with respect to any
of the Securities, such mentioned 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 Securities or any other document or instrument referred to
therein, or the receipt of any payments with respect to the Securities,
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 Securities or any other such document or instrument following the occurrence
of any Event of Default with respect to 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
hereto, 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
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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
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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) 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;
(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
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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 and the Trustee, if applicable, 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 accelerated 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.
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
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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 institute any proceeding or 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.
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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 and directed 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.
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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 its 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; provided,
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.
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(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.
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(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.
(k) In the absence of written notice from the Company, the
Trustee is entitled to assume that no Additional Interest is due or
payable on the Securities.
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
an Event of Default in payment of principal of or interest on any Security or in
the case of a Default or an Event of Default with respect to Article Five
hereof, 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.
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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, 2000, 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 notice of redemption.
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
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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.
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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
herein before 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, premium, if any, 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, cash in Euros, Euro Government
Obligations or a combination thereof sufficient to pay all remaining
indebtedness on the Securities 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
the Securities will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit and termination of obligations and (iii)
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, cash in Euros,
Euro Government Obligations or a combination thereof sufficient 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
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Federal tax law since the date of this Indenture to such effect and (iii)
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 Euros, Euro
Government Obligations or a combination thereof 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 Euros, Euro
Government Obligations or a combination thereof deposited with it pursuant to
Section 8.01, and shall apply the deposited money 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 Agents with respect to such
money shall thereupon cease.
SECTION 8.04. Reinstatement.
If the Trustee is unable to apply any Euros, Euro Government
Obligations or a combination thereof 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
Euros, Euro Government Obligations or a combination thereof 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
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reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the Euros, Euro
Government Obligations or a combination thereof 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 aggregate principal amount of the outstanding Securities, including
consents obtained in connection with a tender offer or exchange offer for such
Securities. Subject to Section 6.07, the Holders of a majority in aggregate
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:
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(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.
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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.
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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 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:
Global TeleSystems Europe B.V.
World Trade Center
Strawinskylaan 425
1077 XX Amsterdam, The Netherlands
Attention: Chief Executive Officer
Facsimile: 31-20-575-2155
Telephone: 31-20-575-2160
with a copy to:
Global TeleSystems Group, Inc.
4121 Wilson Boulevard, 8th Floor
Arlington, Virginia 22203
Attention: Chief Executive Officer
Facsimile: (703) 236-3100
Telephone: (703) 236-3101
and
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Shearman & Sterling
599 Lexington Avenue
New York, New York 10022-6069
Attention: David Beveridge
Facsimile: (44 171) 920-9020
Telephone: (44 171) 920-9005
if to the Trustee:
United States Trust Company of New York
114 W. 47th Street
New York, NY 10036-1532
Attention: Corporate Trust Administration
Facsimile: (212) 852-1626
Telephone: (212) 852-1000
if to the Principal Paying Agent:
Deutsche Bank AG, London branch
Winchester House, 1 Great Winchester Street
London, EC2N 2DB
England
Attention: Corporate Trust Administration
Facsimile: 44 171 207 5164
Telephone: 44 171 545 8000
if to the Luxembourg Paying and Transfer Agents:
Banque Internationale a Luxembourg
69, route d'Esch
L-1470 Luxembourg
Facsimile: (352) 4590-4227
Telephone: (352) 4590-3550
Bankers Trust Luxembourg S.A.
14 Boulevard F.D. Roosevelt
L-2450 Luxembourg
Facsimile: 00 352 473 136
Telephone: 00 352 460 241
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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 ss.
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
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(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 Agents or Registrar may make reasonable
rules for their 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. 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.
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. The waiver and release are part of the
consideration for issuance of the Securities.
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.
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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 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.
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SECTION 10.16. Unclaimed Funds.
If funds for the payment of principal or interest remain
unclaimed for two years, the Trustee and the Paying Agents 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.
[Signature Page Follows]
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first written above.
GLOBAL TELESYSTEMS EUROPE B.V.
By: /s/ JIM REYNOLDS
-------------------------------------
Name: Jim Reynolds
Title: Managing Director
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
By: /s/ SIROJNI DINDIAL
-------------------------------------
Name: Sirojni Dindial
Title: Assistant Vice President
<PAGE> 73
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.
NOTES MAY NOT BE OFFERED IN THE NETHERLANDS OR ELSEWHERE AS
PART OF THEIR INITIAL DISTRIBUTION, TO THE ACCOUNT
A-1
<PAGE> 74
OF ANY PERSON OR ENTITY OTHER THAN TO PERSONS OR ENTITIES WHO OR WHICH
TRADE OR INVEST IN SECURITIES 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.
A-2
<PAGE> 75
GLOBAL TELESYSTEMS EUROPE B.V.
11% Senior Note due 2009
Common No.:
No. Euro 275,000,000
GLOBAL TELESYSTEMS EUROPE 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 TWO HUNDRED SEVENTY FIVE MILLION Euro, on December 1, 2009.
Interest Payment Dates: June 1 and December 1, commencing
June 1, 2000.
Interest Record Dates: May 15 and November 15.
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.
A-3
<PAGE> 76
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officer.
GLOBAL TELESYSTEMS EUROPE B.V.
By:
----------------------------------
Name:
Title:
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 11% Senior Notes due 2009, described in the
within-mentioned Indenture.
Dated: November 24, 1999
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
By:
------------------------------------------
Authorized Signatory
A-4
<PAGE> 77
(REVERSE OF SECURITY)
GLOBAL TELESYSTEMS EUROPE B.V.
11% Senior Note due 2009
1. Interest.
GLOBAL TELESYSTEMS EUROPE 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 November 24, 1999. The Company will pay interest
semi-annually in arrears on each Interest Payment Date, commencing June 1, 2000.
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
principal 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, Deutsche Bank AG, London branch will act as
principal Paying Agent, the Trustee (as defined below) will act as Paying Agent
in New York City, Banque Internationale a Luxembourg S.A. will act as Paying
Agent in Luxembourg and Bankers Trust Luxembourg S.A. will act as Paying Agent
in Luxembourg and Registrar. 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 November 24, 1999 (the "Indenture"), between the Company and United States
Trust Company of New York, as trustee (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
A-5
<PAGE> 78
referred to in the Indenture are general obligations of the Company limited in
aggregate principal amount to Euro 275,000,000.
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 December 1,
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, 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 twelve-month period commencing on December 1 of the years set forth
below:
Redemption
Year Price
---- ----------
2004 105.500%
2005 103.667%
2006 101.833%
2007 and thereafter 100.000%
The Company shall cause a copy of such notice to be published
in a daily newspaper with general circulation in Luxembourg (which is expected
to be the Luxembourger Wort).
(b) Redemption Upon Public Equity Offering or Strategic Equity
Investment.
At any time, or from time to time, prior to December 1, 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, the Company may redeem up to 35%
of the principal amount of the Securities at a redemption price equal to 111% of
the principal amount of the Securities 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 65% 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 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 shall cause a copy of such notice to be published in a daily newspaper
with general circulation in Luxembourg (which is expected to be the Luxembourger
Wort).
(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.
A-6
<PAGE> 79
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). In the event that less
than all of the Securities are to be redeemed at any time pursuant to an
optional redemption, selection of such Securities for redemption shall be made
by the Trustee in compliance with the requirements of the principal 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 by such method as the Trustee shall deem appropriate; provided,
however, that no Security of a principal amount of Euro 1,000 or less shall be
redeemed in part; provided, further, however, that if a partial redemption is
made, selection of the Securities or portions thereof 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 Euroclear and Cedel Bank), unless such
method is otherwise prohibited.
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 applicable Paying Agent
for the Securities funds in satisfaction of the Redemption Price pursuant to the
Indenture.
7. Change of Control Offer.
Following the occurrence of a Change of Control, the Company
will be required to notify the Holders of such occurrence in the manner
prescribed by the Indentures and shall, within 30 days after the occurrence of
the Change of Control, make an 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.
A-7
<PAGE> 80
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 Agents 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 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
A-8
<PAGE> 81
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. Common Numbers.
The Company has caused common 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.
A-9
<PAGE> 82
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> 83
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> 84
EXHIBIT B
(FORM OF SERIES B SECURITY)
GLOBAL TELESYSTEMS EUROPE B.V.
11% Senior Note due 2009, Series B
Common No.:
No. Euro 275,000,000
GLOBAL TELESYSTEMS EUROPE 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 TWO HUNDRED SEVENTY FIVE MILLION Euro, on December 1, 2009.
Interest Payment Dates: June 1 and December 1, commencing
June 1, 2000.
Interest Record Dates: May 15 and November 15.
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.
B-1
<PAGE> 85
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officer.
GLOBAL TELESYSTEMS EUROPE B.V.
By:
------------------------------------
Name:
Title:
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 11% Senior Notes due 2009, Series B,
described in the within-mentioned Indenture.
