<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 27, 1998
REGISTRATION STATEMENT NO. 333-[ ]
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM F-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
VERSATEL TELECOM B.V.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
VERSATEL TELECOM B.V.
(TRANSLATION OF REGISTRANT'S NAME INTO ENGLISH)
<TABLE>
<S> <C> <C>
THE NETHERLANDS 4813 NONE
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
PAALBERGWEG 36
1105 BV AMSTERDAM-ZUIDOOST
THE NETHERLANDS
(31 20) 430 4300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
CT CORPORATION SYSTEM
1633 BROADWAY
NEW YORK, NY 10019
(212) 664-1666
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR PROCESS)
------------------------
WITH COPIES TO:
DAVID J. BEVERIDGE
SHEARMAN & STERLING
199 BISHOPSGATE
LONDON, ENGLAND EC2M 3TY
(44 171) 920-9000
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. [ ]
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
13 1/4% Senior Notes due 2008........ $225,000,000 100% $225,000,000 $66,375
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THOSE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED , 1998
[LOGO]
OFFER TO EXCHANGE
ANY AND ALL OUTSTANDING
13 1/4% SENIOR NOTES DUE 2008
($225,000,000 AGGREGATE PRINCIPAL AMOUNT OUTSTANDING)
FOR
13 1/4% SENIOR NOTES DUE 2008
OF
VERSATEL TELECOM B.V.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME ON , 1998, UNLESS EXTENDED
VersaTel Telecom B.V. ("VersaTel" or the "Company"), a company organized
under the laws of The Netherlands, hereby offers (the "Exchange Offer"), upon
the terms and subject to the conditions set forth in this Prospectus and the
accompanying letter of transmittal (the "Letter of Transmittal"), to exchange
$1,000 principal amount of its 13 1/4% Senior Notes due May 15, 2008, (the
"Exchange Notes"), which have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), pursuant to a Registration Statement (as
defined herein) of which this Prospectus constitutes a part, for each $1,000
principal amount of the outstanding 13 1/4% Senior Notes due May 15, 2008 (the
"Outstanding Notes") of the Company of which $225,000,000 aggregate principal
amount is outstanding. The Exchange Notes and the Outstanding Notes are
collectively referred to herein as the "Notes."
The Company will accept for exchange any and all Outstanding Notes that are
validly tendered on or prior to 5:00 p.m., New York City time, on the date the
Exchange Offer expires, which will be , 1998, unless the Exchange Offer
is extended (the "Expiration Date"). Tenders of Outstanding Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date, unless previously accepted for payment. The Exchange Offer is not
conditioned upon any minimum principal amount of Outstanding Notes being
tendered for exchange. However, the Exchange Offer is subject to certain
conditions, which may be waived by the Company, and to the terms and provisions
of the Registration Rights Agreement (as defined herein). See "The Exchange
Offer." Outstanding Notes may be tendered only in denominations of $1,000 and
integral multiples thereof. The Company has agreed to pay the expenses of the
Exchange Offer.
The Exchange Notes will be obligations of the Company entitled to the
benefits of the Indenture (as defined herein) 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. Following the completion of the
Exchange Offer, none of the Notes will be entitled to the benefits of the
Registration Rights Agreement (as defined herein) relating to contingent
increases in the interest rates provided for pursuant thereto. See "The Exchange
Offer."
(Cover continued on following page)
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE> 3
(Cover continued from previous page)
The Exchange Notes will bear interest from May 27, 1998. 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 May 27, 1998 to the date of the issuance of
the Exchange Notes. Interest on the Exchange Notes will be payable semiannually
on May 15 and November 15 of each year, commencing November 15, 1998, and will
accrue from May 27, 1998 at a rate of 13 1/4% per annum.
The Exchange Notes will be redeemable at the option of the Company, in
whole or in part, at any time on or after March 1, 2003 at the redemption prices
set forth herein, together with accrued and unpaid interest Additional Amounts
(as defined), if any, and Liquidated Damages (as defined), if any, to the
redemption date. The Notes will not be subject to any mandatory sinking fund.
The Notes may also be redeemed at the option of VersaTel, in the event of
certain changes affecting Netherlands withholding taxes requiring the payments
of Additional Amounts. See "Description of the Exchange Notes -- Redemption for
Taxation Reasons." In the event of a Change of Control (as defined), each holder
of the Notes will have the right to require the Company to purchase all or any
part of such holder's Notes at a price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, Additional Amounts, if any, and
Liquidated Damages, if any, to the date of purchase. See "Description of the
Exchange Notes -- Repurchase of Notes upon a Change of Control."
The Notes will be general unsecured obligations of the Company and will
rank senior in right of payment to all existing and future Indebtedness (as
defined) of the Company that is, by its terms or by the terms of the agreement
or instrument governing such Indebtedness, expressly subordinated in right of
payment to the notes and pari passu in right of payment with all existing and
future unsecured liabilities of the Company that are not so subordinated. The
Company intends to transfer all or substantially all of its assets and
liabilities (other than the Notes) to certain of its Restricted Subsidiaries (as
defined). After such transfer, the Company will be a holding company with
limited assets and will operate its business through its Restricted
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. At March 31, 1998, after giving
pro forma effect to the Recapitalization (as defined) and the transfer of all or
substantially all of the Company's assets and liabilities (other than the Notes)
to certain of its Restricted Subsidiaries as described above, the Company's
Subsidiaries would have had total liabilities of approximately $16.9 million
reflected on the Company's balance sheet.
The ability of the Company to incur additional Indebtedness in the future
is limited by the provisions of the Indenture relating to the Notes. See
"Description of Exchange Notes -- Certain Covenants -- Limitation on
Indebtedness."
The Exchange Notes are being offered hereunder to satisfy certain
obligations of the Company contained in the registration rights agreement, dated
May 27, 1998 (the "Registration Rights Agreement") between the Company and
Lehman Brothers Inc., as the initial purchaser (the "Initial Purchaser") with
respect to the sale of 225,000 units (the "Units") consisting of the Outstanding
Notes and warrants to purchase 1,500,000 ordinary shares of the Company (the
"Warrants"). The Units were sold by the Company (the "Offering") on May 27, 1998
to the Initial Purchaser who placed the Units with certain institutional
investors in reliance on certain exceptions under the Securities Act. The Notes
and the Warrants will be separately transferable upon the commencement of the
Exchange Offer (the "Separation Date"). The Warrants will not be registered
under the Securities Act and cannot be tendered for exchange. As a consequence,
the Warrants will continue to be subject to the restrictions on transfer of such
Warrants as set forth on the legends thereon.
The Outstanding Notes, initially purchased by qualified institutional
buyers (as defined in Rule 144A under the Securities Act ("QIBs")) or in
offshore transactions pursuant to Regulation S under the Securities Act, were
initially represented by two global Notes in registered form, in the name of a
nominee of The
ii
<PAGE> 4
Depository Trust Company ("DTC"), as depository. The Exchange Notes exchanged
for Outstanding Notes represented by the global Notes will be represented by up
to two global Exchange Notes in registered form, registered in the name of the
nominee of DTC, unless the beneficial holders thereof request otherwise. The
global Exchange Notes will be exchangeable for Exchange Notes in registered
form, in denomination of $1,000 and integral multiples thereof. See "Description
of the Exchange Notes -- Book-Entry Delivery and Form."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
the Exchange Notes issued pursuant to the Exchange Offer in exchange for the
Outstanding Notes may be offered for resale, resold and otherwise transferred by
any holder thereof (other than (i) a broker-dealer who purchased such
Outstanding Notes directly from the Company to resell pursuant to Rule 144A or
any other available exemption under the Securities Act or (ii) a person that is
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that the holder is acquiring the
Exchange Notes in its ordinary course of business and is not participating, and
has no arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes. Holders of Outstanding Notes wishing to
accept the Exchange Offer must represent to the Company that such conditions
have been met. In the event that the Company's belief is inaccurate, holders of
Exchange Notes who transfer Exchange Notes in violation of the prospectus
delivery provisions of the Securities Act and without an exemption from
registration thereunder may incur liability under the Securities Act. The
Company does not assume or indemnify holders against such liability, although
the Company does not believe any such liability should exist.
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. This Prospectus, as it may be amended or supplemented from time to time,
may be used by such broker-dealer in connection with resales of Exchange Notes
received in exchange for Outstanding Notes. The Company has agreed that, for a
period of 180 days after the Expiration Date, it will make this Prospectus and
any amendment or supplement to this Prospectus available to any such
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
The Company believes that no registered holder of the Outstanding Notes is
an affiliate (as such term is defined in Rule 405 under the Securities Act) of
the Company.
The Company will not receive any proceeds from the Exchange Offer, and no
underwriter is being utilized in connection with the Exchange Offer.
Upon completion of the Exchange Offer, Outstanding Notes which have not
been exchanged for Exchange Notes will remain outstanding. See "Risk
Factors -- Consequences of Failure to Exchange."
Prior to the Exchange Offer, there has been no public market for the
Outstanding Notes or Exchange Notes. If a market for the Exchange Notes should
develop, the Exchange Notes could trade at a discount from their principal
amount. While the Company does intend to list the Exchange Notes on the
Luxembourg Stock Exchange, there can be no assurance that the Exchange Notes
will be approved for listing or, if so, that an active public market for the
Exchange Notes will develop.
The Company has been advised by the Initial Purchaser, that, following
completion of the Exchange Offer, it intends to make a market in the Exchange
Notes; however, the Initial Purchaser is under no obligation to do so and any
market activities with respect to the Exchange Notes may be discontinued at any
time.
iii
<PAGE> 5
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS OF OR EXCHANGE FROM, HOLDERS OF OUTSTANDING NOTES IN ANY JURISDICTION
IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A SOLICITATION
IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS, NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
THE SECURITIES MAY NOT BE OFFERED OR SOLD IN OR INTO THE UNITED KINGDOM
EXCEPT IN CIRCUMSTANCES THAT DO NOT CONSTITUTE AN OFFER TO THE PUBLIC WITHIN THE
MEANING OF THE PUBLIC OFFERS OF SECURITIES REGULATION 1996. 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.
THE SECURITIES MAY NOT BE OFFERED, TRANSFERRED OR SOLD, AS APART OF THEIR
INITIAL DISTRIBUTION OR AT ANY TIME THEREAFTER, TO ANY INDIVIDUAL OR LEGAL
ENTITY ESTABLISHED, DOMICILED OR RESIDENT IN THE NETHERLANDS. THE COMPANY
CONFIRMS THAT ANY ANNOUNCEMENT OF AN OFFER OF THE SECURITIES, AS PART OF THEIR
INITIAL DISTRIBUTION, ANY ADVERTISEMENT RELATING TO SUCH OFFER AND ANY SUCH
OFFER ITSELF WILL COMPLY WITH ALL APPLICABLE SECURITIES LAWS IN THE COUNTRIES IN
WHICH THE SECURITIES ARE OFFERED. A STATEMENT TO THAT EFFECT WILL BE SUBMITTED
TO THE DUTCH SECURITIES AUTHORITIES ("STICHTING TOEZICHT EFFECTEN VERKEER")
BEFORE THE SECURITIES ARE OFFERED. THIS STATEMENT WILL ALSO BE MENTIONED IN ALL
OFFERS AND OFFER DOCUMENTS.
THE SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR DELIVERED AS PART
OF THEIR INITIAL DISTRIBUTION OR AT ANY TIME THEREAFTER, DIRECTLY OR INDIRECTLY,
OTHER THAN TO (INVESTMENT) BANKS, PENSION FUNDS INSURANCE COMPANIES, SECURITIES
FIRMS, INVESTMENT INSTITUTIONS, CENTRAL GOVERNMENTS, LARGE INTERNATIONAL AND
SUPRA-NATIONAL ORGANIZATIONS AND OTHER COMPARABLE ENTITIES, INCLUDING, ITNER
ALIA, TREASURIES AND FINANCE COMPANIES OF LARGE ENTERPRISES, WHO OR WHICH ARE
ACTIVE ON A REGULAR AND PROFESSIONAL BASIS IN THE FINANCIAL MARKETS FOR THEIR
OWN ACCOUNT.
iv
<PAGE> 6
SERVICE OF PROCESS AND
ENFORCEABILITY OF CIVIL LIABILITIES
The Company is incorporated under the laws of The Netherlands and
substantially all of its assets are located outside the United States. In
addition, most executive officers, the member of the Management Board and
members of the Supervisory Board of the Company 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 the Company judgments of courts of the United
States predicated upon civil liabilities under the United States federal
securities laws. Since there is no treaty between the United States and The
Netherlands providing for the reciprocal recognition and enforcement of
judgments, United States judgments are not enforceable in The Netherlands.
However, a final judgment for the payment of money obtained in a United States
court, which is not subject to appeal or any other means of contestation and is
enforceable in the United States, would in principle be upheld by a Netherlands
court of competent jurisdiction when asked to render a judgment in accordance
with such final judgment by a United States court, without substantive
re-examination or relitigation on 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 the Company, or
executive officers or members of the Management or Supervisory Boards, or
certain experts named herein who are residents of The Netherlands or other
countries outside the United States, any judgments in civil and commercial
matters, including judgments under the federal securities laws. The Company has
been advised by its Netherlands counsel, Stibbe Simont Monahan Duhot, that,
there is doubt as to whether a Netherlands court would impose civil liability on
the Company, or on its executive officers or on the members of the Management or
Supervisory Boards in an original action predicated solely upon the federal
securities laws of the United States brought in a court of competent
jurisdiction in The Netherlands against the Company or such members.
The Company is organized under the laws of The Netherlands and its
executive offices are currently located at Paalbergweg 36, 1105 BV
Amsterdam-Zuidoost, The Netherlands, and its telephone number is
+31-20-430-4300.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking information" within the meaning
of Section 27A of the Securities Act, and Section 21E of the Securities Exchange
Act of 1934, as amended ("Exchange Act"). Certain statements included in this
Offering Memorandum, including without limitation those concerning (i) the
Company's expansion plans for its Network (as defined), (ii) management's belief
concerning the impact of this expansion on its revenue potential, cost basis and
margins, (iii) management's belief concerning the competitiveness of its
services, (iv) the effects on the Company of certain regulatory developments and
the rate and scope of the liberalization of telecommunication services across
Europe and (v) the Company's revenue, access, network and termination costs,
liquidity and capital resources and rate of future expenditures, contain certain
forward-looking statements concerning the Company's business, operating
performance and financial condition. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, no
assurance can be given that such expectations will prove to have been correct.