Dated: November 24, 1999
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
By:
-------------------------------------
Authorized Signatory
B-2
<PAGE> 86
(REVERSE OF SECURITY)
GLOBAL TELESYSTEMS EUROPE B.V.
11% Senior Note due 2009, Series B
1. Interest.
GLOBAL TELESYSTEMS EUROPE 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 November 24, 1999. The Company will pay interest
semi-annually in arrears on each Interest Payment Date, commencing June 1, 2000.
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
principal 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, Deutsche Bank AG, London branch will act as Paying
Agent, the Trustee (as defined below) will act as Paying Agent in New York City,
Banque Internationale a Luxembourg S.A. will act as Paying Agent in Luxembourg
and Bankers Trust Luxembourg S.A. will act as Paying Agent in Luxembourg and
Registrar. 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 November 24, 1999 (the "Indenture"), among the Company and United States
Trust Company of New York, as trustee (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 B Securities referred to
in the Indenture. The Series A Securities and the Series B Securities
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<PAGE> 87
referred to in the Indenture are general obligations of the Company limited in
aggregate principal amount to Euro 275,000,000.
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 December 1,
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, 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 twelve-month period commencing on December 1 of the years set forth
below:
Redemption
Year Price
---- ----------
2004 105.500%
2005 103.667%
2006 101.833%
2007 and thereafter 100.000%
The Company shall cause a copy of such notice to be published
in a daily newspaper with general circulation in Luxembourg (which is expected
to be the Luxembourger Wort).
(b) Redemption Upon Public Equity Offering or Strategic Equity
Investment.
At any time, or from time to time, prior to December 1, 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, the Company may redeem up to 35%
of the principal amount of the Securities at a redemption price equal to 111% of
the principal amount of the Securities 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 65% 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 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 shall cause a copy of such notice to be published in a daily newspaper
with general circulation in Luxembourg (which is expected to be the Luxembourger
Wort).
(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.
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<PAGE> 88
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). In the event that less
than all of the Securities are to be redeemed at any time pursuant to an
optional redemption, selection of such Securities for redemption shall be made
by the Trustee in compliance with the requirements of the principal 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 by such method as the Trustee shall deem appropriate; provided,
however, that no Security of a principal amount of Euro 1,000 or less shall be
redeemed in part; provided, further, however, that if a partial redemption is
made, selection of the Securities or portions thereof 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 Euroclear and Cedel Bank), unless such
method is otherwise prohibited.
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 applicable Paying Agent
for the Securities funds in satisfaction of the Redemption Price pursuant to the
Indenture.
7. Change of Control Offer.
Following the occurrence of a Change of Control, the Company
will be required to notify the Holders of such occurrence in the manner
prescribed by the Indentures and shall, within 30 days after the occurrence of
the Change of Control, make an 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.
B-5
<PAGE> 89
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 Agents 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 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
B-6
<PAGE> 90
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. Common Numbers.
The Company has caused common 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.
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<PAGE> 91
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> 92
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> 93
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.
C-1
<PAGE> 94
EXHIBIT D
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
United States Trust Company of New York
114 W. 47th Street
New York, NY 10036-1532
Attention: Corporate Trust Administration
Re: 11% Senior Notes due 2009
(the "Securities"), of Global TeleSystems Europe 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.
D-1
<PAGE> 95
[ ] 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.
D-2
<PAGE> 96
\
EXHIBIT E
Form of Certificate To Be
Delivered in Connection with
Transfers to Institutional Accredited Investors
---------------, ----
United States Trust Company of New York
114 W. 47th Street
New York, NY 10036-1532
Attention: Corporate Trust Administration
Re: Global TeleSystems Europe B.V. (the "Company")
Indenture (the "Indenture") relating to 11%
Senior Notes due 2009
Ladies and Gentlemen:
In connection with our proposed purchase of Euro _____
aggregate principal amount of 11% Senior Notes due 2009 (the "Notes") of Global
TeleSystems Europe 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
E-1
<PAGE> 97
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.
4. We understand that the Company, Donaldson, Lufkin &
Jenrette International, Merrill Lynch International, Deutsche Bank
AG London, Lehman Brothers International (Europe) and Dresdner Bank
AG London Branch, 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).
E-2
<PAGE> 98
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:
----------------------------------
E-3
<PAGE> 99
EXHIBIT F
Form of Certificate To Be
Delivered in Connection
with Regulation S Transfers
---------------, ----
United States Trust Company of New York
114 W. 47th Street
New York, NY 10036-1532
Attention: Corporate Trust Administration
Re: Global TeleSystems Europe B.V. (the "Company") 11%
Senior Notes due 2009 (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:
-----------------------
F-1
<PAGE> 1
EXHIBIT 4.7
================================================================================
REGISTRATION RIGHTS AGREEMENT
BETWEEN
GLOBAL TELESYSTEMS EUROPE B.V.
AND
DONALDSON, LUFKIN & JENRETTE INTERNATIONAL
MERRILL LYNCH INTERNATIONAL
DEUTSCHE BANK AG LONDON
LEHMAN BROTHERS INTERNATIONAL (EUROPE)
DRESDNER BANK AG LONDON BRANCH
================================================================================
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated
as of November 24, 1999, by and between GLOBAL TELESYSTEMS EUROPE B.V., a
company incorporated under the laws of the Netherlands (the "Company"), and
DONALDSON, LUFKIN & JENRETTE INTERNATIONAL, MERRILL LYNCH INTERNATIONAL,
DEUTSCHE BANK AG LONDON, LEHMAN BROTHERS INTERNATIONAL (EUROPE) and DRESDNER
BANK AG LONDON BRANCH (the "Initial Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of November 18, 1999, 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 (i) Euro 225,000,000
aggregate principal amount of its 10 1/2% Senior Notes due 2006 ("Notes due
2006") and (ii) Euro 275,000,000 aggregate principal amount of its 11% Senior
Notes due 2009 ( "Notes due 2009" and together with the 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 150th 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 150th 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.
<PAGE> 3
-2-
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
90th 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.
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.
Indentures: The Indentures, dated as of November 24, 1999,
between the Company and United States Trust Company 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).
<PAGE> 4
-3-
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.
Shelf Notice: See Section 2(c).
Shelf Registration Statement: See Section 3(b).
<PAGE> 5
-4-
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 Indentures 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 Indentures or a trust
indenture that is substantially identical to the Indentures (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-
<PAGE> 6
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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").
If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Notes acquired by them which have, 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 180th day after the Issue Date, (iv)
any Holder of Private Exchange Securities so requests or (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 (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 affected thereby (the "Initial Shelf Registration
Statement"). The
<PAGE> 7
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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
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 the Initial Shelf Registration Statement and any Subsequent Shelf
Registration Statement.
(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 under-
<PAGE> 8
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written 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 at 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 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
<PAGE> 9
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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 Indentures. 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 the 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
<PAGE> 10
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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;
(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 end of 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 the 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
<PAGE> 11
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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 the 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 the 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 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 the 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
<PAGE> 12
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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 or (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 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, or (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 the 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 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;
<PAGE> 13
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(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; 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 the 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
<PAGE> 14
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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
Indentures 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
<PAGE> 15
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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, 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 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.
<PAGE> 16
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(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.
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
pro-
<PAGE> 17
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ceeding, 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 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
<PAGE> 18
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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.
<PAGE> 19
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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 provided herein, in the
Indentures 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.
(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.
(d) 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(d) 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.
(e) 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 GLOBAL TELESYSTEMS EUROPE B.V.,
World Trade Center, Strawinskylaan 425, 1077 XX Amsterdam, The Netherlands,
Attention: Chief Financial Officer with a copy to Global TeleSystems Group,
Inc., 4121 Wilson Boulevard, 8th Floor, Arlington, VA 22203, Attention: Chief
Executive Officer.
<PAGE> 20
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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 Indentures at the address specified in such Indenture.
(f) 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.
(g) 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.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) 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.
(j) 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 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.
(k) 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.
(l) 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.
(m) 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, des-
<PAGE> 21
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ignated 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.
(n) 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> 22
-S1-
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
GLOBAL TELESYSTEMS EUROPE B.V.
By: /s/ JIM REYNOLDS
-------------------------------------
Name: Jim Reynolds
Title: Managing Director
<PAGE> 23
-S2-
DONALDSON, LUFKIN & JENRETTE INTERNATIONAL
MERRILL LYNCH INTERNATIONAL
DEUTSCHE BANK AG LONDON
LEHMAN BROTHERS INTERNATIONAL (EUROPE)
DRESDNER BANK AG LONDON BRANCH
By: DONALDSON, LUFKIN & JENRETTE
INTERNATIONAL
By: /s/ JON EZROW
---------------------------------------------------
Name: Jon Ezrow
Title: Managing Director, High Yield Capital Markets
<PAGE> 1
EXHIBIT 10.5
ARBEIDSOVEREENKOMST VOOR BEDIENDEN
ONBEPAALDE DUUR-VOLTIJDS
Tussen de ondergetekende partijen:
enerzijds
HERMES EUROPE RAILTEL B.V., gevestigd te Terhulpsesteenweg 6A- 1560
Hoeilaart, vertegenwoordigd door de heer J. LOEBER, hierna genoemd de
werkgever
en anderzijds
De heer Jan DE WISPELAERE,
wonede Weidestraat 9, 3050 Oud-Heberlee,
hierna genoemd de werknemer
wordt overeengekomen wat volgt:
ARTIKEL 1
De werkgever werft de werknemer aan in de hoedanigheid van General Counsel.
De werknemer zal benoemd worden tot Corporate Secretary (Secretaris van de
Raad van Bestuur) indien dit goedgekeurd wordt door de board of Directors.
ARTIKEL 2
Deze overeenkomst wordt afgesloten voor onbepaalde duur en vangt aan op 1
mei, 1997.
ARTIKEL 3
De werkzaamheden zullen in hoofdzaak worden uitgeoefend in Hoeilaart maar
er wordt uitdrukkelijk overeengekomen dat de overbrenging van de
arbeidsplaats naar een andere plaats in Belgie niet kan worden beschouwd
als zijnde een fundamentele wijziging van de arbeidsvoorwaarden.
ARTIKEL 4
Het verloingspakket is als volgt samengevat:
1. SALARIS: De brutojaarwedde is vastgesteld op 4.500.000 BF (inclusief
vakantiegeld en 13 degrees maand) en zal uitbetaald worden door
overschrijving op een bank- of postcheckrekening.
Daar de firma op een pan-Europese basis zal werken, zal u in de toekomst
internationaal tewerkgesteld worden. Uw verloningspakket zal overeenkomstig
gestructureerd worden, onder andere door split-payment over de landen die
uw aanwezigheid en aandacht het meest vereisen. In die optiek, en mits
goedkeuring van uw benoeming tot Corporate Secretary (Secretaris van de
Raad van Bestuur) van de holdingfirma, zal een split-payment regeling
uitgewerkt worden op basis van 70% tewerkstelling in Belgie en 30% in
Nederland. Op Uw Nederlands inkomen zal de 35%-regeling aangevraagd worden
bij de betreffende autoriteiten. Effective implementatie van deze regeling
is afhankelijk van hun goedkeuring.
2. BONUS: De werknemer komt tevens in aanmerking voor een bonus die
maximaal 20% van het basisjaar-salaris bedraagt.
De bonus wordt uitbetaald ten laatste 30 dagen na ontvangst van de finale
financiele auditrapporten van het betreffende fiscale jaar uitbetaald. Het
eerste en laatste jaar is deze bonus prorata het aantal gewerkte maanden.
<PAGE> 2
3. SOCIALE ZEKERHEID: De werknemer zal gedekt worden door de Belgische
sociale zekerheid.
4. VERZEKERING: - De werknemer verklaart zich akkoord toe te treden tot de
groepsverzekering welke door Hermes werd afgesloten.
(target 80%).
-Het bedrijf zal een verzekering "Aansprakelijkheid van
bestuurders en executive officers" afsluiten.
5. BEDRIJFSWAGEN: Een bedrijfswagen (Director level) wordt ter beschikking
gesteld van de werknemer. De firma betaalt alle onderhoudskosten
overeenkomstig de Belgische gebruiken voor kaderleden. De bijgevoegde
Company Car Policy is van toepassing.
6. AANDELEN OPTIELAN: Aan de werknemer wordt een optie verleend tot de
aankoop van GTS-Hermes Inc. aandelen, beginnend op 01/01/97 tegen een
uitoefenprijs gelijk aan de waarde, niet hoger dan het gestorte
aandelenkapitaal van GTS-Hermes Inc. op 01/01/97. Het aantal aandelen zal
1/2 van 1 procent (0,5%) bedragen van de waarde van GTS-Hermes Inc. Deze
optie zal uitgeoefend worden in 3 gelijke delen, zijnde 1/3 op elk van de
eerste drie verjaardagen vanaf datum van toekenning, beginnend 01/01/98.
Het is de bedoeling een Hermes Aandelen Optieplan "Hermes Plan" op te
stellen. Hieronder wordt verstaan dat het GTS-Hermes Inc. Aandelen
Optieplan geconverteerd zal worden naar het "Hermes plan". De details zijn
gespecifieerd in de GTS-Hermes Inc. Aandelen Optieplan toekenningsbrief.
Er wordt uitdrukkelijk overeengekomen dat elke andere bezoldiging of
gratifikatie, die de werkgever bij uitzondering of periodiek aan de
werknemer mocht toekennen, buiten het in hogerlid vermeld loon, en
behoudens tegenstrijidge bepalingen, een gift zal uitmaken en derhalve
nooit rechten kan doen ontstaan voor de toekomst.
ARTIKEL 5
De wekelijkse arbeidsduur bedraagt 38u. Deze zijn verspreid over de vijf
eerste dagen van de week van maandag tot vrijdag (dagelijks van 9u tot
12:30u en van 13:30u tot 17:36u).
ARTIKEL 6
In geval van afwezigheid of werkonbekwaamheid is de werknemer verplicht de
werkgever (HR of manager) onmiddellijk, en zo mogelijk telefonisch voor
tien uur hiervan te verwittigen en hem de duur van de ongeschiktheid mee te
delen. Als de afwezigheid het gevolg is van werkonbekwaamheid wegens
ziekte of ongeval, is de werknemer verplicht een medisch attest te bezorgen
binnen de 48 uren vanaf de dag van de ongeschiktheid waarin de voorziene
duur van de werkonbekwaamheid vermeld wordt. Dezelfde verplichtingen rusten
op de werknemer ingeval verlenging van de ongeschiktheid.
ARTIKEL 7
De werknemer verbindt er zich toe, gedurende en 5 jaar na de beeindiging
van het contract, noch de fabrieks - of zakengeheimen van de werkgever aan
derden bekend te maken, noch enige daad van oneerlijke konkurrentie te
stellen of hieraan deel te nemen, noch de naam en de faam van de werkgever
in het gedrang te brengen.
ARTIKEL 8
De werknemer verplicht zich ertoe zijn volledige beroepsaktiviteit
uitsluitend te wijden aan de vennootschap en zal noch persoonlijk, noch via
tussenpersoon enige functie in dienstverband of winstegevende werkzaamheid
uitoefenen zonder voorafgaande schriftelijke toestemming van de werkgever.
ARTIKEL 9
Al hat aan de werknemer ter beschikking gestelde materiaal blijft steeds
eigendom van de maatschappij. Het is verboden dit materiaal te gebruiken
voor prive doeleinden zonder uitdrukkelijke goedkeuring van de werkgever en
zal bij het beeindigen van het contract of op eerste verzoek aan de
werkgever teruggegeven worden.
<PAGE> 3
ARTIKEL 10
De overeengekomen opzegperiode bij opzeg door de werkgever bedraagt 6
maanden.
ARTIKEL 11
Onderhavige overeenkomst is bovendien onderworpen aan de volgende
bijzondere bepaling: -Per gewerkte dag ontvangt de bediende een
maaltijdcheque met een waarde van BF 225 waarvan 45,-BF te zijnen
laste.
ARTIKEL 12
Deze overeenkomst is afgesloten en in overeenkomst met het Belgisch
Arbeidsrecht, meer bepaald de Wet op de Arbeidsovereenkomsten van 3
juli, 1978.
Alleen de rechtbanken in het arrondissement van Brussel zijn bevoegd
om uitspraak te doen over alle geschillen in verband met onderhavige
overeenkomst.
In dubbel opgemaakt te Brussel op 18 april, 1997, waarbij iedar van de partijen
erkent een exemplaar ontvangen te hebben.
HERMES EUROPE RAILTEL B.V.
Voor akkoord
/s/ JAN DE WISPELAERE /s/ J. LOEBER
Jan De Wispelaere J. Loeber
De Werknemer Managing Director
<PAGE> 4
[HERMES EUROPE RAILTEL LETTERHEAD]
ADDENDUM AAN DE ARBEIDSOVEREENKOMST DD.18 APRIL 1997
Tussen de ondergetekende partijen:
- -enerzijds
HERMES EUROPE RAILTEL B.V., gevestigd te Terhulpsesteenweg 6A- 1560
Hoeilaart, vertegenwoordigd door de heer J. LOEBER,
hierna genoemd de werkgever
en anderzijds
De heer Jan DE WISPELAERE,
wonende Weidestraat 9, 3050 Oud-Heverlee,
hierna genoemd de werknemer
wordt overeengekomen wat volgt:
ARTIKEL 1
BONUS: De werknemer komt vanaf 01 januari 1998 in aanmerking voor een bonus
die maximaal 30% van het basisjaar-jaarsalaris bedraagt in plaats van 20%
zoals overeengekomen in het origineel kontrakt dd 18 april 1997.