Important factors that could cause results to differ materially from such
expectations ("Cautionary Statements") are disclosed in this Prospectus,
including, without limitation, in conjunction with certain forward-looking
statements under "Risk Factors," "Business" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations." All subsequent
written and oral forward-looking statements attributable to the Company or
persons acting on its behalf are expressly qualified in their entirety by the
Cautionary Statements.
1
<PAGE> 7
PRESENTATION OF INFORMATION
The Company publishes its financial statements in Dutch guilders. In this
Prospectus, references to "U.S. dollars" or "$" are to United States dollars,
references to "Dutch guilders" or "NLG" are to the currency of The Netherlands
and references to "Belgian francs" or "BEF" are to the currency of Belgium.
Solely for the convenience of the reader, this Prospectus contains translations
of certain Dutch guilder amounts into U.S. dollars at specified rates. These
translations should not be construed as representations that the Dutch guilder
amounts actually represent such U.S. dollar amounts or could be converted into
U.S. dollars at the rate indicated or at any other rate. Unless otherwise
indicated, the translations of Dutch guilders into U.S. dollars have been made
at NLG 2.08 per $1.00, the noon buying rate in the City of New York for cable
transfers in Dutch guilders as certified for customs purposes by the Federal
Reserve Bank of New York ("Noon Buying Rate") on March 31, 1998. See "Exchange
Rate Information" for historical information regarding the Noon Buying Rate. On
May 20, 1998, the Noon Buying Rate was NLG 1.99 per $1.00. See "Risk
Factors -- Risks Associated with International Operations and Exchange Rate
Fluctuations" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" for a discussion of the effects of exchange rate
fluctuations on the Company. No representation is made that the amounts in Dutch
guilders have been, could have been or could be converted into U.S. dollars at
the rates indicated or at any other rates. For information regarding recent
rates of exchange between Dutch guilders and U.S. dollars, see "Exchange Rate
Information." This Prospectus contains translations of certain Belgian franc
amounts into U.S. dollars at specified rates. These translations should not be
construed as representations that the Belgian francs amounts actually represent
such U.S. dollar amounts or could be converted into U.S. dollars at the rate
indicated or at any other rate. Unless otherwise indicated, the translation of
Belgian francs into U.S. dollars has been made at BEF 38.14 per $1.00, the noon
buying rate in the City of New York for cable transfers in Belgian francs as
certified for customs purposes by the Federal Reserve Bank of New York on March
31, 1998.
2
<PAGE> 8
SUMMARY
The following summary should be read in conjunction with, and is qualified
in its entirety by, the more detailed information, including risk factors, and
the financial statements (including the notes thereto) appearing elsewhere in
this Prospectus. Unless otherwise noted, all information in this Prospectus
reflects the completion of the Recapitalization, which was completed immediately
prior to the closing of the Offering. Unless the context otherwise requires, the
terms "Company" and "VersaTel" refer to VersaTel Telecom B.V. See "Glossary" for
the definitions of certain terms used in this Prospectus.
THE COMPANY
VersaTel is a rapidly growing alternative telecommunications service
provider based in Amsterdam, The Netherlands. VersaTel's objective is to become
the leading alternative provider of facilities-based national and international
telecommunications services in the Benelux region. The Company, formed in
October 1995, currently provides high quality, competitively priced,
international and increasingly national long distance telecommunications
services in The Netherlands, primarily to small- and medium-sized businesses,
and wholesale telecommunications services to other carriers. With over 2,600
business customers, the Company is a leading alternative to PTT Telecom B.V.
("PTT Telecom," recently renamed KPN Telecom N.V.), the former monopoly
telecommunications carrier of The Netherlands, in the small- and medium-sized
business market. The Company's business customer base has grown from 669 as of
December 31, 1996 to 2,619 as of March 31, 1998. In addition, the Company has
recently begun offering its services to targeted residential customers. As of
March 31, 1998, the Company had 617 residential customers. The Company's
revenues for the year ended December 31, 1997 were approximately NLG 18.9
million and for the three months ended March 31, 1998 were approximately NLG 6.4
million.
VersaTel was founded to capitalize on the opportunities created by the
liberalization of the telecommunications market in the Benelux region. With a
population of approximately 26.2 million, the Benelux market is characterized by
one of the world's highest population densities (approximately 351 persons per
square kilometer) and relatively high income levels (a per capita GDP of
approximately $25,800 in 1996). Located in the heart of Europe in a relatively
small geographic area, the Benelux region is a major transportation and trade
gateway, generating a relatively high level of telecommunications traffic. The
total Benelux telecommunications services market amounted to approximately $12.7
billion in 1996, and if ranked as a single country would have been the fourth
largest market in international outgoing minutes in Europe behind Germany, the
United Kingdom and France. The Company expects that the importance of
telecommunications will continue to increase as the Benelux market liberalizes,
and that telecommunications revenues as a percentage of GDP in the Benelux
region (1.9% in 1996) will increase to levels approaching those of more
liberalized markets such as the United Kingdom (2.3% in 1996) and the United
States (3.2% in 1996.) At present, the Benelux market is dominated by the former
monopoly telecommunications carriers, PTT Telecom, Belgacom S.A. ("Belgacom"),
and P&T Luxembourg, in, respectively, The Netherlands, Belgium and Luxembourg.
The Company believes that the Benelux telecommunications market represents a
substantial opportunity on which it can capitalize by capturing a portion of the
incremental growth of the market and by winning market share from the PTTs.
Currently, VersaTel's primary service offerings consist of international
and increasingly national long distance services. VersaTel has recently
introduced services aimed at the residential market including VersaContact, a
dial-around service, and calling cards. In addition to its retail voice and data
services, the Company offers wholesale switched voice services to other
telecommunications service providers. These services include international
gateway and national termination services in The Netherlands. VersaTel plans to
offer additional services, including toll-free, local access, Internet and high
speed data services to its business customers over the next 18 months.
VersaTel was one of the first carriers in The Netherlands to obtain a
carrier select code and to obtain full interconnection with PTT Telecom.
Customers access VersaTel's services by dialing (manually or through an
auto-dialer) the Company's select codes or through leased lines. The Company's
Nortel DMS 100 switch located in Amsterdam connects customers' calls to the
required destination using the most efficient routing. In addition to
interconnection with PTT Telecom, VersaTel has a national carrier agreement with
Castel N.V., one of the largest regional cable television companies in The
Netherlands, and international carrier
3
<PAGE> 9
agreements with companies such as Telfort B.V., WorldCom Inc., FaciliCom
International Inc. and Global One Communications B.V.
NETWORK PLAN
The Company has begun building a network infrastructure which is designed
to connect all major business and population centers in the Benelux region and
to provide local access in high density business areas as well as international
connectivity to Germany, France and the United Kingdom (the "VersaTel Network"
or the "Network"). VersaTel believes that the demographics and high
concentration of businesses in the Benelux market will enable the Company to
access a substantial portion of the business and residential market with
relatively low capital expenditures. The Company plans to establish the first
integrated overlay network in the Benelux region and plans for the Network to
connect to most of the PTTs' points of interconnection, pass within five
kilometers of more than 270,000 businesses and cover all major population
centers. VersaTel believes that its Network will enable the Company to better
control costs, ensure access to bandwidth, offer a broader portfolio of services
and improve margins.
The VersaTel Network will consist of three integrated elements:
- Benelux Overlay Network. VersaTel plans to construct an overlay network
that will connect the major commercial centers in the Benelux region,
including most interconnection points with the PTTs and other
telecommunications service providers (the "Benelux Overlay Network"). The
Company has contracted to acquire fiber-ready conduit between Rotterdam,
The Netherlands and Antwerp, Belgium. The Company is also negotiating to
acquire dark fiber and rights-of-way from a number of utilities and has
contracted to build fiber-optic rings. The initial phase of the Benelux
Overlay Network will consist of a fiber-optic ring connecting Amsterdam,
The Hague, Rotterdam and Utrecht (the "Netherlands Randstad") and a
fiber-optic link extending to Antwerp and Brussels. This initial phase is
expected to be completed by the end of 1998. The remainder of the Benelux
Overlay Network is expected to connect an additional 23 major business
centers in the Benelux by the end of 1999. Upon completion, the Company
expects that the Benelux Overlay Network will consist of approximately
2,200 route kilometers of fiber-optic rings.
- Local Access Network. VersaTel intends to establish local access
infrastructure in areas with high business concentrations (the "Local
Access Network") along the Benelux Overlay Network. The Local Access
Network will connect business customers directly to the VersaTel Network.
The Local Access Network will consist of both fiber-optic cable and radio
links. The Company intends to start implementing local access early in
1999, shortly after the first segment of the Benelux Overlay Network
becomes operational. The Company plans to install up to 1,500 route
kilometers of local access infrastructure over the next 18 months.
- International Network. VersaTel intends to build or acquire direct
fiber-optic links connecting the Benelux Overlay Network to
interconnection points in Germany, France and the United Kingdom (the
"International Network"). Approximately 55.3% of the Benelux region's
outbound traffic currently terminates in these three countries. VersaTel
expects to complete its fiber-optic links to its initial interconnection
points in Dusseldorf, Lille, Paris and London in 1999.
BUSINESS STRATEGY
VersaTel's objective is to become the leading alternative provider of
facilities-based national and international telecommunications services in the
Benelux region. The principal elements of the Company's strategy are:
- Targeted Network Roll-out. The Benelux Overlay Network's routing is
designed to cover the major business and population centers in the
Benelux region and pass as many businesses as economically feasible. As
individual segments of the Benelux Overlay Network are completed, the
Company intends to connect business customers directly via the Local
Access Network. For example, the first segment of the Benelux Overlay
Network, when completed, will connect the Netherlands Randstad, Antwerp
and Brussels and will pass within five kilometers of approximately
100,000 businesses. The Company believes that this targeted network
roll-out strategy will allow it to gain market share rapidly, increase
revenues and improve margins.
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- Grow Customer Base. The Company intends to leverage the growth of its
facilities-based Network, its product and service offerings and its sales
and marketing capabilities to expand its customer base. The Company
believes it has developed strong brand recognition in its target market
of small- and medium-sized businesses and intends to capitalize on this
by increasing its direct sales force, introducing new distribution
channels and targeting new customer segments, including high-usage
residential customers.
- Increase Product and Service Offerings. The Company intends to provide
new products and services in order to attract additional customers,
enhance customer loyalty and increase network utilitization by its
existing customer base. In addition to international long distance,
VersaTel has also introduced national long distance, dial-around services
and calling cards to its customers. The Company also expects to introduce
toll-free, local access, Internet and high speed data services over the
next 18 months.
- Focus on Superior Customer Service. VersaTel strives to maintain a
competitive advantage over its competitors in its target markets by
providing superior customer service. The Company believes that its target
market of small- and medium-sized businesses has been particularly
underserved by the PTTs and that providing a high level of customer
service is a key element to establishing customer loyalty and attracting
new customers. The Company has dedicated customer service representatives
who initiate contact with customers on a routine basis to ensure
satisfaction and market new products. In addition, the Company provides
detailed monthly billing statements and monthly call management reports
which identify savings to customers and enable them to manage their
telecommunications expenditures more effectively.
- Expand Facilities-Based Wholesale Services. The Company currently offers
international gateway services as well as domestic termination services
for both international and national carriers. In addition, as VersaTel
deploys its Network, the Company intends to offer additional wholesale
services, including leased lines, conduits, dark fiber and managed
bandwidth in order to increase network utilization and to offset the cost
of network construction. The Company expects the creation of network
capacity in the form of dark fiber, conduits and rights-of-way will
provide a trading currency to be used with other carriers as a means of
accelerating the deployment of the VersaTel Network.
- Pursue Selective Acquisitions and Strategic Relationships. The Company
seeks to acquire other alternative telecommunications service providers
and Internet service providers in order to accelerate the growth of its
customer base, Network and service portfolio. In addition, the Company is
actively pursuing strategic relationships with alternative carriers in
Germany, France and the United Kingdom in order to establish
interconnection agreements, to partner on infrastructure projects and to
expand its geographic reach.
REGULATORY AND COMPETITIVE ENVIRONMENT
The European telecommunications market has historically been dominated by
monopoly PTTs. With a series of directives, the European Commission ("EC") has
been instrumental in opening the telecommunications market to competition. As
part of the liberalization of the telecommunications market, PTTs are now
required to offer cost-oriented interconnection agreements to alternative
service providers. In addition, the EC has mandated carrier selection, carrier
pre-selection and number portability. The Company has and will continue to
maintain a proactive approach to regulatory issues on both a national and
European level. The Company believes that this approach will help ensure
compliance by the PTTs with EC directives, allow it to take advantage of
regulatory opportunities and help it influence a regulatory framework that
fosters a competitive environment. Liberalization has resulted in increased
competition from new market entrants, reduced long distance tariffs and
increased traffic volumes as well as the emergence of new service offerings and
enhanced product and price awareness.
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<PAGE> 11
MANAGEMENT
VersaTel was founded by R. Gary Mesch, the Company's Managing Director. Mr.
Mesch has substantial experience in telecommunications in the United States,
where he founded NovaNet Communications, Inc. ("NovaNet"), a regional carrier in
Colorado, which was acquired by ICG Communications in 1994, and in Europe, where
he acted as a strategic adviser to several large telecommunications carriers.
VersaTel's management team also includes W. Greg Mesch, Chief Operations
Officer, brother of R. Gary Mesch. W. Greg Mesch was the Chief Operations
Officer of Esat Telecom Limited, the predecessor of Esat Telecom Group plc, a
facilities-based long distance and wireless carrier in Ireland, from 1993 to
1996. VersaTel's senior management team also includes co-founder Marc van der
Heijden, Legal Counsel; Raj Raithatha, Chief Financial Officer, who was
previously the Chief Financial Officer and Director of Business Development for
ACC Corp.'s European operations; Larry Hendrickson, Chief Technology Officer;
John de Rooij, Sales Manager, and Maurice J.J.J.M. Bergmans, Manager Belgium
Operations.
RECENT DEVELOPMENTS
VersaTel has undertaken a four part recapitalization (the
"Recapitalization"). In February 1998, two of the three shareholders of the
Company, Telecom Founders B.V. ("Telecom Founders") and NeSBIC Venture Fund C.V.
("NeSBIC"), a subsidiary of Fortis, invested an additional NLG 7.2 million in
equity capital in the Company. In addition, NeSBIC and Cromwilld Limited
("Cromwilld"), the third shareholder of the Company, converted their
subordinated convertible notes totaling NLG 3.6 million into Ordinary Shares of
the Company, and NeSBIC converted its NLG 4.5 million bridge loan into Ordinary
Shares of the Company. The third component of the Recapitalization was comprised
of a new equity investment by Paribas Deelnemingen N.V. ("Paribas") of NLG 12.8
million. Lastly, the Company received from Telecom Founders, NeSBIC, Paribas and
Nederlandse Participatie Maatschappij N.V. ("NPM") an additional NLG 15.0
million in equity capital immediately prior to the closing of the Offering. As a
result of the Recapitalization, the Company's share capital has increased from
NLG 7.0 million to NLG 50.1 million. See "Capitalization" and "Security
Ownership of Principal Shareholders and Management."
VersaTel's revenues for the fourth quarter of 1997 and the first and second
quarters of 1998 were NLG 4.6 million, NLG 6.4 million and NLG 9.3 million,
respectively, representing quarter over quarter revenue growth of 38.2% and
46.0%, respectively. VersaTel's billed minutes of use for the fourth quarter of
1997 and the first and second quarters of 1998 were 7.1 million, 12.4 million
and 26.9 million, respectively, representing quarter over quarter minutes of use
growth of 74.4% and 116.1%, respectively. See "Management's Discussion and
Analysis of Financial Condition and Results of Operation -- Results of
Operations." In June 1998, the Company acquired a 55% interest in Bizztel
Telematica B.V., a small, regional switchless reseller with over 400 small- and
medium-sized business customers in The Netherlands. The Company acquired the
remaining 45% of equity in July 1998. Also, in July 1998, the Company signed a
letter of intent to acquire an internet service provider based in The
Netherlands.
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<PAGE> 12
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $225,000,000 aggregate
principal amount of Outstanding Notes for an equal aggregate principal amount
Exchange Notes. The Exchange Notes will be obligations of the Company entitled
to the benefits of the Indenture (as defined herein) 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, and therefore are not
entitled to the benefits of the registration rights (the "Registration Rights")
granted under the Registration Rights Agreement relating to the contingent
increases in the interest rates provided for pursuant thereto.
The Exchange Offer......... $1,000 principal amount of Exchange Notes will be
issued in exchange for each $1,000 principal amount
of Outstanding Notes validly tendered pursuant to
the Exchange Offer. As of the date hereof, $225
million in aggregate principal amount of
Outstanding Notes is outstanding. The Company will
issue the Exchange Notes to tendering holders of
Outstanding Notes on or promptly after the
Expiration Date.
Resale of the Exchange
Notes...................... Based on interpretation by the staff of the
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), the Company believes that Exchange Notes
issued pursuant to the Exchange Offer in exchange
for Outstanding Notes may be offered for resale,
resold and otherwise transferred by any holder
thereof (other than (i) a broker-dealer who
purchased such Outstanding Notes directly from the
Company for resale pursuant to Rule 144A or any
other available exemption under the Securities Act
or (ii) a person that is an "affiliate" of the
Company within the meaning of the Rule 405 under
the Securities Act) without compliance with the
registration and prospectus delivery provisions of
the Securities Act, provided that the holder is
acquiring the Exchange Notes in its ordinary course
of business and is not participating, and has no
arrangement or understanding with any person to
participate, in the distribution of the Exchange
Notes. In the event that the Company's belief is
inaccurate, holders of Exchange Notes who transfer
Exchange Notes in violation of the prospectus
delivery provisions of the Securities Act and
without an exemption from registration thereunder
may incur liability under the Securities Act. The
Company does not assume or indemnify holders
against such liability, although the Company does
not believe that any such liability should exist.
Each broker-dealer that receives Exchange Notes in
exchange for Outstanding Notes held for its own
account, as a result of market-making activities 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. This
Prospectus, as it may be amended or supplemented
from time to time, may be used by such
broker-dealer in connection with resales of
Exchange Notes received in exchange for Outstanding
Notes. The Company has agreed that, for a period of
180 days after the date of this Prospectus, it will
make this Prospectus and any amendment or
supplement to this Prospectus available to any such
broker-dealer for use in
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<PAGE> 13
connection with any such resales. See "Plan of
Distribution." The Company believes that no
registered holder of the Outstanding Notes is an
affiliate (as such term is defined in Rule 405 of
the Securities Act) of the Company.
The Exchange Offer is not being made to, nor will
the Company 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...................... 5:00 p.m., New York City time, on ,
1998, unless the Exchange Offer is extended, in
which case the term "Expiration Date" means the
latest date and time to which the Exchange Offer is
extended. See "The Exchange Offer -- Expiration
Date; Extensions; Amendments."
Accrued Interest on the
Exchange Notes and the
Outstanding Notes........ The Exchange Notes will bear interest from May 27,
1998. 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 such Outstanding
Notes accrued from May 27, 1998 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 November 15, 1998 (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.
See "The Exchange Offer -- Interest on the Exchange
Notes."
Termination of the Exchange
Offer.................... The Company may terminate the Exchange Offer if it
determines that its 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 Commission of any existing law,
statute, rule or regulation. The Company does 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 the Company
under the Registration Rights Agreement should the
Company fail to consummate the Exchange Offer. See
"The Exchange Offer -- Termination."
Procedures for Tendering
Outstanding Notes........ Each holder of Outstanding Notes wishing to accept
the Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with the Outstanding Notes to be exchanged and any
other required documentation to United States Trust
Company of New York, as Exchange Agent, at the
address set forth herein and therein or effect a
tender of Outstanding Notes pursuant to the
procedures for book-entry transfer as provided
herein. See "The Exchange Offer -- Procedures for
Tendering."
By executing the Letter of Transmittal, each holder
will represent to the Company that, among other
things, (i) the Exchange Notes acquired
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<PAGE> 14
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, (ii) neither the holder nor
any such other person has an arrangement or
understanding with any person to participate in the
distribution of 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 the Company.
Special Procedures for
Beneficial Holders....... Any beneficial holder whose Outstanding Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender in the Exchange Offer should
contact such registered holder promptly and
instruct such registered holder to tender on its
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 its 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. See "The
Exchange Offer -- Procedures for Tendering."
Guaranteed Delivery
Procedures............... Holders of Outstanding Notes who wish to tender
their Outstanding Notes and whose Outstanding Notes
are not immediately available or who cannot deliver
their Outstanding Notes (or who cannot complete the
procedure for book-entry transfer on a timely
basis) and a properly completed Letter of
Transmittal or any other documents required by the
Letter of Transmittal to the Exchange Agent prior
to the Expiration Date may tender their Outstanding
Notes according to the guaranteed delivery
procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures."
Withdrawal Rights.......... Tenders of Outstanding Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time,
unless previously accepted for exchange. See "The
Exchange Offer -- Withdrawal of Tenders."
Acceptance of Outstanding
Notes and Delivery of
Exchange Notes........... Subject to certain conditions (as summarized above
in "Termination of the Exchange Offer" and
described more fully under the "The Exchange
Offer -- Termination"), the Company will accept for
exchange any and all Outstanding Notes which are
properly tendered in the Exchange Offer prior to
5:00 p.m., New York City time, on the Expiration
Date. The Exchange Notes issued pursuant to the
Exchange Offer will be delivered promptly following
the Expiration Date. See "The Exchange
Offer -- General."
Certain Tax
Considerations........... The exchange pursuant to the Exchange Offer will
generally not be a taxable event for federal income
tax purposes. See "Certain Tax Considerations."
Exchange Agent............. United States Trust Company of New York, the
Trustee under the Indenture, is serving as exchange
agent (the "Exchange Agent") in connection with the
Exchange Offer. The address of the Exchange Agent
is: United States Trust Company of New York, 114
West 47th Street,
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<PAGE> 15
New York, NY 10036, Attention: Corporate Trust
Services. For information with respect to the
Exchange Offer, the telephone number for the
Exchange Agent is (800) 548-6565 and the facsimile
number for the Exchange Agent is (212) 420-6152.
Use of Proceeds............ There will be no cash proceeds payable to the
Company from the issuance of the Exchange Notes
pursuant to the Exchange Offer. The net proceeds to
the Company from the sale of the Outstanding Notes
were approximately $216.2 million, after deducting
underwriting discounts and commissions and
estimated fees and expenses. The Company used
approximately $81.6 million to acquire the Pledged
Securities with respect to the first six interest
payments on the Notes. The Company intends to use
the remaining net proceeds from the Offering,
together with the proceeds from the
Recapitalization, to make capital expenditures
related to the expansion and development of the
VersaTel Network, including through acquisitions,
to fund operating losses and working capital
requirements and for other general corporate
purposes including acquisitions and strategic
alliances. The Company estimates that the total
capital expenditures necessary to construct and
develop its Network through 1999 will be
approximately NLG 222.2 million ($106.8 million),
with approximately NLG 106.5 million required for
the construction and development of the Benelux
Overlay Network, approximately NLG 46.6 million for
the construction and development of the initial
Local Access Network, approximately NLG 37.1
million for the construction and development of the
International Network and NLG 32.0 million for
switching, network management and billing/back-
office support systems. Prior to the application of
the net proceeds from the sale of the Outstanding
Notes, as described above, such funds will be
invested by the Company in short-term investment
grade securities.
SUMMARY DESCRIPTION OF THE EXCHANGE NOTES
Notes Offered.............. $225,000,000 principal amount of 13 1/4% Senior
Notes due 2008.
Maturity Date.............. May 15, 2008.
Interest Payment Dates..... May 15 and November 15 of each year, commencing
November 15, 1998.
Ranking.................... The Notes will rank senior in right of payment to
any existing and future subordinated Indebtedness
of the Company and pari passu in right of payment
with all existing and future senior Indebtedness of
the Company. At March 31, 1998, after giving pro
forma effect to the Recapitalization and the
Offering, the Company would have had approximately
$225.0 million of Indebtedness. 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. At March 31, 1998, after
giving pro forma effect to the Recapitalization and
the transfer of all or substantially all of the
Company's assets and liabilities (other than the
Notes) to certain of its Restricted Subsidiaries,
the Company's Subsidiaries would have had total
liabilities of $16.9 million reflected on the
Company's balance sheet.
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<PAGE> 16
Escrow Account............. Concurrently with the consummation of the Offering,
the Company purchased, pledged and transferred to
the Trustee (as defined), for the benefit of the
Holders of the Notes, U.S. Government Securities in
such amounts sufficient upon scheduled interest and
principal payments of such securities to provide
for the payment in full of the first six scheduled
interest payments on the Notes (excluding any
Additional Amounts and any Liquidated Damages). The
company used approximately $81.6 million of the net
proceeds of the Offering to acquire the Pledged
Securities. The Pledged Securities have been
pledged to the Trustee for the benefit of the
Holders of the Notes and deposited into the Escrow
Account (as defined) held by an Escrow Agent (as
defined) for the benefit of the Trustee and the
Holders of the Notes in accordance with the Escrow
Agreement (as defined). Funds may not be disbursed
from the Escrow Account for interest payments on
the Notes. Upon acceleration of the maturity of the
notes, the Escrow Agreement will provide for the
payment of the amount remaining in the Escrow
Account to the Trustee to be applied on account of
amounts owing on the Notes as provided in the
Indenture. Pending such disbursement, any
uninvested funds contained in the Escrow Account
will be invested in Cash Equivalents (as defined).
See "Description of the Exchange Notes -- Escrow
Account."
Optional Redemption........ The Notes may be redeemed at the option of the
Company, in whole or in part at any time on or
after May 15, 2003 at the redemption prices set
forth herein, plus accrued and unpaid interest,
Additional Amounts, if any, and Liquidated Damages,
if any, to the redemption date. The Notes may also
be redeemed at the option of the Company, in whole
but not in part, at any time at a redemption price
equal to the aggregate principal amount thereof,
together with accrued and unpaid interest and
Liquidated Damages, if any, to the redemption date
and all Additional Amounts then due and which will
become due as a result of the redemption or
otherwise in the event of certain changes affecting
Netherlands, withholding taxes. See "Description of
the Exchange Notes -- Optional Redemption" and
"-- Redemption for Taxation Reasons."
Withholding Taxes;
Additional Amounts......... Unless required by law, all payments by the Company
respect of the Notes will be made without
withholding or deduction for or on account of any
Taxes imposed by or within any Relevant Taxing
Jurisdiction. Subject to certain exceptions and
limitations, the Company will be required to pay
any Additional Amounts as may be necessary in order
that the net amounts received by the holders after
any withholding or deduction in respect of any such
Taxes required by law shall equal the respective
amounts of principal and interest that would have
been received in respect of the Notes in the
absence of such withholding or deduction. See
"Description of the Exchange Notes -- Withholding
Taxes."
Change of Control.......... Upon a Change of Control, holders of the Notes will
have the right to require the Company to purchase
their Notes in whole or in part at a price in cash
equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest, thereon
to the date of repurchase, plus Additional Amounts,
if any, and Liquidated Damages, if any, to the date
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<PAGE> 17
of repurchase. See "Description of the Exchange
Notes -- Repurchase of Notes upon a Change of
Control."
Certain Covenants.......... The Indenture contains certain covenants that,
among others things, limit the ability of the
Company and its Restricted Subsidiaries to incur
additional Indebtedness, create Liens, pay
dividends or make other distributions or
investments, repurchase Equity Interest or make
certain other Restricted Payments, sell assets of
the Company or its Restricted Subsidiaries, enter
into certain consolidations or mergers or enter
into certain transactions with affiliates. In
addition, under certain circumstances, the Company
will be required to offer to purchase the Notes, in
whole or in part, at a purchase price equal to 100%
of the outstanding principal amount thereof, plus
accrued and unpaid interest thereon, plus
Additional Amounts, if any, and Liquidated Damages,
if any, to the date fixed for the closing of such
offer, with the proceeds of certain Asset Sales.
These covenants are subject to a number of
important exceptions and qualifications. See
"Description of the Exchange Notes -- Certain
Covenants."
Registration Rights........ In connection with the sale of the Outstanding
Notes, the Company agreed in the Registration
Rights Agreement to (i) file within 90 days, and
use its reasonable best efforts to cause to be
declared effective within 150 days, of the date of
the original issuance of the Outstanding Notes, a
registration statement (the "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 and (ii) use its reasonable best
efforts to cause the Exchange Offer to be
consummated on or before 30 days after the date on
which the Registration Statement is declared
effective by the Commission.