De bonus wordt uitbetaald ten laatste 30 dagen na ontvangst van de finale
financiele auditrapporten van het betreffende fiscale jaar uitbetaald. Het
eerste en laatste jaar is deze bonus prorata het aantal gewerkte maanden.
In dubbel opgemaakt te Brussal op 10-Feb-98, waarbij ieder van de partijen
erkent een exemplaar ontvangen te hebben.
HERMES EUROPE RAILTEL B.V.
Voor akkoord
/s/ JAN DE WISPELAERE /s/ J. LOEBER
Jan De Wispelaere J.LOEBER
De Werknemer Managing Director
<PAGE> 5
ENGLISH SUMMARY OF EXHIBIT 10.5
The contract is a full-time employment contract for an indefinite time, entered
into by and between Hermes Europe Railtel B.V. and Jan de Wispelaere.
Article 1
The employee is being granted the position of General Counsel, and, if approved
by the Board of Directors, also as Corporate Secretary.
Article 2
The contract is for an indefinite time and starts on May 1, 1997.
Article 3
The place of employment will be Hoeilaart, Belgium, but can be transferred to
any place in Belgium.
Article 4
Compensation will be as follows:
1) The salary will be BEF 4,500,000 (including paid vacations and a 13th month)
a year. Due to the international nature of the employment and upon approval of
the position of Corporate Secretary, the salary will be allocated as earned 70%
in Belgium and 30% in The Netherlands.
2) Bonus: HER can also pay the employee a bonus of up to 20% of the yearly
salary, payable at the latest 30 days after receipt of the financial audit
reports of the relevant year. The bonus will be prorated for the first and last
year of employment.
3) Social security: employee will be covered by the Belgian social security
system.
4) Insurance: employee agrees to adhere to the group insurance plan of HER; and
HER will enter into an insurance regarding the liability of directors and
executive officers.
5) Company car: a company car (director level) will be at the disposal of the
employee in accordance with Company car policy.
6) Options: employee has the option to purchase shares of GTS-Hermes Inc.,
starting on January 1, 1997 at an exercise price of equal to the value of the
paid in capital stock of GTS-Hermes Inc. on January 1, 1997. The number of
shares will be equal to 0.5% of the value of GTS-Hermes Inc. These options will
be exercisable in three equal tranches: one third on each of the three first
birthday's of the grant date of the options, starting on January 1, 1998. It is
the intention to start a
<PAGE> 6
Hermes option plan and it is also understood that the GTS-Hermes Inc. option
plan will be converted into the Hermes option plan.
Article 5
The weekly work time will be 38 hours, divided over five days, from Monday
through Friday.
Article 6
(notification procedures in case of absence or inability to work)
Article 7
Up until 5 years after termination of the employment, employee shall not
communicate to third parties the business secrets of employer and shall
not participate in unfair competition with employer and shall not endanger
the reputation of employer.
Article 8
Employee shall only work for employer and shall not engage in any other
business activities unless with written permission employer.
Article 9
Any materials put at the disposal of employee shall remain property of
employer.
Article 10
The employer can terminate the contract upon 6 month's notice.
Article 11
For every day that employee has worked, he will receive a "meal-cheque"
in the amount of BEF 225, of which BEF 45 is payable by employee.
Article 12
The agreement is entered into in accordance with Belgian law on Employment
Contracts and the competent court is the courts of Brussels.
The agreement is dated April 18, 1997.
There is also an amendment to the contract; the amendment is dated
February 10, 1998 and raises the bonus under Article 4.2 to being
potentially 30% of the yearly salary.
<PAGE> 1
EXHIBIT 10.17
Federal Communications Commission (F.C.C.)
Public Notice
OVERSEAS COMMON CARRIER SECTION 214 APPLICATIONS AND
SECTION 310(B)(4) ACTIONS TAKEN
Report No. TEL-00024
DA No. 98-2204
Thursday October 29, 1998
The following applications for International Section 214 certification have
been granted pursuant to the Commission's streamlined processing procedures set
forth in Section 63.12 of the Commission's Rules, 47 C.F.R. Section 63.12.
Unless otherwise noted, these authorizations grant the referenced applicants (1)
global or limited global facilities-based authority; and/or (2) global or
limited global resale authority. The general terms and conditions of such
global authority are set forth in Section 63.18(e)(1) & (2) of the Commission's
rules, 47 C.F.R. Section 63.18(e)(1) & (2). These authorizations also are
subject to all other applicable Commission rules and policies. This Public
Notice serves as each referenced carrier's Section 214 authorization. It
contains general and specific conditions which are set forth below. Carriers
should review carefully the general terms and conditions of their
authorizations. These are set forth in detail below and in Section 63.18(e)(1) &
(2) of the rules. Failure to comply with general or specific terms and
conditions of the referenced authorizations, or with other relevant Commission
rules and policies, could result in fines and forfeitures.
The Commission recently amended its Part 43 and Part 63 rules that apply to
U.S. international carriers in IB Docket No. 97-142, Rules and Policies on
Foreign Participation in the U.S. Telecommunications Market, FCC 97-398, rel.
Nov. 26, 1997, 62 Fed. Reg. 64.741 (Dec. 9, 1997); 83 Fed. Reg. 5743 (Feb. 4,
1998)(Foreign Participation Order). Carriers are advised to review the new
rules, which became effective February 9, 1998. These rules are contained in
Appendix C to the Foreign Participation Order and are published in the Federal
Register. The Foreign Participation Order is also available as a text file at
http://www.fcc.gov/Bureaus/international/Orders/fees7398.txt.
- -------------------------------------
ITC-214-19980804-00626 TCI WIRELESS, INC.
International Telecommunications Certificate
Global Facilities-Based Service
Grant of Authority Date Effective: 10/23/1998
Application for authority to operate as a facilities-based carrier in
accordance with the provision of Section 63.18(e)(1) of the rules.
- -------------------------------------
ITC-214-19980831-00630 PLANT LONG DISTANCE COMPANY
International Telecommunications Certificate
Global Resale Service
Grant of Authority Date Effective: 10/23/1998
Application for authority to provide resale services in accordance with the
provision of Section 63.18(e)(2) of the rules.
- -------------------------------------
ITC-214-19960901-00627 COPPER VALLEY LONG DISTANCE, INC.
International Telecommunications Certificate
Global Resale Service
Grant of Authority Date Effective: 10/23/1998
Application for authority to provide resale service in accordance with the
provision of Section 63.18(e)(2) of the rules.
- -------------------------------------
ITC-214-19980903-00619 HERMES EUROPE RAILTEL B.V.
International Telecommunications Certificate
Limited Global Facilities-Based/Global Resale Service
Other Companies:
<PAGE> 2
HER NETWORK SERVICES B.V.B.A., HERMES EUROPE RAILTEL (IRELAND) LTD., HERMES
EUROPE RAILTEL (NETWORK) LTD. HERMES EUROPE RAILTEL (US) INC.
Grant of Authority Date Effective: 10/23/1998
Application for authority to operate as a facilities-based carrier in accordance
with provisions of Section 63.18(e)(1) of the rules and also to provide service
in accordance with the provisions of Section 63.18(e)(2) of the rules except
Hungary, Poland, Czech Republic, Romania, Monaco, Russia, Ukraine, Kazakhstan,
Uzbekistan, Azerbajain, China and India. Applicants also seek authority to
acquire facilities on the Danika North and South Cable System (collectively
known as the "Danika Cable System") between Denmark and Sweden.
- -------------------------------------------------
ITC-214-19980903-00621 CONSULTA AMERICA INTERNATIONAL, INC. (d/b/a
CONSULTA SOLUTIONS, INC.)
International Telecommunications Certificate
Global Facilities-Based/Global Resale Service
Grant of Authority Date Effective: 10/23/1998
Application for authority to operate as a facilities-based carrier in accordance
with the provisions of Section 63.18(e)(1) of the rules and also to provide
service in accordance with the provisions of Section 63.18(e)(2) of the rules.
- -------------------------------------------------
ITC-214-19980903-00623 LDT NET COM INC.
International Telecommunications Certificate
Global Facilities-Based/Global Resale Service
Grant of Authority Date Effective: 10/23/1998
Application for authority to operate as a facilities-based carrier in accordance
with the provisions of Section 63.18(e)(1) of the rules and also to provide
service in accordance with the provisions of Section 63.18(e)(2) of the rules.
- -------------------------------------------------
ITC-214-19980903-00628 PUBLIC COMMUNICATIONS SERVICES, INC.
International Telecommunications Certificate
Global Resale Service
Grant of Authority Date Effective: 10/23/1998
Application for authority to provide resale services in accordance with the
provision of Section 63.18(e)(2) of the rules.
- -------------------------------------------------
ITC-214-19980904-00620 COSMOS ENGINEERS INTERNATIONAL, INC.
International Telecommunications Certificate
Global Facilities-Based/Global Resale Service
Grant of Authority Date Effective: 10/23/1998
Application for authority to operate as a facilities-based carrier in accordance
with the provisions of Sections 63.18(e)(1) of the rules and also to provide
service in accordance with the provisions of Section 63.18(e)(2) of the rules.
- -------------------------------------------------
ITC-214-19980904-00622 ULTRALINE (BERMUDA) LIMITED
International Telecommunications Certificate
Global Facilities-Based/Global Resale Service
Grant of Authority Date Effective: 10/23/1998
Application for authority to operate as a facilities-based carrier in accordance
with the provisions of Section 63.18(e)(1) of the rules and also to provide
service in accordance with the provisions of Section 63.18(e)(2) of the rules.
- -------------------------------------------------
ITC-214-19980908-00624 COMBINED BILLING, INC. (d/b/a Loca Combined
Billing)
International Telecommunications Certificate
Global Facilities-Based/Global Resale Service
<PAGE> 3
Grant of Authority Date Effective: 10/23/1998
Application for authority to operate as a facilities-based carrier in accordance
with the provisions of Section 63.18(e)(1) of the rules and also to provide
service in accordance with the provisions of Section 63.18(e)(2) of the rules.
- -----------------------------------------------
ITC-214-19980908-00625 COMPASS TELECOMMUNICATIONS, INC.
International Telecommunications Certificate
Global Facilities-Based/Global
Resale Service
Grant of Authority Date Effective: 10/23/1998
Application for authority to operate as a facilities-based carrier in accordance
with the provisions of Section 63.18(e)(1) of the rules and also to provide
service in accordance with the provisions of Section 63.18(e)(2) of the rules.
- -----------------------------------------------
ITC-214-19980908-00631 AMERIMEX COMMUNICATIONS CORP.
International Telecommunications Certificate
Global Resale Service
Grant of Authority Date Effective: 10/23/1998
Application for authority to provide resale services in accordance with the
provision of Section 63.18(e)(2) of the rules.
- -----------------------------------------------
ITC-214-19980908-00629 TRANSMISSION NETWORKS, INC. (d/b/a TRANSNET)
International Telecommunications Certificate
Global Resale Service
Grant of Authority Date Effective: 10/23/1998
Application for authority to provide resale services in accordance with the
provision of Section 63.18(e)(2) of the rules.
- -----------------------------------------------
ITC-214-19980909-00632 DISTRIBUTED COMMUNICATIONS CORPORATION
International Telecommunications Certificate
Global Resale Service
Grant of Authority Date Effective: 10/23/1998
Application for authority to provide resale services in accordance with the
provision of Section 63.18(e)(2) of the rules.
- -----------------------------------------------
ITC-ASG-19980929-00709 NEW SOUTH COMMUNICATIONS, LLC.
Assignment
Grant of Authority Date Effective: 10/21/1998
FROM: NEW SOUTH COMMUNICATIONS, LLC.
TO: NEWSOUTH COMMUNICATIONS CORP.
Application for Consent to Pro Forma Assignment of License from NewSouth
Communications, LLC to NewSouth Communications Corp.
- -----------------------------------------------
ITC-ASG-19981019-00727 HYPERION TELECOMMUNICATIONS INTERNATIONAL INC.
(d/b/a HYPERION TELECOMMUNICATIONS)
Assignment
Grant of Authority Date Effective: 10/28/1998
FROM: HYPERION TELECOMMUNICATIONS INTERNATIONAL, INC.
<PAGE> 4
TO: HYPERION COMMUNICATIONS INTERNATIONAL, LLC
Application for Consent to Pro Forma Assignment of License from Hyperion
Telecommunications International, Inc. d/b/a Hyperion Telecommunications to
Hyperion Communications International, LLC.
- -------------------------------------------------
ITC-T/C-19980930-00728 NETLINK USA
Transfer of Control
Grant of Authority Date Effective: 10/28/1998
FROM: NETLINK USA
TO: UNITED VIDEO SATELLITE GROUP, INC.
Application for Consent to Pro Forma Transfer of Control from Liberty Media
Corporation to United Video Satellite Group, Inc.
- -------------------------------------------------
ITC-T/C-19981008-00717 AXISTEL INTERNATIONAL, INC.
Transfer of Control
Grant of Authority Date Effective: 10/27/1998
FROM: AXISTEL INTERNATIONAL, INC.
TO: AXISTEL COMMUNICATIONS, INC.
Application for Consent to Pro Forma Transfer of Control from Axistel
International, Inc. to Axistel Communications, Inc.
- -------------------------------------------------
GENERAL CONDITIONS OF AUTHORIZATION
(1) These authorizations are subject to the International Bureau's Exclusion
List that identifies restrictions on providing service to particular countries
or using particular facilities. The most recent Exclusion List is attached to
this Public Notice. The list applies to all U.S. International carriers.
Including those that have previously received global or limited global Section
214 authority, whether by streamlined grant or specific written order. Carriers
are advised that the attached Exclusion List is subject to amendment at any time
pursuant to the procedures set forth in streamlining the International Section
214 Authorization Process and Tariff Requirements, 18 Docket No. 95-118, 11 FCC
Rcd 12884 (1996), para. 18. A copy of most current Exclusion List will be
maintained in the International Bureau's Reference Center and will be available
at http://www.fcc.gov/lb/td/pf/exclusionlist.html. It also will be attached to
each Public Notice that grants International Section 214 authority.
(2) The export of telecommunications services and related payments to countries
that are subject to economic sanctions may be restricted. For information
concerning current restrictions, call the Office of Foreign Assets Control, U.S.
Department of the Treasury, (202) 622-2520.
(3) Carriers shall comply with the requirements of Section 63.11 of the
Commission's rules, which requires notification by, and in certain circumstances
prior approval for, U.S. carriers acquiring an affiliation with foreign
carriers. A carrier that acquires an affiliation with a foreign carrier will be
subject to possible reclassification as a dominant carrier on an affiliated
route pursuant to the provisions of Section 63.10 of the rules.
(4) Carriers shall file with the Commission a copy of all operating agreements
entered into with their foreign correspondents and all amendments within thirty
(30) days of their execution, and shall otherwise comply with the filing
requirements contained in Sections 43.51, 64.1001 and 64.1002 of the
Commission's Rules, 47 C.F.R. Sections 43.51, 64.1001, 64.1002. In addition, any
carrier interconnecting private lines to the U.S. public switched network at its
switch, including any switch in which the carrier obtains capacity either
through lease or otherwise, shall file annually with the Chief, International
Bureau, a certified statement containing, on a country-specific basis, the
number and type (e.g. 64 kbps circuits) of private lines interconnected in such
manner. The Commission will treat the country of origin information as
confidential. Carriers need not file their contracts for interconnection unless
the Commission specifically requests. Carriers shall file their annual report on
February 1 (covering international private lines interconnected during the
preceding January 1 to December 31 period) of each year. International private
lines to countries for which the Commission has authorized the provision of
switched basic services over private lines at any time during a particular
reporting period are exempt from this requirement. See 47 C.F.R.43.51 (d).
(5) Carriers authorized to provide private line service either on a facilities
or resale basis are limited to the provision of such private line service only
between the United States and those foreign points covered by their referenced
applications for Section 214 authority. In addition, the carriers may not - and
their tariffs must state that their customers may not - connect their private
lines to the public switched network at either the U.S. or foreign end, or both,
for the provision of international switched basic services, unless the
Commission has authorized the provision of switched services over private lines
to the particular country at the foreign end of the private line. See 47 C.F.R.
<PAGE> 5
Section 63.18(e)(2)(ii)(C), (e)(3)-(4); 63.21(a). This restriction is subject
to an exception for facilities-based private lines as set forth in 47 C.F.R.
Section 63.18(e)(4)(ii)(B). See generally international Settlement Rates, IB
Docket No. 96-261, Report and Order, FCC 97-280 (rel. Aug. 18, 1997),
paragraphs 242-259.
(6) The Commission has authorized the provision of switched basic services via
facilities-based or resold private lines between the United States and the
following countries: Sweden, Canada, New Zealand, the United Kingdom,
Australia, The Netherlands, Luxembourg, Norway, Denmark, France, Germany,
Belgium, Austria, Switzerland, Japan, and Italy.
(7) Carriers may engage in "switched hubbing" to countries for which the
Commission has not authorized the provision of switched basic services over
private lines consistent with Section 63.17(b) of the rules.
(8) Carriers may provide U.S. inbound or outbound switched basic service via
their authorized private lines extending between or among the United States,
Sweden, New Zealand, the United Kingdom, Australia, The Netherlands, Luxembourg,
Norway, Denmark, France, Germany, Belgium, Austria, Switzerland, Japan, and
Italy.
(9) Carriers shall comply with the "No Special Concessions" rule, Section
63.14, 47 C.F.R. 63.14.
(10) Carriers shall file a tariff pursuant to Section 203 of the Communications
Act of 1934, as amended, 47 U.S.C. Section 203, and Part 61 of the Commission's
Rules, 47 C.F.R. Part 61, for their authorized services.