In the event that (i) the Company is not permitted
to file the Registration Statement or to consummate
the Exchange Offer on account of changes in law or
the applicable interpretations of the staff of the
Commission, (ii) any holder that is a QIB notifies
the Company at least 20 business days prior to the
consummation of the Exchange Offer that (a)
applicable law or SEC policy prohibits the Company
from participating in the Exchange Offer, (b) such
holder may not resell the Exchange Notes acquired
by it in the Exchange Offer to the public without
delivering a prospectus and that this Prospectus is
not appropriate or available for such resales by
such holder or (c) such holder is a broker-dealer
and holds Notes acquired directly from the Company
or an affiliate of the Company, (iii) the Exchange
Offer is not for any other reason consummated
within 180 days after the original issue date of
the Outstanding Notes, (iv) any holder (other than
a Participating Broker-Dealer) is not eligible to
participate in the Exchange Offer, or in the case
of any holder that participates in the Exchange
Offer, such holder does not receive Exchange Notes
on the date of the exchange that may be sold
without restriction under federal securities laws
(other than due solely to the status of such holder
as an affiliate of the Company within the meaning
of the Securities Act or due to the requirement
that such holder deliver a copy of this Prospectus
in connection with any resale of the Exchange
Notes) or (v) the Exchange Offer has been completed
and in the opinion of counsel for the Initial
Purchaser a Registration
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<PAGE> 18
Statement must be filed and a prospectus must be
delivered by the Initial Purchaser in connection
with any offering or sale of Transfer Restricted
Securities (as defined in the Registration Rights
Agreement), the Company will use its reasonable
best efforts to file, within 90 days of the
earliest to occur of the preceding events, a shelf
registration statement pursuant to the Securities
Act with respect to the resale of the Outstanding
Notes (the "Shelf Registration Statement") and to
keep the Shelf Registration Statement effective
until the second anniversary of the Issue Date.
In the event that (i) neither the Registration
Statement nor the Shelf Registration Statement is
filed with the Commission on or prior to the 90th
day following the date of original issue of the
Outstanding Notes, (ii) neither the Registration
Statement nor the Shelf Registration Statement is
declared effective on or prior to the 150th day
following the date of original issue of the
Outstanding Notes, (iii) the Exchange Offer is not
consummated on or before 30 days after the 150th
day following the date of original issue of the
Outstanding Notes, or (iv) (a) the Registration
Statement is filed and declared effective but
thereafter ceases to be effective or fails to be
usable for its intended purpose at any time prior
to the time that the Exchange Offer is consummated
and is not declared effective within five business
days thereafter or (b) the Shelf Registration
Statement is filed and declared effective but
thereafter ceases to be effective or fails to be
usable for its intended purpose at any time during
the Effectiveness Period (as defined in the
Registration Rights Agreement) and is not declared
effective again within five business days
thereafter, the interest rate borne by the
Outstanding Notes shall be increased by one-half of
one percent per annum following such 90-day period
in the case of clause (i) above, following such
150-day period in the case of clause (ii) above,
following such 30-day period in the case of clause
(iii) above, or commencing on the day the
applicable registration statement ceases to be
effective or usable for its intended purpose
without being declared effective again within 5
business days in the case of clause (iv) above. The
aggregate amount of such increase from the original
interest rate pursuant to these provisions will in
no event exceed 1.5 percent per annum. Upon (w) the
filing of the Registration Statement or the Shelf
Registration Statement for the Exchange Offer after
the 90-day period described in clause (i) above,
(x) the effectiveness of the Registration Statement
or Shelf Registration Statement after the 150-day
period described in clause (ii) above, (y) the
consummation of the Exchange Offer after the 30-day
period described in clause (iii) above, or (z) the
effectiveness or usability of the Registration
Statement which had ceased to remain effective or
be usable, or the effectiveness or usability of the
Shelf Registration Statement which had ceased to
remain effective or be usable, the interest rate
borne by the Outstanding Notes from the date of
such filing, effectiveness, usability or the day
before the date of consummation, as the case may
be, will be reduced to the original interest rate
if the Company is otherwise in compliance with such
requirements. See "Exchange Offer."
Trustee, Escrow Agent
And Paying Agent......... United States Trust Company of New York.
13
<PAGE> 19
Listing.................... The Notes are expected to be designated as eligible
for trading in the PORTAL market. In addition, the
Company expects to make an application to list the
Notes on the Luxembourg Stock Exchange after the
Separation Date.
Risk Factors............... See "Risk Factors" for a discussion of certain
factors which should be considered by prospective
investors in evaluating an investment in the
Exchange Notes.
For additional information concerning the Exchange Notes and the
definitions of certain capitalized terms used above, see "Description of the
Exchange Notes."
CONSEQUENCES OF FAILURE TO EXCHANGE
Untendered Outstanding Notes that are not exchanged for Exchange Notes
pursuant to the Exchange Offer will remain restricted securities. Outstanding
Notes will continue to be subject to the following restrictions on transfer: (i)
Outstanding Notes may be resold only if registered pursuant to the Securities
Act, if an exemption from registration is available thereunder, or if neither
such registration nor such exemption is required by law, (ii) Outstanding Notes
shall bear a legend restricting transfer in the absence of registration or an
exemption therefrom and (iii) a holder of Outstanding Notes who desires to sell
or otherwise dispose of all or any part of its Outstanding Notes under an
exemption from registration under the Securities Act, if requested by the
Company, must deliver to the Company an opinion of independent counsel
experienced in Securities Act matters, reasonably satisfactory in form and
substance to the Company, that such exemption is available. See "Risk
Factors -- Consequences of Failure to Exchange."
RISK FACTORS
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED CAREFULLY IN
CONNECTION WITH AN INVESTMENT IN THE EXCHANGE NOTES, SEE "RISK FACTORS"
BEGINNING ON PAGE 17.
14
<PAGE> 20
SUMMARY FINANCIAL AND OTHER DATA
The summary financial data for VersaTel, presented below, as of and for the
two fiscal years ended December 31, 1996 and 1997 have been derived from the
financial statements of VersaTel, which have been prepared in accordance with
U.S. generally accepted accounting principles ("U.S. GAAP") and have been
audited by Arthur Andersen, independent public accountants (together with the
notes thereto, the "Audited Financial Statements"). The summary financial data
as of and for the three months ended March 31, 1997 and 1998, have been derived
from the unaudited financial statements of VersaTel, which have been prepared in
accordance with U.S. GAAP and on a basis which management believes is consistent
with that of the Audited Financial Statements (the "Unaudited Financial
Statements" and, together with the Audited Financial Statements, the "Financial
Statements"). The information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations" and the Financial Statements included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------------- ------------------------------
1996 1997 1997 1998
-------- -------------------- -------- -------------------
NLG NLG $(1) NLG NLG $(1)
(IN THOUSANDS, EXCEPT RATIO)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.................................. 6,428 18,896 9,085 3,917 6,402 3,078
Cost of revenue.......................... 4,954 17,405 8,368 3,093 5,460 2,625
------ ------- ------ ------ ------ ------
Gross margin........................... 1,474 1,491 717 824 942 453
Operating expenses:
Selling, general and administrative.... 5,485 17,527 8,427 2,054 5,544 2,665
Depreciation and amortization.......... 453 3,237 1,556 292 1,087 523
------ ------- ------ ------ ------ ------
Total operating expenses............ 5,938 20,764 9,983 2,346 6,631 3,188
------ ------- ------ ------ ------ ------
Loss from operations..................... (4,464) (19,273) (9,266) (1,522) (5,689) (2,735)
Interest expense (income), net........... 269 534 257 93 200 97
Currency loss............................ -- 53 25 -- 115 55
------ ------- ------ ------ ------ ------
Net loss................................. (4,733) (19,860) (9,548) (1,615) (6,004) (2,887)
====== ======= ====== ====== ====== ======
Net loss per share (Basic and Diluted)... (0.95) (2.20) (1.06) (0.73) (2.51) (1.21)
Weighted average number of shares
outstanding............................ 5,004 9,042 9,042 8,910 9,580 9,580
OTHER DATA:
EBITDA(2)................................ (4,011) (16,036) (7,710) (1,230) (4,602) (2,212)
Capital expenditures..................... 2,569 14,516 6,979 1,157 2,424 1,165
Ratio of earnings to fixed charges(3).... -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OPERATING DATA BY QUARTER
THREE MONTHS ENDED
----------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MARCH 31,
1997 1997 1997 1998
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Number of billable minutes (thousands)(4).............. 5,769 6,230 7,127 12,432
Average revenue per billable minute (NLG).............. 0.87 0.85 0.65 0.51
Gross margin as percentage of revenue.................. 28.4% 9.1% (34.6%) 14.7%
Total customers -- business (at period end)............ 1,158 1,463 2,014 2,619
Total customers -- residential (at period end)......... -- -- 230 617
</TABLE>
15
<PAGE> 21
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------
1996 1997 AS OF MARCH 31, 1998
------ ------------------ --------------------
NLG NLG $(1) NLG $(1)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and restricted cash.................. 4,443 1,495 719 5,298 2,547
Working capital (excluding cash and
restricted cash)........................ (2,704) (24,774) (11,911) (28,792) (13,842)
Property plant and equipment, net......... 2,340 13,619 6,548 14,956 7,190
Total assets.............................. 8,160 19,331 9,294 26,189 12,591
Total long-term obligations (including
current portion)........................ 4,185 8,491 4,082 15,623 7,511
Total shareholders' equity (deficit)...... 146 (18,214) (8,757) (24,218) (11,643)
</TABLE>
- ---------------
(1) Solely for the convenience of the reader, Dutch guilder amounts have been
translated into U.S. dollars at the Noon Buying Rate on March 31, 1998 of
NLG 2.08 per $1.00.
(2) EBITDA consists of earnings (loss) before interest expense, income taxes,
depreciation, amortization and foreign exchange gain (loss). EBITDA is
included because management believes it is a useful indicator of a company's
ability to incur and service debt. EBITDA should not be considered as a
substitute for operating earnings, net income, cash flow or other statements
of operations or cash flow data computed in accordance with U.S. GAAP or as
a measure of the Company's results of operations or liquidity. Because all
companies do not calculate EBITDA identically, the presentation of EBITDA
contained herein may not be comparable to other similarly entitled measures
of other companies.
(3) The ratio of earnings to fixed charges is calculated by dividing (i) income
(loss) from continuing operations before income taxes ("Earnings") plus
fixed charges by (ii) fixed charges. Fixed charges consist of interest
expense. Earnings plus fixed charges were insufficient to cover fixed
charges by NLG 4.5 million in 1996, NLG 19.3 million in 1997 and NLG 5.8
million for the three months ended March 31, 1998.
(4) Billable minutes are those minutes during which a call is connected to the
VersaTel switch and for which the Company bills a customer.
16
<PAGE> 22
RISK FACTORS
Prospective participants in the Exchange Offer should consider carefully
the following factors in evaluating the Company and its business in addition to
the other information contained in this Prospectus.
SUBSTANTIAL INDEBTEDNESS
The Company has substantial indebtedness after the Offering. As of March
31, 1998, on a pro forma basis after giving effect to the Recapitalization and
the Offering, the Company's total indebtedness would have been approximately NLG
468.0 million and its stockholders' equity would have been approximately NLG
22.2 million and the Company would have had total assets of approximately NLG
518.5 million. In addition, the Company and its subsidiaries may incur
additional indebtedness and liens on their assets in the future, subject to
limitations imposed by its debt instruments, including, without limitation, the
Indenture. The Indenture does not limit the amount of indebtedness that may be
incurred to finance the cost of the development of the VersaTel Network. A
significant amount of such indebtedness will likely be secured. Consequently, in
the event of a bankruptcy, liquidation, dissolution, reorganization or similar
proceeding, the holders of any secured indebtedness will be entitled to proceed
against the collateral that secures such indebtedness and such collateral will
not be available for satisfaction of any amounts owed under the Notes. The
Company anticipates that it will incur substantial additional indebtedness in
the future. See "Selected Financial and Other Data," the Financial Statements
included elsewhere in this Prospectus, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Description of the Exchange
Notes."
The level of the Company's indebtedness and the terms of such indebtedness
could have several important effects on the future operations of VersaTel and
the holders of the Notes, including the following: (i) the ability of the
Company to obtain any necessary financing in the future for working capital,
capital expenditures, debt service requirements or other purposes may be
restricted; (ii) a substantial portion of the Company's cash flow from
operations will be dedicated to the payment of principal and interest on its
indebtedness and other obligations and will not be available for use in its
business; (iii) the Company's level of indebtedness could limit its flexibility
in planning for, or reacting to, changes in its business; (iv) the Company may
be more highly leveraged than many of its competitors, which may place it at a
competitive disadvantage; (v) the debt service requirements of any additional
indebtedness could make it more difficult for the Company to make payments of
principal and interest on the Notes; (vi) the Company will be required to comply
with certain financial covenants and other restrictions contained in its debt
instruments; and (vii) the Company's high degree of indebtedness will increase
its vulnerability to adverse general economic and industry conditions.
Although the Company has entered into an Escrow Agreement pursuant to which
it has deposited with the Escrow Agent Pledged Securities in such amounts as
will be sufficient to cover the first six scheduled interest payments on the
Notes, the ability to deal freely with the funds in the Escrow Account following
an Event of Default under the Indenture may be limited by applicable bankruptcy,
reorganization, receivership, insolvency, liquidation or other similar
legislation or legal principles. See "Description of the Exchange
Notes -- Escrow Account."
HISTORICAL AND FUTURE OPERATING LOSSES; NEGATIVE EBITDA; LIQUIDITY
For the year ended December 31, 1997, the Company had a loss from operating
activities of NLG 19.3 million and negative EBITDA of NLG 16.0 million and for
the year ended December 31, 1996, the Company had a loss from operating
activities of NLG 4.5 million and negative EBITDA of NLG 4.0 million. In
addition, the Company had an accumulated deficit of NLG 25.2 million as of
December 31, 1997. Although the Company has experienced revenue growth since it
commenced operations in 1995, there can be no assurance that such growth shall
continue. The Company expects to incur negative EBITDA and significant operating
losses and net losses for the foreseeable future as it incurs additional costs
associated with the development and expansion of its Network, the expansion of
its marketing and sales organization and the introduction of new
telecommunications services. In addition, prices in the telecommunications
industry in Europe have declined in recent years and, as competition continues
to increase, the Company expects that
17
<PAGE> 23
prices will continue to decline. Although the Company believes that such
decreases in price will be at least partially offset by increased traffic volume
and decreases in the cost of providing telecommunication services, there can be
no assurance that VersaTel will achieve or, if achieved, will sustain
profitability or positive cash flow from operating activities in the future.