(11) Carriers shall file the annual reports of overseas telecommunications
traffic required by Section 43.61(a). Carriers shall also file the quarterly
reports required by Section 43.61 in the circumstances specified in paragraphs
(b) and (c) of that Section.
(12) Carriers shall file annual reports of circuit status and/or circuit
additions in accordance with the requirements set forth in Rules for Filing or
International Circuit Status Reports, CC Docket No. 93-157, Report and Order,
10 FCC Red 8605 (1995). See 47 C.F.R. 43.82 & 63.15(b). These requirements
apply to facilities-based carriers and private One resellers, respectively.
(13) Carriers should consult Sec. 63.19 of the rules when contemplating a
discontinuance, reduction or impairment of service. Further, the grant of these
applications shall not be construed to include authorization for the
transmission of money in connection with the services the applicants have been
given authority to provide. The transmission of money is not considered to be a
common carrier service.
(14) If any carrier is reselling service obtained pursuant to a contract with
another carrier, that contract or a contract summary shall be filed publicly by
the underlying carrier in accordance with Section 203 of the Communications
Act, 47 U.S.C. _203, and Competition in the Interstate Interexchange
Marketplace, 8 FCC Red 5880, 5902 (1991). In addition, the services obtained by
contract shall be made generally available by the underlying carrier to
similarly situated customers at the same terms, conditions and rates.
(15) To the extent that any of the above-listed applicants intends to provide
international call-back services through the use of uncompleted call signaling,
its authorization to resell international switched voice and/or date services to
provide these services is expressly subject to the conditions listed in VIA USA
Ltd., et al., 9 FCC Red 2288 (1994), on recon., 10 FCC Red 9540 (1995).
(16) To the extent the applicant is, or is affiliated with, an incumbent
independent local exchange carrier, as those terms are defined in Section
64.1902 of the rules, it shall provide the authorized services in compliance
with the requirements of Section 64.1903. See Regulatory Treatment of LEC
Provision of Interexchange Services Originating in the LEC's Local Exchange
Area and Policy and Rules Concerning the Interstate, Interexchange Marketplace,
Second Report and Order in CC Docket No. 96-149 and Third Report and Order in
CC Docket No. 98-61, FCC 97-142 (released April 18, 1997), recon., 12 FCC Red
6730.
(17) Any carrier authorized here to provide facilities-based service between
the United States and markets served by a foreign carrier with which it has an
affiliation may provide U.S. facilities-based service between the United States
and such market only if the affiliated foreign carrier has negotiated a
settlement ratio for its settled traffic with U.S. international carriers that
is in effect and is at or below the relevant benchmark settlement rate adopted
in International Settlement Rates, IB Docket No. 96-261, Report and Order, FCC
97-280 (rel. Aug. 18, 1997) (Benchmarks Order). See also Benchmarks Order at
paragraphs 224-227. For the purposes of this condition, "affiliation" and
"foreign carrier" are defined in Section 63.18(h)(1)(i) and (ii), respectively.
Petitions for reconsideration under Section 1.108 or applications for review
under Section 1.115 of the Commission's Rules in regard to the grant of any of
these applications may be filed within thirty (30) days of this public notice
(see Section 1.4(b)(2)).
For additional information concerning this matter, please contact the
International Bureau Public Reference Center at (202) 418-1492 or (202)
418-1493.
Exclusion List for International Section 214 Authorizations
- - Last Amended May 11, 1998 -
<PAGE> 6
The following is a list of countries and facilities not covered by grant of
global Section 214 authority under Section 63.18(e)(1) of the Commission's
Rules, 47 C.F.R. Section 63.18(e)(1). In addition, the facilities listed shall
not be used by U.S. carriers authorized under Section 63.01 of the Commission's
Rules, unless the carrier's Section 214 authorization specifically lists the
facility. Carriers desiring to serve countries or use facilities listed as
excluded hereon shall file a separate Section 214 application pursuant to
Section 63.18(e)(6) of the Commission's Rules.
Countries
Cuba (applications for service to this country shall comply with the separate
filing requirements of the Commission's Public Notice Report No. I-6831, dated
July 27, 1993, "FCC to Accept Applications for Service to Cuba.")
Facilities
All non-U.S. licensed cable and satellite systems except the following foreign
cable systems:
Aden-Djibout
APC
APCN
APHRODITE 2
ARIANNE 2
ASEAN
B-M-P
Brunei-Singapore
CADMOS
CANTAT-3
CARAC
CELTIC
China-Japan
CIOS
Denmark-Russia 1
ECFS
EMOS-1
EURAFRICA
FLAG
Germany-Denmark 1
Germany-Sweden No. 4
Germany-Sweden No. 5
H-J-K
HERMES
HONTAI-2
ITUR
KATTEGAT-1
Kuantan-Kota Kinabalu
LATVIA-SWEDEN
Malaysia-Thailand
Marsallie/Palermo Link
MAT-2
ODIN
PENCAN-6
R-J-K
RIOJA
SAT-2
SEA-ME-WE 2
SEA-ME-WE 3
T-V-H
Sweden-Finland
TAGIDE 2
TASMAN 2
UGARIT
UK-BEL 6
UK-Denmark 4
UK-Germany 5
UK-Germany 6
UK-Netherlands 12
UK-Netherlands 14
UK-Spain 4
Ulysses
UNISUR
This list is subject to change by the Commission when the public interest
requires. Before amending the list, the Commission will first issue a public
notice giving affected parties the opportunity for comment and hearing on the
<PAGE> 7
proposed changes. The Commission will then release an order amending the
exclusion list. This list also is subject to change upon issuance of an
Executive Order. See Streamlining the Section 214 Authorization Process and
Tariff Requirements, 11 FCC Rcd, 12884.
For additional information, contact the international Bureau's
Telecommunications Division, Policy & Facilities Branch, (202) 418-1450.
<PAGE> 1
EXHIBIT 10.18
[LOGO] PUBLIC NOTICE
FEDERAL COMMUNICATIONS COMMISSION
445 12th STREET S.W.
WASHINGTON D.C. 20554
-----------------------------------------------------------------------
News media information 202-418-0550
Fax-On-Demand 202-418-2830; Internet: http://www.fcc.gov
(or ftp.fcc.gov)
TTY (202) 418-2555
Report No. TEL-00152S Friday October 29, 1999
STREAMLINED INTERNATIONAL APPLICATIONS ACCEPTED FOR FILING
SECTION 214 APPLICATIONS (47 C.F.R. SECTION 63.13): CABLE LANDING LICENSE
APPLICATIONS (47 C.F.R. SECTION 1.767) REQUESTS TO AUTHORIZE SWITCHED SERVICES
OVER PRIVATE LINES (47 C.F.R. SECTION 63.16), SECTION 310(B)(4) REQUESTS
Unless otherwise specified, the following procedures apply to the applications
listed below:
The International Section 214 applications listed below have been found, upon
initial review, to be acceptable for filing and subject to the streamlined
processing procedures set forth in Section 63.12 of the Commission's rules, 47
C.F.R. Section 63.12. These applications are for authority under Section 214 of
the Communications Act, 47 U.S.C. Section 214 (a) to transfer control of an
authorized carrier or to assign a carrier's existing authorization; and/or (b)
to become a facilities-based international common carrier; and/or (c) to become
a resale-based international common carrier.
Pursuant to Section 63.12 of the rules, these Section 214 applications will be
granted 14 days after the date of this public notice (see 47 C.F.R. Section 1.4
regarding computation of time), and the applicant may commence operations on the
15th day, unless the Commission has informed the applicant in writing, within 14
days after the date of this public notice, that the application, on further
examination, has been deemed ineligible for streamlined processing.
Communications between outside parties and Commission staff concerning these
applications are permitted subject to the Commission's rules for
"permit-but-disclose proceedings." See 47 C.F.R. Section 1.1206. An
application can be removed from streamlined processing only in the sound
discretion of Commission staff. The filing of comments or a petition to deny
will not necessarily result in an application being deemed ineligible for
streamlined processing.
The petitions for declaratory ruling listed below are (1) for authority under
Section 310(b)(4) of the Communications Act, 47 U.S.C. Section 310(b)(4), to
exceed the 25 percent foreign ownership benchmark applicable to common carrier
radio licensees, or (2) under Section 63.16 of the rules, to add a foreign
market to the list of markets for which carriers may provide switched services
over private lines. The requested rulings will be granted 14 days after the date
of this public notice, effective the next day, unless the application is
formally opposed or the Commission has informed the applicant in writing,
within 14 days of the date of this public notice, that the application, on
further examination, has been deemed ineligible for streamlined processing. For
this purpose, a formal opposition shall be sufficient only if it is received by
the Commission and by the applicant within 14 days of the date of this public
notice and its caption and text make it unmistakably clear that it is intended
to be a formal opposition.