After giving pro forma effect to the Recapitalization and the Offering,
interest expense of the Company for the year ended December 31, 1997 would have
been NLG 62.0 million. Accordingly, VersaTel will need to increase substantially
its net cash flow in order to meet its debt service obligations, including its
obligations with respect to the Notes. The ability of the Company to improve its
operating performance and financial results will depend not only on its ability
to successfully implement its business plan, but also upon economic, financial,
competitive, regulatory and other factors beyond its control, including,
fluctuations in exchange rates and general economic conditions in the Benelux
region. There can be no assurance that the Company will generate sufficient
positive cash flow from operating activities in the future to service its debt
and to allow the Company to make necessary capital expenditures. If the Company
is unable to generate sufficient positive cash flow in the future, it may be
required to refinance all or a portion of its debt, including the Notes, to sell
assets or to obtain additional financing. There can be no assurance that any
such refinancing would be possible or that any such sales of assets or
additional financing could be achieved. The failure by the Company to meet its
debt service obligations or to otherwise comply with any of the covenants
contained in any of its debt instruments could result in a default thereunder
permitting the acceleration of the maturity of the indebtedness under such
agreement. Any default or acceleration under such agreement could also result in
other debt of the Company, including the Notes, becoming immediately payable.
Under any of these circumstances, there can be no assurance that the Company
would have sufficient funds or other resources to satisfy all of such
obligations, including payments with respect to the Notes, on a timely basis or
otherwise. See "-- Future Capital Needs; Uncertainty of Additional Funding" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
ANTICIPATED HOLDING COMPANY STRUCTURE; STRUCTURAL SUBORDINATION OF THE NOTES;
DEPENDENCE UPON CASH FLOW OF SUBSIDIARIES
The Company intends to transfer all or substantially all of its assets and
liabilities (other than the Notes) to certain of its Restricted Subsidiaries.
After such transfer, the Company will be a holding company with limited assets
and will operate its business through its Restricted Subsidiaries. Consequently,
the Company will rely upon distributions from its subsidiaries, as well as its
own credit arrangements, to generate the funds necessary to meet its
obligations, including payments on the Notes. Such subsidiaries will be separate
and distinct legal entities which have no obligation, contingent or otherwise,
to pay any amount due pursuant to the Notes or to make any funds available
therefor, whether by dividends, loans or other payments. In addition, the
ability of the Company's subsidiaries to pay dividends and make other payments
to the Company may be restricted by, among other things, applicable corporate
and other laws and regulations and by the terms of the agreements to which such
subsidiaries become subject. Although the Indenture will limit the ability of
such subsidiaries to enter into consensual restrictions on their ability to pay
dividends and make other payments, such limitations are subject to a number of
significant qualifications. See "Description of the Exchange Notes -- Certain
Covenants -- Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries." The failure of the Company's subsidiaries to pay any
such dividends or to make any such other payments would restrict the Company's
ability to pay principal and interest on the Notes and to utilize cash flow from
one subsidiary to cover shortfalls of another subsidiary, and could otherwise
have a material adverse effect on the Company's business, financial condition
and results of operation.
Generally, claims of creditors of a subsidiary, including trade creditors,
secured creditors and creditors holding indebtedness and guarantees issued by
such subsidiary, and claims of preferred stockholders (if any) of such
subsidiary, will have priority with respect to the assets and earnings of such
subsidiary over the claims of creditors of its parent company. Accordingly, the
Notes will be effectively subordinated to all creditors (including trade
creditors) and preferred stockholders (if any) of the Company's subsidiaries.
Although the Indenture will limit the incurrence of Indebtedness and preferred
stock of certain of the Company's subsidiaries, such limitation is subject to a
number of significant qualifications. Moreover, the Indenture will
18
<PAGE> 24
not impose any limitation on the incurrence by such subsidiaries of liabilities
that are not considered Indebtedness or preferred stock under the Indenture. See
"Description of the Exchange Notes -- Certain Covenants -- Limitation on
Indebtedness." Any right of the Company to receive assets of any subsidiary upon
the liquidation or reorganization of such subsidiary (and the consequent rights
of the holders of the Notes to participate in those assets) will be effectively
subordinated to the claims of such subsidiary's creditors (including trade
creditors) and preferred stockholders (if any), except to the extent that the
Company is itself recognized as a creditor, in which case the claims of the
Company would still be subordinated with respect to any assets of such
subsidiary pledged to secure other indebtedness and any indebtedness of such
subsidiary senior to that held by the Company.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The development and expansion of the Company's Network, sales and marketing
capabilities and product and service offerings, as well as the funding of
operating losses and working capital needs will require significant capital. The
Company does not currently maintain significant lines of credit or similar
facilities with commercial banks, but has historically financed its operations
via capital contributions and shareholder loans. The Company expects that the
net proceeds from the Recapitalization and the Offering, together with other
available financing, and cash flow from operations will provide the Company with
sufficient capital to fund planned capital expenditures and anticipated losses
through December 1999. The amount of VersaTel's future capital requirements will
depend primarily on the rate and extent of the Company's development and
expansion of its network infrastructure, its sales and marketing capabilities
and its product and service offerings, and the level of partner participation in
sharing funding of certain sections of the Network, as well as other factors
such as competitive conditions, regulatory or other government actions and the
rate of its customer growth. In the event that the Company's plans or
assumptions change or prove to be inaccurate or the net proceeds of the
Offering, together with funds available from the Recapitalization and cash flow
from operations, if any, prove to be insufficient to fund the Company's growth
and operations, then some or all of the Company's development and expansion
plans (including the planned development of the VersaTel Network) could be
delayed or abandoned, or the Company may be required to seek additional
financing earlier than anticipated. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources." There can be no assurance that, the Company will be able to obtain
additional financing, if necessary, or, if obtained, that it will be able to do
so on a timely basis or on terms favorable to the Company. In addition, the
Company's debt instruments, including the Indenture, impose limitations on the
Company's ability to raise additional indebtedness and to create liens on its
assets. Any additional indebtedness incurred by the Company is likely to be
subject to additional restrictive financial covenants. The inability of the
Company to obtain such additional capital or to obtain such additional capital
on acceptable terms could have a material adverse effect on the Company's
business, results of operations and financial condition.
DEVELOPMENT, EXPANSION AND OPERATION OF THE NETWORK
The Company currently provides its services through a single Nortel DMS 100
switch in Amsterdam and does not own, lease or manage any telecommunications
transmission infrastructure. The long-term success of the Company is dependent
upon its ability to construct, operate, manage and maintain its own
telecommunications network. Success in these activities will depend on, among
other factors, the Company's ability to: (i) attract and retain experienced and
qualified personnel; (ii) obtain additional switch sites; (iii) interconnect
with the PTTs' and other carriers' networks; (iv) obtain and retain necessary
licenses permitting origination and termination of traffic; and (v) construct or
obtain access to additional transmission facilities, all in a timely manner, at
reasonable costs and on terms and conditions acceptable to VersaTel. In
addition, the Company must obtain easements, rights-of-way and entry to premises
from various property owners, actual and potential competitors and national,
provincial and local governments in order to construct its Network. There can be
no assurance that the Company will obtain rights and licenses on acceptable
terms or that current or potential competitors will not obtain similar rights
and licenses on more favorable terms that will allow them to compete
successfully against the Company. The successful implementation of the Company's
construction and expansion strategy will be subject to a variety of other risks,
including operating and technical
19
<PAGE> 25
problems, regulatory uncertainties, delays in the full implementation of the EC
directives regarding telecommunications liberalization, competition, the
availability of capital and the risk of damage to software and hardware
resulting from fire, power loss, natural disasters and other causes. There can
be no assurance that the VersaTel Network will grow and develop as planned or,
if developed, that such growth or development will be completed on schedule, at
a commercially reasonable cost or within the Company's specifications.
Although the Company believes that its cost estimates and build-out
schedule are reasonable, there can be no assurance that the actual construction
or acquisition costs or time required to construct the Network will not
substantially exceed current estimates. In addition, there can be no assurance
that even if the Network is successfully developed that the Company will be able
to operate the Network efficiently. Any significant delay or increase in the
costs associated with the construction, development and management of the
Network could have a material adverse impact on the Company, including the
ability of the Company to make payments on the Notes, and on the Company's
business, results of operations and financial condition generally.
The construction and development of the VersaTel Network will entail
significant expenditures of resources based on projections of growth in traffic
volumes and routing preferences and determinations of the most cost-effective
means of constructing the VersaTel Network. Failure to project traffic volume
and determine route preferences correctly or to determine the optimal means of
constructing the VersaTel Network could have a material adverse effect on
VersaTel's business, results of operations and financial condition. See
"Business -- Network." The Company has signed a framework agreement for the
design and construction of key components of its planned network infrastructure
with Detron a Benelux-based engineering, consulting and construction firm. In
addition, the Company has signed a framework agreement with Nortel to implement
its SDH network and network management systems on a turnkey basis. However,
definitive agreements with Nortel and the construction contractors have not been
signed and there can be no assurance that such agreements will be entered into
or if entered into, that these companies will efficiently and cost-effectively
design and deliver the VersaTel Network. In addition, the Company's proposed
Network will be significantly dependent on the technology and products which the
Company acquires from its suppliers. These firms provide similar products and
services to competitors of the Company. There can be no assurance that these
firms will continue to act for the Company or, should they cease to so act, that
the Company would be able to obtain equivalent products and services from other
sources. The failure of the Company to obtain similar products and services from
alternative sources on a timely and cost-effective basis could result in delays,
operational problems and increased expenses and thus could have a material
adverse effect on the Company.
The success of the Company is largely dependent upon its ability to deliver
high quality, uninterrupted telecommunications services and on its ability to
protect its software against damage. Service quality and availability may be
disrupted by (i) the inability to provide adequate network capacity; (ii) the
inability to accomplish timely and error free upgrades to network and management
systems; and (iii) the failure to prevent damage from external causes. Although
the Company will take all reasonable measures to provide adequate capacity in
all system components and all locations, no assurance can be given that adequate
capacity will be available. As growth occurs, network and management systems
must be upgraded. Timing of upgrades cannot be predicted with certainty and most
upgrades create many opportunities for errors, especially when done under time
pressure. Although the Company will use all standard quality management
practices and procedures, no assurances can be given that failures will not
occur from time to time. In addition, all telecommunications networks are
subject to external damage, in particular from construction work, but also from
such causes as floods and vehicle accidents. Such events are mostly beyond the
control of the Company. The VersaTel Network will utilize high quality design
and management techniques for rerouting traffic in case of failures and will be
designed for rapid restoration in the event such failures occur. However, any
prolonged or significant system failures or difficulties in customers accessing
the VersaTel Network could threaten the Company's relationship with clients,
damage the reputation of the Company and result in customer attrition and
financial losses. Such failures could have a material adverse impact on the
Company's business, financial condition and results of operations.
20
<PAGE> 26
LIMITED OPERATING HISTORY; ENTRY INTO NEW MARKETS
VersaTel, a development stage enterprise, was founded in October 1995, and,
as a result, has a limited operating history and has generated only limited
revenues. The Company intends to enter the Belgium and Luxembourg markets where
it has no operating experience and where services have previously been provided
primarily by the national PTTs. Accordingly, there can be no assurance that the
Company's future operations will generate operating or net income, and the
Company's prospects must therefore be considered in light of the risks,
expenses, problems and delays inherent in establishing operations.
RISKS ASSOCIATED WITH A RAPIDLY CHANGING INDUSTRY; TECHNOLOGY
The European telecommunication industry is changing rapidly due to, among
other factors, liberalization, privatization of PTTs, technology improvements,
expansion of telecommunications infrastructure and the globalization of the
world's economies and trade. Such changes may happen at any time and can
significantly affect the Company's operations. There can be no assurance that
one or more of these factors will not occur as the Company expects or will not
have unforeseen effects which could have a material adverse effect on the
Company. There can also be no assurance, even if these factors turn out as
anticipated, that the Company's strategy will be successful in this rapidly
evolving market.
The telecommunications industry is in a period of rapid technological
evolution, marked by the introduction of new products and services, and
increased availability of transmission capacity, as well as the increasing
utilization of the Internet for voice and data transmission. The Company's
success will depend substantially on its ability to predict which of the many
possible current and future networks, products and services will be important to
finance, establish and maintain. In particular, as the Company undertakes to
further expand and develop its Network, it will become increasingly exposed to
the risks associated with the relative effectiveness of its technology and
equipment. The cost of implementation of emerging and future technologies could
be significant, and there can be no assurances that the Company will select
appropriate technology and equipment or that the Company will obtain appropriate
new technology on a timely basis or on satisfactory terms. The failure to obtain
effective technology and equipment may adversely affect the ability of the
Company to provide competitive products and service, and the viability of the
Company's operations and could have a material adverse impact on the Company's
business, financial condition and results of operations. See "-- Development,
Expansion and Operation of the Network."
DEPENDENCE ON MANAGEMENT AND OTHER KEY PERSONNEL
The Company's success depends in significant part upon the continued
service of its senior management personnel, including R. Gary Mesch, the
Company's Managing Director. In addition, several of the Company's key
personnel, including its Chief Financial Officer and Chief Technology Officer,
have been with the Company for only a short period of time. See "Management."
The Company does not maintain any "key person" insurance. Certain of the
Company's key management and technical personnel are working for the Company
pursuant to consultancy agreements. Such agreements are terminable at will by
the consultant. The consultancy agreements do not contain non-competition
clauses in the event that such consultant's employment terminates, and as a
result, there can be no assurance that such consultants will not work for direct
competitors of the Company in the future. If such key management and technical
personnel left the Company and/or began to work for competitors, it could have a
material adverse effect on the Company's business, financial condition and
results of operation.
The Company's future growth and success also depend on its ability to
attract, train, retain and motivate highly skilled managerial, sales, marketing,
administrative, operating and technical personnel. Competition for qualified
employees and personnel in the telecommunications industry in Europe is intense,
and there are generally a limited number of persons with the requisite knowledge
and experience in the particular sectors and countries in which the Company
operates and intends to operate. There can be no assurance that the Company will
be able to attract, recruit and retain sufficient qualified personnel as the
Company expands its current operations and enters into new markets. The loss of
the services of one or more of the Company's key
21
<PAGE> 27
management or operating personnel, or the failure to attract and retain
additional key personnel could have a material adverse effect on the Company's
business, operating results and financial condition.
MANAGEMENT OF GROWTH
The Company's growth strategy has placed, and is expected to continue to
place, a significant strain on the Company's management, systems, controls and
operational and financial resources. The Company's growth has resulted in
increased responsibilities for management personnel, and the Company's expansion
plans will create significant additional demands on the Company's managerial
resources. The Company's ability to manage its growth successfully will require
it to further expand its Network, enhance its management, financial and
information systems and controls and expand, train and manage its employee base
effectively. Management is currently in the process of addressing certain
weaknesses in the Company's systems of internal controls that have been
identified by the Company's auditors. In addition, as the Company increases its
product and service offerings and expands its target markets, there will be
additional demands on its customer service, support, sales, marketing and
administrative resources. If the Company's management is unable to manage growth
effectively or maintain the quality of its service, the Company's business,
financial condition and results of operations would be materially adversely
effected.
DEPENDENCE ON FACILITIES PROVIDERS AND INTERCONNECT ARRANGEMENTS
The Company does not own any transmission infrastructure and currently uses
telecommunications transmission infrastructure owned by other carriers under a
variety of arrangements. As a result, the Company depends and will continue to
depend upon the transmission infrastructures of the PTTs and other facilities-
based carriers in the Benelux region. Most of these carriers are competitors of
the Company. In addition, the Company's ability to connect its customers to the
Company's Network is dependent on the Company securing and maintaining
interconnection agreements with the local PTTs in the Benelux region. There can
be no assurance that the Company will be successful in securing and maintaining
such arrangements at attractive rates, if at all. Former monopoly carriers may
try to limit access to their facilities by new competitors, which may adversely
affect the Company's entry into the Belgian and Luxembourg markets as well as
other European markets. The Company's profitability depends in part on its
ability to secure and maintain interconnection arrangements on a timely basis
and at favorable rates. The failure of the PTTs to provide cost-oriented access
could have a material adverse effect on the Company's business, results of
operations and financial condition. See "-- Intense Competition,"
"-- Regulation" and "Business -- Regulation."
All of the Company's transmission capacity is currently obtained under
arrangements with third parties which subjects the Company to the risk of
unanticipated price fluctuations and service restrictions or cancellations.
Although the Company believes that its arrangements and relationships with
carriers generally are satisfactory, the deterioration or termination of the
Company's arrangements and relationships, or the Company's inability to enter
into new arrangements and relationships with one or more carriers could have a
material adverse effect upon the Company's cost structure, service, quality,
network coverage, results of operations and financial condition.
INTENSE COMPETITION
Liberalization in the European telecommunications market has coincided with
technological innovation to create an increasingly competitive market,
characterized by still-dominant PTTs as well as an increasing number of new
market entrants. In the Benelux region, the Company competes primarily with the
national PTTs and other providers which have greater market presence, network
coverage, brand name recognition, customer loyalty, and financial and other
resources. The PTTs generally have significant competitive advantages (including
cost advantages) due to their control over domestic transmission lines and
connection to such lines that the Company and its other competitors do not have.
In addition, customers in most of these markets are not accustomed to
alternative service providers and may be reluctant to switch from the dominant
PTTs to new and relatively unproven competitors such as VersaTel. In addition,
the Company relies on the PTTs for timely access to their transmission
infrastructure lines. Moreover, these PTTs generally have certain competitive
advantages due to their close ties with national regulatory authorities, which
have, in certain
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instances, shown reluctance to adopt policies and grant regulatory approvals
that would result in increased competition for the local PTT. The reluctance of
some national regulators to accept liberalizing policies, grant regulatory
approvals and to enforce access to PTT networks may have a material adverse
effect on the Company's competitive position. See "-- Dependence on Facilities
Providers and Interconnect Arrangements."
Competition in the European long distance telecommunications industry is
based upon price, customer service, type and quality of products and services
and customer relationships. VersaTel's strategy is predicated on its ability to
price its services at a discount to the prices charged by the PTTs in each of
its markets and to offer high quality customer care and telecommunications
products and services. However, prices for international long distance calls
have decreased substantially over the last few years in most of the markets in
which VersaTel currently maintains operations or in which it expects to
establish operations. Some of the Company's larger competitors may be able to
use their greater financial resources to cause severe price competition in the
countries in which VersaTel operates or plans to operate. The Company expects
that prices for its services will continue to decrease for the foreseeable
future and that PTTs and other providers will continue to improve their product
offerings. Price competition could have a material adverse effect on VersaTel's
business, results of operations and financial condition.
The Company believes that competition for telecommunications services in
the Benelux region will continue to increase as a result of continuing
liberalization of the telecommunications industry. The Company faces strong
competition from, among others, Telfort B.V., RSL Communications Ltd., Viatel,
Inc., Telenet N.V., EnerTel N.V., Telegroup, Inc. and Tele2 A.B., as well as
other resellers, microwave and satellite carriers, mobile wireless
telecommunications providers, cable television companies, utilities and other
competitive local telecommunications providers. In addition, the development of
new technologies could give rise to significant new competitors to the Company.
Many of the Company's competitors have significantly greater financial,
managerial and operational resources and more experience than the Company. See
"Business -- Competition."
RISKS ASSOCIATED WITH ACQUISITIONS, INVESTMENTS AND STRATEGIC ALLIANCES
As part of its business strategy, the Company may enter into strategic
alliances with, acquire assets or businesses from, or make investments in,
companies in business areas that are complementary to its current operations.
Any such future strategic alliances, acquisitions or investments would involve
risks. VersaTel's strategy presents risks inherent in assessing the value,
strengths and weaknesses of acquisition and investment opportunities, and in
integrating and managing newly-acquired operations and improving their operating
efficiency. In addition, such acquisitions and investments could divert the
resources and management time of the Company. There can be no assurance that any
desired strategic alliance, acquisition or investment could be made in a timely
manner or on terms and conditions acceptable to VersaTel. There can also be no
assurance that the Company will be successful in identifying attractive
acquisition candidates, completing and financing additional acquisitions on
favorable terms, or integrating the acquired businesses or assets into its
existing operations. VersaTel's ability to make acquisitions will depend on the
availability of additional debt financing on acceptable terms and will be
subject to compliance with the covenants contained in its debt instruments,
including the Indenture. See "Description of the Exchange Notes." In addition,
VersaTel expects that the realization of certain acquisition-related benefits
may be dependent upon VersaTel taking certain actions which will result in
one-time charges or expenses.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS AND EXCHANGE RATE FLUCTUATIONS
The Company's international expansion will present certain risks, including
complying with a multiplicity of regulatory and taxation regimes, difficulties
in staffing and managing foreign operations, any of which could have a material
adverse effect on the Company's future operations and, consequently, on the
Company's business, results of operations and financial condition. In addition,
there can be no assurance that laws or administrative practices relating to
taxation, foreign exchange or other matters of countries within which the
Company operates or plans to operate will not change. Any such change could have
a material adverse effect on the Company's business, financial condition and
results of operations.
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<PAGE> 29
The proceeds of the Offering are denominated in U.S. dollars, but the
Company expects to incur many of its expenses in the construction of its Network
and the expansion of its sales and marketing capabilities and product and
service offerings in Dutch guilders and Belgian francs. Any change in the
currency exchange rates that reduces the amount obtained in Dutch guilders or
Belgian francs upon conversion of the U.S. dollar proceeds of the Offering could
have a material adverse effect on the Company and its ability to fund its
capital expenditure program. VersaTel's revenues will be largely denominated in
Dutch guilders, Belgian francs, and, upon its introduction, euro, but principal
and interest on the Notes will be payable in U.S. dollars. Consequently, the
ability of the Company to pay interest and principal when due is dependent on
current and future exchange rates, which are subject to fluctuation. The Company
has not entered into hedging transactions to limit the foreign currency risk
exposure, although the Company may implement such practices in the future. While
the Company may enter into transactions to hedge the risk of exchange rate
fluctuations, there can be no assurance that the Company will be able to obtain
hedging arrangements on commercially satisfactory terms.
RISK OF FRAUD AND BAD DEBT
Although the Company has experienced problems relating to the fraudulent
use of its access codes and the failure of certain of its customers to make full
payment for services rendered, the Company does not believe that its experiences
with such problems are substantially different from what is generally
experienced in the telecommunications industry. While the Company believes that
changes in the technology it employs will curtail potential fraudulent use of
its facilities, the Company does not have in place insurance coverage for
potential fraud. The Company's revenue for any given period may be adversely
affected by significant fraud since revenue is recorded upon the completion of a
call but may be subsequently reversed if the Company is unable to bill for that
call. In addition, where the Company uses third party service providers to
complete calls, any charges payable by the Company which result from the
fraudulent use of the Company's facilities will remain payable by the Company.
The Company believes it makes provisions for non-payment at adequate levels. The
Company expects that the bad debt risk associated with its customer base will
increase as it begins to target residential consumers. Any significant increase
in the levels of fraud and bad debt could have a material adverse impact on the
Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
REGULATION
The Company's strategy has in part been based upon the timely
implementation of regulatory liberalization of the EU telecommunications market
(particularly in the Benelux region). Although EU Member States have a legal
obligation to liberalize their markets under existing EC directives,
implementation and enforceability of the EC directives is dependent on the
action taken by each EU Member State and may be subject to delays in specific
countries. The Company is dependent on implementation of the EC directives in
order to gain cost-oriented access to the PTTs' network infrastructure and to be
permitted to provide certain services to its customers. See "-- Dependence on
Facilities Providers and Interconnect Arrangements" and "Business --
Regulation." If the implementation or enforceability of the relevant EC
directives is challenged or delayed in any of the markets in which the Company
operates or intends to operate, such delay could have a material adverse effect
on the Company's business, results of operations and financial condition.
The Company is subject to varying degrees of regulation in each of the
jurisdictions in which it operates or intends to operate. Local laws and
regulations, and the interpretation of such laws and regulations, differ among
the jurisdictions in which the Company operates or intends to operate. There can
be no assurance that future regulatory, judicial and legislative changes will
not have a material adverse effect on the Company, that regulators or third
parties will not raise material issues with regard to the Company's compliance
or noncompliance with applicable regulations or that any changes in applicable
laws or regulations will not have a material adverse effect on the Company.
The Company's operations are dependent on licenses which it acquires from
governmental authorities in each jurisdiction in which it operates. The Company
has obtained licenses, authorizations and/or registrations
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<PAGE> 30
in The Netherlands and Belgium and has applied for such licenses, authorizations
and/or registrations in the United Kingdom. The terms and conditions of these
licenses may limit or otherwise affect the Company's scope of operations. There
can be no assurance that it will be able to obtain, maintain or renew licenses
to provide the services it currently provides and plans to provide or that such
licenses will be issued or renewed on terms or with fees that are commercially
viable. In certain circumstances such registrations, authorizations and licenses
may be revoked. The loss, revocation, or failure to obtain these
telecommunications registrations, authorizations and licenses or a substantial
limitation upon the terms of these telecommunications registrations,
authorizations and licenses could have a material adverse effect on the Company.
See "Business -- Regulation."
PRINCIPAL SHAREHOLDERS
Telecom Founders, NeSBIC, Cromwilld, Paribas and NPM (collectively, the
"Shareholders") currently own 90.1% of the Company's outstanding Ordinary Shares
on a fully diluted basis, assuming all warrants and options currently
outstanding have been exercised. See "Summary -- Recent Developments." The
Shareholders have the power to exercise voting and management control of the
Company, including, without limitation, the right to adopt amendments to the
Company's Articles of Association and approve mergers, sales of all or
substantially all of the Company's assets or other similar transactions. The
interests of the Shareholders may differ from those of holders of the Notes.
Cromwilld, the owner of 15.8% of the Company's outstanding Ordinary Shares
on a fully diluted basis after giving effect to the Recapitalization and the
Offering, has objected to the Recapitalization and the Offering and has
threatened to challenge in court certain of the Company's actions in connection
therewith. The legal remedies potentially available to Cromwilld include an
action petitioning for the nullification of certain resolutions of the Company's
shareholders meeting, Management Board or Supervisory Board. Such a petition
would need to be premised on a claim that the adoption of such resolution was
procedurally defective or contrary to Netherlands legal principles of
reasonableness and fairness to the aggrieved shareholder. According to The
Netherlands Civil Code, a nullification judgment would in principle invalidate
the Company's actions, including the Offering, based upon the nullified
resolution. Based upon advice from its Netherlands legal counsel, the Company
believes that, although no assurances can be given, Cromwilld has no legally
valid grounds for any such challenges and that the objections made by Cromwilld
are without merit. In addition, there can be no assurance that Cromwilld will
not attempt to block certain other corporate actions that require the approval
of all the shareholders of the Company.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of Notes will be
entitled to require the Company to purchase any or all of such Notes held by
such holder at the prices stated herein. However, the Company's ability to
repurchase its Notes upon a Change of Control may be limited by the terms of
then existing contractual obligations of the Company. In addition, the Company
may not have adequate financial resources to effect such purchase, and there can
be no assurance that the Company would be able to obtain such resources. If the
Company fails to repurchase all of its Notes tendered for purchase upon the
occurrence of a Change of Control, such failure will constitute an Event of
Default under the Indenture. See "Description of the Exchange Notes."
RESTRICTIONS ON TRANSFERABILITY AND ABSENCE OF PUBLIC MARKET
There is no existing trading market for the Notes. Although the Initial
Purchaser has advised the Company that it currently intends to make a market in
the Notes, it is not obligated to do so and it may discontinue such
market-making at any time without notice. In addition, such market-making
activity may be limited during the Exchange Offer and the pendency of the Shelf
Registration Statements. Although the Notes, after the Separation Date, are
expected to be eligible for trading in the PORTAL market of the Nasdaq Stock
Market Inc. by "qualified institutional buyers" ("QIBs"), as defined in Rule
144A under the Securities Act, there can be no assurance as to the development
of any market or the liquidity of any market that may develop for the Notes. If
such a market were to develop the Notes could trade at prices higher or
25
<PAGE> 31
lower than the initial offering price depending on many factors, including,
among other things, prevailing interest rates, the Company's operating results
and the market for similar securities.
In addition, upon the consummation of the Exchange Offer, the Company
intends to apply for a listing of the Notes on the Luxembourg Stock Exchange.
See "Notice to Investors."
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that the market for the Notes will not be
subject to similar disruptions. Any such disruptions may have an adverse effect
on holders of the Notes.