Copies of all applications listed here are available for public inspection in
the FCC Office of Public Affairs Reference and Information Center, located in
room CY-A257 at the Portals 2 building, 445 12th Street SW, Washington DC
20554. The center can be contacted at (202) 418-0270. All applications listed
are subject to further consideration and review, and may be returned and/or
dismissed if not found to be in accordance with the Commission's rules,
regulations, and other requirements.
We request that comments on any of these applications refer to the application
file number shown below.
Page 1 of 3
<PAGE> 2
- --------------------------------------------------------------------------------
ITC-214-19990690-00544 SPACE COAST COMMUNICATIONS, INC.
International Telecommunications Certificate
Service(s): Global or Limited Global Resale Service
Application for authority to provide service in accordance with the provisions
of Section 63.18(e)(2) of the rules.
- --------------------------------------------------------------------------------
ITC-214-19990920-00698 CONGEE COMMUNICATIONS CORPORATION
International Telecommunications Certificate
Service(s): Global or Limited Global Facilities-Based AND Resale Service
Application for authority to operate as a facilities-based carrier in
accordance with the provisions of Section 63.18(e)(1) of the rules and also to
provide service in accordance with the provisions of Section 63.18(e)(2) of the
rules.
- --------------------------------------------------------------------------------
ITC-214-19991008-00624 INFINITY INTERACTIVE, INC.
International Telecommunications Certificate
Service(s): Global or Limited Global Facilities-Based AND Resale Service
Application for authority to provide service in accordance with the provisions
of Section 63.18(e)(2) of the rules.
- --------------------------------------------------------------------------------
ITC-214-19991018-00650 NETLOJIX TELECOM, INC.
International Telecommunications Certificate
Service(s): Global or Limited Global Facilities-Based AND Resale Service
Application for authority to operate as a facilities-based carrier in
accordance with the provisions of Section 63.18(e)(1) of the rules and also to
provide service in accordance with the provisions of Section 63.18(e)(2) of
the rules.
- --------------------------------------------------------------------------------
ITC-214-19991019-00660 RICHMOND CONNECTIONS, INC.
International Telecommunications Certificate
Service(s): Global or Limited Global Facilities-Based AND Resale Service
Application for authority to operate as a facilities-based carrier in
accordance with the provisions of Section 63.18(e)(1) of the rules and also to
provide service in accordance with the provisions of Section 63.18(e)(2) of the
rules.
- --------------------------------------------------------------------------------
ITC-214-19991019-00661 PEAK COMMUNICATIONS, INC.
International Telecommunications Certificate
Service(s): Global or Limited Global Facilities-Based AND Resale Service
Application for authority to operate as a facilities-based carrier in
accordance with the provisions of Section 63.18(e)(1) of the rules and also to
provide service in accordance with the provisions of Section 63.18(e)(2) of the
rules.
- --------------------------------------------------------------------------------
ITC-214-19991020-00683 OMNITRON COMMUNICATIONS, INC.
International Telecommunications Certificate
Service(s): Global or Limited Global Resale Service
Application for authority to provide service in accordance with the provisions
of Section 63.18(e)(2) of the rules.
- --------------------------------------------------------------------------------
ITC-214-19991021-00649 OPENPOP.COM, INC.
International Telecommunications Certificate
Service(s): Global or Limited Global Resale Service
Application for authority to provide service in accordance with the provisions
of Section 63.18(e)(2) of the rules.
- --------------------------------------------------------------------------------
ITC-224-19991021-00650 WINCEL CELLULAR CORPORATION (d/b/a GREAT
LAKES COMNET 1)
International Telecommunications Certificate
Service(s): Global or Limited Global Resale Service
Application for authority to provide service in accordance with the provisions
of Section 63.18(e)(2) of the rules.
- --------------------------------------------------------------------------------
Page 2 of 3
<PAGE> 3
- --------------------------------------------------------------------------------
ITC-214-19991021-0685 AMCOM
International Telecommunications Certificate
Service(s): Global or Limited Global Facilities-Based AND Resale Service
Application for authority to operate as a facilities-based carrier in accordance
with the provisions of Section 63.18(e)(1) of the rules and also to provide
service in accordance with the provisions of Section 63.18(e)(2) of the rules.
- --------------------------------------------------------------------------------
ITC-214-19991021-00666 TDS INCORPORATED
International Telecommunications Certificate
Service(s): Global or Limited Global Resale Service
Application for authority to provide service in accordance with the provisions
of Section 63.18(e)(2) of the rules.
- --------------------------------------------------------------------------------
ITC-214-19991021-00667 TDS TECHNOLOGIES INCORPORATED
International Telecommunications Certificate
Service(s): Global or Limited Global Resale Service
Application for authority to provide service in accordance with the provisions
of Section 63.18(e)(2) of the rules.
- --------------------------------------------------------------------------------
ITC-T/C-19991018-00664 MATRIX TELECOM, INC.
Transfer of Control
FROM: MATRIX TELECOM, INC.
TO: ENERGY TRACS ACQUISITION CORP.
Application for Consent to Transfer Control of Matrix Telecom, Inc. from ETAC
and Netlojix Communications, Inc. to Energy TRACS Acquisition Corp.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INFORMATIVE
ITC-214-19990816-00577 HERMES EUROPE RAILTEL B.V.
Hermes Europe Railtel B.V. et al., filed an application on August 16, 1999 for
authority to operate as a facilities-based carrier in accordance with the
provisions of Section 63.18(e)(1) of the rules and also to provide service in
accordance with the provisions of Section 63.18(e)(2) of the rules between the
United States and Hungary, Poland, Czech Republic, Romania, Monaco, Ukraine,
Kazakhstan, Uzbekistan, Azerbajain, China and India. The application was placed
on public notice on September 29, 1999. By public notice of October 13, 1999,
the International Bureau removed from streamlined processing the portion of the
application that seeks to provide service on the U.S.-Russia route. The
remainder of the application was granted on October 13, 1999.
- --------------------------------------------------------------------------------
REMINDERS:
Applicants must certify that neither the applicant nor any party to the
application is subject to a denial of federal benefits by federal and/or state
courts under authority granted in 21 U.S.C. Section 862. See 47 C.F.R Sections
1.2001-2003.
The Commission most recently amended its rules applicable to international
telecommunications common carriers in IB Docket No. 98-118. Review of
International Common Carrier Regulations, FCC 99-51, released March 23, 1999,
64 Fed. Reg. 19.057 (Apr. 19, 1999). An updated version of Section 63.09-24 of
the rules, and other related sections, is available at
http://www.fee.gov/ib/td/pf/telecomrules.html.
<PAGE> 1
EXHIBIT 12.1 - STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS AVAILABLE TO COVER
FIXED CHARGES
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended Sept. 30,
---------------------------------------- ------------------
1995 1996 1997 1998 1998 1999
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net (loss) income (7,051) (16,577) (31,163) (48,935) (37,940) 22,062
Add back: Income Tax Expense 2,343 1,819 4,649
------- ------- ------- ------- ------- -------
Pretax (loss) income (7,051) (16,577) (31,163) (46,592) (36,121) 26,711
Adjustments:
Fixed charges, less Cap interest 9 153 12,826 30,852 23,419 54,181
Amortization expense on capitalized interest 156 30 850
------- ------- ------- ------- ------- -------
Adjusted (loss) earnings from continuing operations (7,042) (16,424) (18,337) (15,584) (12,672) 81,742
Interest expense from indebtedness, including
amortization of discount 9 153 12,826 30,852 23,419 54,181
Capitalized interest 4,865 2,365 8,937
------- ------- ------- ------- ------- -------
Total fixed charges 9 153 12,826 35,717 25,784 63,118
Deficiency of earnings available to
cover fixed charges: (7,051) (16,577) (31,163) (51,302) (38,456) n/a
======= ======= ======= ======= ======= =======
Ratio of earnings to fixed charges n/a n/a n/a n/a n/a 1.3
======= ======= ======= ======= ======= =======
</TABLE>
<PAGE> 1
Exhibit 21.1
Company Name Country of Organization
- ------------ -----------------------
GTS Europe Holdings B.V. Netherlands
GTS Transatlantic Limited Ireland
GTS Network Services (Belgium) B.V.B.A. Belgium
Hermes Europe Railtel (US) Inc. United States
GTS Carrier Services (Spain) S.L. Spain
GTS Carrier Services (Switzerland) GmbH Switzerland
GTS Support Services (Belgium) B.V.B.A. Belgium
GTS Carrier Services (Germany) GmbH Germany
GTS Carrier Services (France) Sarl France
GTS Carrier Services (Italy) s.r.l. Italy
GTS Carrier Services (Denmark) Aps Denmark
GTS Carrier Services (Ireland) Ltd. Ireland
GTS Network (Ireland) Ltd. Ireland
GTS Carrier Services (Czech) s.r.o. Czech Republic
GTS Carrier Services (Vienna) GmbH Austria
GTS Carrier Services (Sweden) AB Sweden
GTS Carrier Services (UK) Limited United Kingdom
Ebone A/S Denmark
Global TeleSystems (Denmark) A/S Denmark
<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 "Experts" and to the
use of our report dated February 26, 1999, except for Notes 1 and 2 as to which
the date is November 1, 1999 (Hermes Europe Railtel B.V.), in the Registration
Statement (Form S-4) and related Prospectus of Global TeleSystems Europe B.V.