INVESTMENT COMPANY CONSIDERATIONS
VersaTel's U.S. counsel, Shearman & Sterling, has advised the Company that,
in such counsel's opinion, it is not an "investment company" which is required
to be registered under the U.S. Investment Company Act of 1940, as amended (the
"Investment Company Act"). In rendering such opinion, Shearman & Sterling did
not independently establish or verify any information or facts supplied by the
Company and, with the Company's permission, assumed and relied entirely on the
completeness and accuracy of the information supplied by the Company. The
Company intends to conduct its affairs so as to avoid becoming an "investment
company." The Investment Company Act contains substantive regulations with
respect to investment companies, including restrictions on their capital
structure, operations, transactions with related persons and other matters which
may be incompatible with the operations of the Company. If the Company were to
be deemed an "investment company," it would, among other things, effectively be
precluded from making any public offering in the United States and, accordingly,
would be unable to implement the Exchange Offer. If the Company, is deemed an
"investment company," it could also be subject to administrative or legal
proceedings and, among other things, contracts to which the Company is a party
might be rendered unenforceable or subject to rescission.
CONSEQUENCES OF FAILURE TO EXCHANGE
Untendered Outstanding Notes that are not exchanged for Exchange Notes
pursuant to the Exchange Offer will remain restricted securities. Outstanding
Notes will continue to be subject to the following restrictions on transfer: (i)
Outstanding Notes may be resold only if registered pursuant to the Securities
Act, if an exemption from registration is available thereunder, or if neither
such registration nor such exemption is required by law, (ii) Outstanding Notes
shall bear a legend restricting transfer in the absence of registration or an
exemption therefrom and (iii) a holder of Outstanding Notes who desires to sell
or otherwise dispose of all or any part of its Outstanding Notes under an
exemption from registration under the Securities Act, if requested by the
Company, must deliver to the Company an opinion of independent counsel
experienced in Securities Act matters, reasonably satisfactory in form and
substance to the Company, that such exemption is available.
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<PAGE> 32
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
contemplated herein, the Company will receive in exchange Outstanding Notes in
like principal amount. The Outstanding Note surrendered in exchange for the
Exchange Notes will be retired and canceled and cannot be reissued. Accordingly,
issuance of the Exchange Notes will not result in any change in the Indebtedness
of the Company.
The net proceeds from the Offering were approximately $216.2 million, after
deducting underwriting discounts and commissions and estimated fees and
expenses. The Company used approximately $81.6 million to acquire the Pledged
Securities with respect to the first six interest payments on the Notes. The
Company intends to use the remaining net proceeds from the Offering, together
with the proceeds from the Recapitalization, to make capital expenditures
related to the expansion and development of the VersaTel Network, including
through acquisitions, to fund operating losses and working capital requirements
and for other general corporate purposes including acquisitions and strategic
alliances. The Company estimates that the total capital expenditures necessary
to construct and develop its Network through 1999 will be approximately NLG
222.2 million ($106.8 million), with approximately NLG 106.5 million required
for the construction and development of the Benelux Overlay Network,
approximately NLG 46.6 million for the construction and development of the
initial Local Access Network, approximately NLG 37.1 million for the
construction and development of the International Network and NLG 32.0 million
for switching, network management and billing/back-office support systems. Prior
to the application of the net proceeds from the Offering, as described above,
such funds will be invested by the Company in short-term investment grade
securities.
THE EXCHANGE OFFER
GENERAL
In connection with the sale of the Outstanding Notes, the Company agreed in
the Registration Rights Agreement to (i) file within 90 days, and use its
reasonable best efforts to cause to be declared effective within 150 days, of
the date of the original issuance of the Outstanding Notes, a registration
statement (the "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 and
(ii) use its reasonable best efforts to cause the Exchange Offer to be
consummated on or before 30 days after the date on which the Registration
Statement is declared effective by the Commission.
In the event that (i) the Company is not permitted to file the Registration
Statement or to consummate the Exchange Offer on account of changes in law or
the applicable interpretations of the staff of the Commission, (ii) any holder
that is a QIB notifies the Company at least 20 business days prior to the
consummation of the Exchange Offer that (a) applicable law or SEC policy
prohibits the Company from participating in the Exchange Offer, (b) such holder
may not resell the Exchange Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and that this Prospectus is not
appropriate or available for such resales by such holder or (c) such holder is a
broker-dealer and holds Notes acquired directly from the Company or an affiliate
of the Company, (iii) the Exchange Offer is not for any other reason consummated
within 180 days after the original issue date of the Outstanding Notes, (iv) any
holder (other than a Participating Broker-Dealer) is not eligible to participate
in the Exchange Offer, or in the case of any holder that participates in the
Exchange Offer, such holder does not receive Exchange Notes on the date of the
exchange that may be sold without restriction under federal securities laws
(other than due solely to the status of such holder as an affiliate of the
Company within the meaning of the Securities Act or due to the requirement that
such holder deliver a copy of this Prospectus in connection with any resale of
the Exchange Notes) or (v) the Exchange Offer has been completed and in the
opinion of counsel for the Initial Purchaser a Registration Statement must be
filed and a prospectus must be delivered by the Initial Purchaser in connection
with any offering or sale of Transfer Restricted Securities (as defined in the
Registration Rights Agreement), the Company will use its reasonable best efforts
to file, within 90 days of the earliest to occur of
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<PAGE> 33
the preceding events, a shelf registration statement pursuant to the Securities
Act with respect to the resale of the Outstanding Notes (the "Shelf Registration
Statement") and to keep the Shelf Registration Statement effective until the
second anniversary of the Issue Date.
In the event that (i) neither the Registration Statement nor the Shelf
Registration Statement is filed with the Commission on or prior to the 90th day
following the date of original issue of the Outstanding Notes, (ii) neither the
Registration Statement nor the Shelf Registration Statement is declared
effective on or prior to the 150th day following the date of original issue of
the Outstanding Notes (iii) the Exchange Offer is not consummated on or before
30 days after the 150th day following the date of original issue of the
Outstanding Notes, or (iv) (a) the Registration Statement is filed and declared
effective but thereafter ceases to be effective or fails to be usable for its
intended purpose at any time prior to the time that the Exchange Offer is
consummated and is not declared effective within five business days thereafter
or (b) the Shelf Registration Statement is filed and declared effective but
thereafter ceases to be effective or fails to be usable for its intended purpose
at any time during the Effectiveness Period (as defined in the Registration
Rights Agreement) and is not declared effective again within five business days
thereafter, the interest rate borne by the Outstanding Notes shall be increased
by one-half of one percent per annum following such 90-day period in the case of
clause (i) above, following such 150-day period in the case of clause (ii)
above, following such 30-day period in the case of clause (iii) above, or
commencing on the day the applicable registration statement ceases to be
effective or usable for its intended purpose without being declared effective
again within 5 business days in the case of clause (iv) above. The aggregate
amount of such increase from the original interest rate pursuant to these
provisions will in no event exceed 1.5 percent per annum. Upon (w) the filing of
the Registration Statement or the Shelf Registration Statement for the Exchange
Offer after the 90-day period described in clause (i) above, (x) the
effectiveness of the Registration Statement or Shelf Registration Statement
after the 150-day period described in clause (ii) above, (y) the consummation of
the Exchange Offer after the 30-day period described in clause (iii) above, or
(2) the effectiveness or usability of the Registration Statement which had
ceased to remain effective or be usable, or the effectiveness or usability of
the Shelf Registration Statement which had ceased to remain effective or be
usable the interest rate borne by the Outstanding Notes from the date of such
filing, effectiveness, usability or the day before the date of consummation, as
the case may be, will be reduced to the original interest rate if the Company is
otherwise in compliance with such requirements.
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept all
Outstanding Notes validly tendered prior to 5:00 p.m., New York City time, on
the Expiration Date. The Company will issue $1,000 principal amount of Exchange
Notes in exchange for each $1,000 principal amount of outstanding 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 $1,000 and
integral multiples thereof.
Based on no-action letters issued by the staff of the Commission to third
parties, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Outstanding Notes may be offered for resale,
resold and otherwise transferred by any holder thereof (other than (i) a
broker-dealer who purchased such Outstanding Notes directly from the Company to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act or (ii) a person that is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery requirements of the Securities Act,
provided that the holder is acquiring the Exchange Notes in its ordinary course
of business and is not participating, and has no arrangements or understanding
with any person to participate, in the distribution of the Exchange Notes.
Holders of Outstanding Notes wishing to accept the Exchange Offer must represent
to the Company that such conditions have been met.
Each broker-dealer that receives Exchange Notes in exchange for Outstanding
Notes held for its own account, as a result of market-making or other trading
activities, must acknowledge that it will deliver a 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
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<PAGE> 34
supplemented from time to time, may be used by such broker-dealer in connection
with resales of Exchange Notes received in exchange for Outstanding Notes. The
Company has agreed that, for a period of 180 days after the Expiration Date, it
will make this Prospectus and any amendment or supplement to this Prospectus
available to any such broker-dealer for use in connection with any such resale.
See "Plan of Distribution."
As of the date of this Prospectus, $225 million aggregate principal amount
of the Outstanding Notes is outstanding. In connection with the issuance of the
Outstanding Notes, the Company arranged for the Outstanding Notes initially
purchased by Qualified Institutional Buyers to be issued and transferable in
book-entry form through the facilities of DTC, acting as depositary. The
Exchange Notes will also be issuable and transferable in book-entry form through
DTC.
This Prospectus, together with the accompanying Letter of Transmittal, is
being sent to all registered holders as of , 1998 (the "Record Date").
The Company shall be deemed to have accepted validly tendered Outstanding
Notes when, as and if the Company has given oral or written notice thereof to
the 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 the Company and delivering Exchange Notes to such
holders.
If any tendered Outstanding Notes are not accepted for exchange because of
an invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted Outstanding Notes will be returned, without
expenses, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
Holders of Outstanding Notes who tender in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of
Outstanding Notes pursuant to the Exchange Offer. The Company will pay all
charges and expenses, other than certain applicable taxes, in connection with
the Exchange Offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean , 1998 unless the Company,
in its sole discretion, extends the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date to which the Exchange Offer is
extended.
In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
record holders of Outstanding Notes an announcement thereof, each prior to 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. Such announcement may state that the Company is
extending the Exchange Offer for a specified period of time.
The Company reserves the right (i) to delay acceptance of any Outstanding
Notes, to extend the Exchange Offer or to terminate the Exchange Offer and to
refuse to accept Outstanding Notes not previously accepted, if any of the
conditions set forth herein under "-- Termination" shall have occurred and shall
not have been waived by the Company (if permitted to be waived by the Company),
by giving oral or written notice of such delay, extension or termination to the
Exchange Agent, and (ii) to amend the terms of the Exchange Offer in any manner
deemed by it to be advantageous to the holders of the Outstanding Notes. Any
such delay in acceptance, extension, termination or amendment will be followed
as promptly as practicable by oral or written notice thereof. If the Exchange
Offer is amended in a manner determined by the Company to constitute a material
change, the Company will promptly disclose such amendment in a manner reasonably
calculated to inform the holders of the Outstanding Notes of such amendment.
Without limiting the manner by which the Company may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the Exchange Offer, the Company shall have no obligation to publish, advertise,
or otherwise communicate any such public announcement, other than by making a
timely release to the Dow Jones News Service.
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INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from May 27, 1998, payable
semiannually on May 15 and November 15 of each year commencing on November 15,
1998, at the rate of 13 1/4% per annum. Holders of Outstanding Notes whose
Outstanding Notes are accepted for exchange will be deemed to have waived the
right to receive any payment in respect of interest on the Outstanding Notes
accrued from May 27, 1998 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 November 15, 1998 (the first interest
payment date with respect to the Outstanding Notes and the Exchange Notes) that
they would have received had they not accepted the Exchange Offer.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the
Outstanding Notes (unless such tender is being effected pursuant to the
procedure for book-entry transfer described below) and any other required
documents, to the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date.
Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system may make book-entry delivery of the Outstanding Notes
by causing DTC to transfer such Outstanding Notes into the Exchange Agent's
account in accordance with DTC's procedure for such transfer. Although delivery
of Outstanding Notes may be effected through book-entry transfer into the
Exchange Agent's account at DTC, the Letter of Transmittal (or facsimile
thereof), with any required signature guarantees and any other required
documents, must, in any case, be transmitted to and received or confirmed by the
Exchange Agent at its addresses set forth herein under "-- Exchange Agent" prior
to 5:00 p.m., New York City time, on the Expiration Date. DELIVERY OF DOCUMENTS
TO DTC IN ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE
EXCHANGE AGENT.
The tender by a holder of Outstanding Notes will constitute an agreement
between such holder and the Company in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal.
Delivery of all documents must be made to the Exchange Agent at its address
set forth herein. 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 the Letters of Transmittal
and all other required documents to the Exchange Agent is at the election and
risk of the holders. Instead of delivery by mail, it is recommended that holders
use an overnight or hand delivery service. In all cases, sufficient time should
be allowed to assure timely delivery. No Letter of Transmittal or Outstanding
Notes should be sent to the Company.
Only a holder of Outstanding Notes may tender such Outstanding Notes in the
Exchange Offer. The term "holder" with respect to the Exchange Offer means any
person in whose name Outstanding Notes are registered on the books of the
Company or any other person who has obtained a properly completed bond power
from the registered holder, or any person whose Outstanding Notes are held of
record by DTC who desires to deliver such Outstanding Notes by book-entry
transfer at DTC.
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.
30
<PAGE> 36
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" within the meaning of Rule
17Ad-15 under the Exchange Act (an "Eligible Institution") unless the
Outstanding Notes tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Outstanding Notes listed therein, such Outstanding
Notes must be endorsed or accompanied by appropriate bond powers which authorize
such person to tender the Outstanding Notes on behalf of the registered holder,
in either case signed as the name of the registered holder or holders appears on
the Outstanding Notes.
If the Letter of Transmittal or any Outstanding Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
All the questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Outstanding Notes will be
determined by the Company in its sole discretion, which determinations will be
final and binding. The Company reserves the absolute right to reject any and all
Outstanding Notes not validly tendered or any Outstanding Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the absolute right to waive any
irregularities or conditions of tender as to particular Outstanding Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Outstanding Notes must be cured within such time as
the Company shall determine. Neither the Company, the Exchange Agent nor any
other person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Outstanding Notes nor shall any of
them incur any liability for failure to give such notification. Tenders of
Outstanding Notes will not be deemed to have been made until such irregularities
have been cured or waived. Any Outstanding Notes received by the Exchange Agent
that are not properly tendered and as to which the defects or irregularities
have not been cured or waived will be returned without cost by the Exchange
Agent to the tendering holder of such Outstanding Notes unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
In addition, the Company reserves the right in its sole discretion to (a)
purchase or make offers for any Outstanding Notes that remain outstanding
subsequent to the Expiration Date, or, as set forth under "Termination," to
terminate the Exchange Offer and (b) to the extent permitted by applicable law,
purchase Outstanding Notes in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or offers may differ
from the terms of the Exchange Offer.