(formerly Hermes Europe Railtel B.V.), dated on or about January 7, 2000.
/s/ Ernst & Young Reviseurs D'Entreprises S.C.C.
Brussels, Belgium
January 5, 2000
<PAGE> 1
EXHIBIT 25.1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
========================
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) _______
========================
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
NEW YORK 13-3818954
(Jurisdiction of incorporation (I. R. S. Employer
if not a U. S. national bank) Identification No.)
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036-1532
(Address of principal (Zip Code)
executive offices)
NONE
(Name, address and telephone number of agent for service)
========================
GLOBAL TELESYSTEMS EUROPE B.V.
(Exact name of obligor as specified in its charter)
THE NETHERLANDS 00-0000000
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
STRAWINSKYLAAN 425
1077 XX AMSTERDAM
(Address of principal executive offices) (Zip Code)
225,000,000 101/2% SENIOR NOTES DUE 2006
275,000,000 11% SENIOR NOTES DUE 2009
(Title of the indenture securities)
<PAGE> 2
-2-
GENERAL
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.
FEDERAL RESERVE BANK OF NEW YORK (2ND DISTRICT), NEW YORK, NEW YORK
(BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM)
FEDERAL DEPOSIT INSURANCE CORPORATION, WASHINGTON, D.C.
NEW YORK STATE BANKING DEPARTMENT, ALBANY, NEW YORK
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
THE TRUSTEE IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
2. Affiliations with the Obligor
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
NONE
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 AND 15:
THE OBLIGOR IS CURRENTLY NOT IN DEFAULT UNDER ANY OF ITS OUTSTANDING
SECURITIES FOR WHICH UNITED STATES TRUST COMPANY OF NEW YORK IS TRUSTEE.
ACCORDINGLY, RESPONSES TO ITEMS 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 AND
15 OF FORM T-1 ARE NOT REQUIRED UNDER GENERAL INSTRUCTION B.
16. List of Exhibits
T-1.1 -- ORGANIZATION CERTIFICATE, AS AMENDED, ISSUED BY
THE STATE OF NEW YORK BANKING DEPARTMENT TO TRANSACT
BUSINESS AS A TRUST COMPANY, IS INCORPORATED BY
REFERENCE TO EXHIBIT T-1.1 TO FORM T-1 FILED ON
SEPTEMBER 15, 1995 WITH THE COMMISSION PURSUANT TO
THE TRUST INDENTURE ACT OF 1939, AS AMENDED BY THE
TRUST INDENTURE REFORM ACT OF 1990 (REGISTRATION NO.
33-97056).
T-1.2 -- INCLUDED IN EXHIBIT T-1.1.
T-1.3 -- INCLUDED IN EXHIBIT T-1.1.
<PAGE> 3
-3-
16. List of Exhibits
(CONT'D)
T-1.4 -- THE BY-LAWS OF UNITED STATES TRUST COMPANY OF NEW
YORK, AS AMENDED, IS INCORPORATED BY REFERENCE TO
EXHIBIT T-1.4 TO FORM T-1 FILED ON SEPTEMBER 15, 1995
WITH THE COMMISSION PURSUANT TO THE TRUST INDENTURE
ACT OF 1939, AS AMENDED BY THE TRUST INDENTURE REFORM
ACT OF 1990 (REGISTRATION NO. 33-97056).
T-1.6 -- THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION
321(B) OF THE TRUST INDENTURE ACT OF 1939, AS AMENDED
BY THE TRUST INDENTURE REFORM ACT OF 1990.
T-1.7 -- A COPY OF THE LATEST REPORT OF CONDITION OF THE
TRUSTEE PURSUANT TO LAW OR THE REQUIREMENTS OF ITS
SUPERVISING OR EXAMINING AUTHORITY.
NOTE
AS OF DECEMBER 13, 1999, THE TRUSTEE HAD 2,999,020 SHARES OF COMMON STOCK
OUTSTANDING, ALL OF WHICH ARE OWNED BY ITS PARENT COMPANY, U.S. TRUST
CORPORATION. THE TERM "TRUSTEE" IN ITEM 2, REFERS TO EACH OF UNITED STATES TRUST
COMPANY OF NEW YORK AND ITS PARENT COMPANY, U. S. TRUST CORPORATION.
IN ANSWERING ITEM 2 IN THIS STATEMENT OF ELIGIBILITY AS TO MATTERS PECULIARLY
WITHIN THE KNOWLEDGE OF THE OBLIGOR OR ITS DIRECTORS, THE TRUSTEE HAS RELIED
UPON INFORMATION FURNISHED TO IT BY THE OBLIGOR AND WILL RELY ON INFORMATION TO
BE FURNISHED BY THE OBLIGOR AND THE TRUSTEE DISCLAIMS RESPONSIBILITY FOR THE
ACCURACY OR COMPLETENESS OF SUCH INFORMATION.
------------------
PURSUANT TO THE REQUIREMENTS OF THE TRUST INDENTURE ACT OF 1939, THE TRUSTEE,
UNITED STATES TRUST COMPANY 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 OF
DECEMBER 1999.
UNITED STATES TRUST COMPANY
OF NEW YORK, TRUSTEE
BY:
---------------------------------
GERARD F. GANEY
SENIOR VICE PRESIDENT
<PAGE> 4
-4-
Exhibit T-1.6
THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321(b) OF THE ACT.
UNITED STATES TRUST COMPANY OF NEW YORK
114 WEST 47TH STREET
NEW YORK, NY 10036
DECEMBER, 13, 1999
SECURITIES AND EXCHANGE COMMISSION
450 5TH STREET, N.W.
WASHINGTON, DC 20549
GENTLEMEN:
PURSUANT TO THE PROVISIONS OF SECTION 321(B) OF THE TRUST INDENTURE ACT OF 1939,
AS AMENDED BY THE TRUST INDENTURE REFORM ACT OF 1990, AND SUBJECT TO THE
LIMITATIONS SET FORTH THEREIN, UNITED STATES TRUST COMPANY OF NEW YORK ("U.S.
TRUST") HEREBY CONSENTS THAT REPORTS OF EXAMINATIONS OF U.S. TRUST BY FEDERAL,
STATE, TERRITORIAL OR DISTRICT AUTHORITIES MAY BE FURNISHED BY SUCH AUTHORITIES
TO THE SECURITIES AND EXCHANGE COMMISSION UPON REQUEST THEREFOR.
VERY TRULY YOURS,
UNITED STATES TRUST COMPANY
OF NEW YORK
-------------------------------
BY: /S/ GERARD F. GANEY
SENIOR VICE PRESIDENT
<PAGE> 5
-5-
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
JUNE 30, 1999
($ IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
- ------
<S> <C>
CASH AND DUE FROM BANKS $ 237,532
SHORT-TERM INVESTMENTS 155,678
SECURITIES, AVAILABLE FOR SALE 505,561
LOANS 2,312,569
LESS: ALLOWANCE FOR CREDIT LOSSES 17,486
-----------
NET LOANS 2,295,083
PREMISES AND EQUIPMENT 56,119
OTHER ASSETS 128,087
-----------
Total Assets $ 3,378,060
===========
LIABILITIES
- -----------
DEPOSITS:
NON-INTEREST BEARING $ 815,644
INTEREST BEARING 1,931,882
-----------
TOTAL DEPOSITS 2,747,526
SHORT-TERM CREDIT FACILITIES 310,113
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 131,638
-----------
Total Liabilities $ 3,189,277
-----------
STOCKHOLDER'S EQUITY
- --------------------
COMMON STOCK 14,995
CAPITAL SURPLUS 53,041
RETAINED EARNINGS 121,974
UNREALIZED LOSS ON SECURITIES
AVAILABLE FOR SALE (NET OF TAXES) (1,227)
-----------
Total Stockholder's Equity 188,783
-----------
Total Liabilities and
Stockholder's Equity $ 3,378,060
===========
</TABLE>
I, RICHARD E. BRINKMANN, MANAGING DIRECTOR & COMPTROLLER OF THE NAMED BANK DO
HEREBY DECLARE THAT THIS STATEMENT OF CONDITION HAS BEEN PREPARED IN CONFORMANCE
WITH THE INSTRUCTIONS ISSUED BY THE APPROPRIATE REGULATORY AUTHORITY AND IS TRUE
TO THE BEST OF MY KNOWLEDGE AND BELIEF.
RICHARD E. BRINKMANN, MANAGING DIRECTOR & CONTROLLER
AUGUST 8, 1999