By tendering, each holder of Outstanding Notes will represent to the
Company that, among other things, the Exchange Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary course of business of the
person receiving such Exchange Notes, whether or not such person is the holder,
that neither the Holder nor any other person has an arrangement or understanding
with any person to participate in the distribution of the Exchange Notes and
that neither the holder nor any such other person is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act.
GUARANTEED DELIVERY PROCEDURES
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
31
<PAGE> 37
other required documents to the Exchange Agent prior to the Expiration Date, or
if such Holder cannot complete the procedure for book-entry transfer on a timely
basis, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (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; 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 confirmation of
a book-entry transfer into the Exchange Agent's account at DTC of
Outstanding Notes delivered electronically) and all other documents
required by the Letter of Transmittal are received by the Exchange Agent
within five business days after the Expiration Date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Outstanding Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, unless previously
accepted for exchange.
To withdraw a tender of Outstanding Notes in the Exchange Offer, a written
or facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the business day prior to the Expiration Date and prior to acceptance for
exchange thereof by the Company. Any such notice of withdrawal must (i) specify
the name of the person having deposited the Outstanding Notes to be withdrawn
(the "Depositor"), (ii) identify the Outstanding Notes to be withdrawn
(including the certificate number or numbers and principal amount of such
Outstanding Notes), (iii) be signed by the Depositor in the same manner as the
original signature on the Letter of Transmittal by which such Outstanding Notes
were tendered (including any required signature guarantees) or be accompanied by
documents of transfers sufficient to permit the Trustee with respect to the
Outstanding Notes to register the transfer of such Outstanding Notes into the
name of the Depositor withdrawing the tender and (iv) specify the name in which
any such Outstanding Notes are to be registered, if different from that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) for such withdrawal notices will be determined by the Company,
whose determination shall be final and binding on all parties. Any Outstanding
Notes so withdrawn will be deemed not to have been validly tendered for purposes
of the Exchange Offer and no Exchange Notes will be issued with respect thereto
unless the Outstanding Notes so withdrawn are validly tendered. Any Outstanding
Notes which have been tendered but which are not accepted for exchange will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Outstanding Notes may be tendered by following one of
the procedures described above under "-- Procedures for Tendering" at any time
prior to the Expiration Date.
TERMINATION
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange Exchange Notes for, any
Outstanding Notes not therefore accepted for exchange, and may terminate or
amend the Exchange Offer as provided herein before the acceptance of such
Outstanding Notes if: (i) any action or proceeding is instituted or threatened
in any court or by or before any governmental agency with respect to the
Exchange Offer, which, in the Company's judgment, might materially impair the
Company's ability to proceed with the Exchange Offer or (ii) any law, statute,
rule or regulation is proposed, adopted or enacted, or any existing law,
statute, rule or regulation is interpreted by the staff of the Commission
32
<PAGE> 38
or court of competent jurisdiction in a manner, which, in the Company's
judgment, might materially impair the Company's ability to proceed with the
Exchange Offer.
If the Company determines that it may terminate the Exchange Offer, as set
forth above, the Company may (i) refuse to accept any Outstanding Notes and
return any Outstanding Notes that have been tendered to the holders thereof,
(ii) extend the Exchange Offer and retain all Outstanding Notes tendered prior
to the Expiration of the Exchange Offer, subject to the rights of such holders
of tendered Outstanding Notes to withdraw their tendered Outstanding Notes, or
(iii) waive such termination event with respect to the Exchange Offer and accept
all properly tendered Outstanding Notes that have not been withdrawn. If such
waiver constitutes a material change in the Exchange Offer, the Company will
disclose such change by means of a supplement to this Prospectus that will be
distributed to each registered holder of Outstanding Notes, and the Company will
extend the Exchange Offer for a period of five to ten business days, depending
upon the significance of the waiver and the manner of disclosure to the
registered holders of the Outstanding Notes, if the Exchange Offer would
otherwise expire during such period.
EXCHANGE AGENT
United States Trust Company of New York, the Trustee under the Indenture,
has been appointed as Exchange Agent for the Exchange Offer. Questions and
requests for assistance and requests for additional copies of this Prospectus or
of the Letter of Transmittal should be directed to the Exchange Agent addressed
as follows:
By Mail or Hand Delivery: United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Services
Facsimile Transmission: (212) 420-6152
Confirm by Telephone: (800) 548-6565
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Company and its affiliates in person, by
telegraph or telephone.
The Company will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
the Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. The Company may also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of this Prospectus, Letters of Transmittal and related
documents to the beneficial owners of the Outstanding Notes and in handling or
forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer,
including fees and expenses of the Exchange Agent and Trustee and accounting and
legal fees, will be paid by the Company.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Outstanding Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or Outstanding Notes 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
33
<PAGE> 39
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.
EXCHANGE RATE INFORMATION
The table below sets forth, for the periods and dates indicated, certain
information concerning the Noon Buying Rates for Dutch guilders expressed in
U.S. dollars per Dutch guilder. On March 31, 1998, the Noon Buying Rate was NLG
2.08 per $1.00.
<TABLE>
<CAPTION>
PERIOD
PERIOD HIGH LOW AVERAGE(1) PERIOD END
------ ---- ---- ---------- ----------
<S> <C> <C> <C> <C>
1993.............................................. 1.96 1.76 1.87 1.95
1994.............................................. 1.98 1.67 1.82 1.74
1995.............................................. 1.75 1.52 1.60 1.60
1996.............................................. 1.76 1.61 1.69 1.73
1997.............................................. 2.12 1.73 1.95 2.03
1998 (through May 20, 1998)....................... 2.09 1.99 2.04 1.99
</TABLE>
- ---------------
(1) The average of the Noon Buying Rates on the last day of each full month
during the period.
34
<PAGE> 40
CAPITALIZATION
The following table sets forth the cash and restricted cash and the
capitalization of the Company as of March 31, 1998 (i) on an historical basis
and (ii) on an as adjusted basis, assuming both (A) the completion of the
Recapitalization on such date and the maintenance of the net cash proceeds
therefrom as cash and (B) the consummation of the Offering on such date and the
maintenance of the estimated net proceeds thereof as cash, in each case as if
the Recapitalization and the Offering had occurred on March 31, 1998. See "Use
of Proceeds." The information set forth in the following table should be read in
conjunction with the Financial Statements included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
---------------------------------------
ACTUAL AS ADJUSTED(1)
------- ----------------------------
NLG NLG(2) $(3)
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and restricted cash(4)............................. 5,298 482,337 231,893
======= ======= =======
Current maturities of long-term debt.................... 269 269 129
Long-term debt (less current portion):
Other debt............................................ 50 50 24
13 1/4% Senior Notes due 2008(5)...................... -- 464,659 223,394
------- ------- -------
Subordinated convertible debt obligations(6).......... 8,105 -- --
------- ------- -------
Total debt.................................... 8,424 464,978 223,547
------- ------- -------
Prepaid shareholder contributions(7).................... 7,200 -- --
------- ------- -------
Shareholders' equity:
Ordinary Shares, par value NLG 0.10 per share --
44,550,000 shares authorized; 9,579,643 shares
issued and outstanding(8).......................... 958 1,943 934
Warrants(5)........................................... -- 3,341 1,606
Additional paid-in capital............................ 6,037 48,157 23,153
Accumulated deficit................................... (31,213) (31,213) (15,006)
------- ------- -------
Total shareholders' equity (deficit).......... (24,218) 22,228 10,687
------- ------- -------
Total capitalization.......................... (8,594) 487,206 234,234
======= ======= =======
</TABLE>
- ---------------
(1) Reflects the Recapitalization and the Offering as if they had been completed
on March 31, 1998, and the maintenance of the net proceeds thereof as cash.
See "Summary -- Recent Developments," "Security Ownership of Principal
Stockholders and Management" and "Certain Relationships and Related
Transactions."
(2) Solely for the convenience of the reader, the U.S. dollar amount of the
Notes has been translated into Dutch guilders at the Noon Buying Rate on
March 31, 1998 of NLG 2.08 per $1.00.
(3) Solely for the convenience of the reader, Dutch guilder amounts have been
translated into U.S. dollars at the Noon Buying Rate on March 31, 1998 of
NLG 2.08 per $1.00.
(4) The estimated net cash proceeds from the Offering of NLG 449.7 million
($216.2 million) and of the Recapitalization of NLG 27.4 million have been
added to cash pending application of such proceeds as described in "Use of
Proceeds."
(5) For the purposes of this table, NLG 3.3 million of the net proceeds of the
Offering have been allocated to the Warrants.
(6) Represents obligations outstanding to NeSBIC and Cromwilld which have been
converted to Ordinary Shares in connection with the Recapitalization.
(7) Prepaid shareholder contributions relates to receipts from shareholders as
part of the Recapitalization before March 31, 1998 which were added to
shareholders' equity on April 17, 1998.
(8) Giving effect to the Recapitalization as of March 31, 1998, 19,427,404
shares would have been issued and outstanding on such date.
Except as disclosed in this Prospectus, there has been no material change
in the capitalization of the Company since March 31, 1998.
35
<PAGE> 41
SELECTED FINANCIAL AND OTHER DATA
The selected financial data for VersaTel, presented below, as of and for
the two fiscal years ended December 31, 1996 and December 31, 1997 have been
derived from the Audited Financial Statements of VersaTel, which have been
audited by Arthur Andersen, independent public accountants. The summary
financial data for the three months ended March 31, 1997 and March 31, 1998,
have been derived from the Unaudited Financial Statements, which have been
prepared in accordance with U.S. GAAP and on a basis which management believes
is consistent with that of the Audited Financial Statements. The information set
forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Results of
Operations" and the Financial Statements included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------------ ----------------------------
1996 1997 1997 1998
------- ------------------- ------ ------------------
NLG NLG $(1) NLG NLG $(1)
(IN THOUSANDS, EXCEPT PERCENTAGES AND OTHER DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue................................... 6,428 18,896 9,085 3,917 6,402 3,078
Cost of revenue........................... 4,954 17,405 8,368 3,093 5,460 2,625
------ ------- ------ ------ ------ --------
Gross margin............................ 1,474 1,491 717 824 942 453
Operating expenses:
Selling, general and administrative..... 5,485 17,527 8,427 2,054 5,544 2,665
Depreciation and amortization........... 453 3,237 1,556 292 1,087 523
------ ------- ------ ------ ------ --------
Total operating expenses........... 5,938 20,764 9,983 2,346 6,631 3,188
------ ------- ------ ------ ------ --------
Loss from operations...................... (4,464) (19,273) (9,266) (1,522) (5,689) (2,735)
Interest expense, net..................... 269 534 257 93 200 97
Currency loss............................. -- 53 25 -- 115 55
------ ------- ------ ------ ------ --------
Net loss.................................. (4,733) (19,860) (9,548) (1,615) (6,004) (2,887)
====== ======= ====== ====== ====== ========
Net loss per share (Basic and Diluted).... (0.95) (2.20) (1.06) (0.73) (2.51) (1.21)
Weighted average number of shares
outstanding............................. 5,004 9,042 9,042 8,910 9,580 9,580
OTHER FINANCIAL DATA:
Gross margin as a percentage of revenue... 22.9% 7.9% 7.9% 21.0% 14.7% 14.7%
SG&A as a percentage of revenue........... 85.3% 92.8% 92.8% 52.4% 86.6% 86.6%
EBITDA(2)................................. (4,011) (16,036) (7,710) (1,230) (4,602) (2,212)
Capital expenditures...................... 2,569 14,516 6,979 1,157 2,424 1,165
OTHER DATA:
Total customers (at period end)........... 670 2,245 2,245 867 3,239 3,239
Number of billable minutes (in
thousands)(3)........................... 6,487 23,361 23,361 4,235 12,432 12,432
Average revenue per billable minute....... 0.99 0.81 0.39 0.92 0.51 0.25
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------- AS OF MARCH 31,
1996 1997 1998
------ ------------------ ------------------
NLG NLG $(1) NLG $(1)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and restricted cash............................ 4,443 1,495 719 5,298 2,547
Working capital (excluding cash and restricted
cash)............................................. (2,704) (24,774) (11,911) (28,792) (13,842)
Property, plant and equipment, net.................. 2,340 13,619 6,548 14,956 7,190
Total assets........................................ 8,160 19,331 9,294 26,189 12,591
Total long-term obligations (including current
portion).......................................... 4,185 8,491 4,082 15,623 7,511
Total shareholders' equity (deficit)................ 146 (18,214) (8,757) (24,218) (11,643)
</TABLE>
- ---------------
(1) Solely for the convenience of the reader, Dutch guilder amounts have been
translated into U.S. dollars at the Noon Buying Rate on March 31, 1998 of
NLG 2.08 per $1.00.
(2) EBITDA consists of earnings (loss) before interest expense, income taxes,
depreciation, amortization and foreign exchange gain (loss). EBITDA is
included because management believes it is a useful indicator of a company's
ability to incur and service debt. EBITDA should not be considered as a
substitute for operating earnings, net income, cash flow or other statements
of operations or cash flow data computed in accordance with U.S. GAAP or as
a measure of the Company's results of operations or liquidity. Because all
companies do not calculate EBITDA identically, the presentation of EBITDA
contained herein may not be comparable to other similarly entitled measures
of other companies.
(3) Billable minutes are those minutes during which a call is connected to the
VersaTel switch and for which the Company bills a customer.
36
<PAGE> 42
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Financial Statements contained elsewhere in this Prospectus. See "Selected
Financial and Other Data." Certain information contained below and elsewhere in
this Prospectus, including information with respect to the Company's plans and
strategy for its business, are forward-looking statements. See "Disclosure
Regarding Forward-Looking Statements."
OVERVIEW
VersaTel is a rapidly growing alternative telecommunications service
provider based in Amsterdam, The Netherlands. VersaTel's objective is to become
the leading alternative provider of facilities-based national and international
telecommunications services in the Benelux region. The Company currently
provides high quality competitively priced, international, and increasingly
national, long distance telecommunications services in The Netherlands,
primarily to small- and medium-sized businesses and selected residential
customers. The VersaTel Network currently consists of a Nortel DMS 100 switch
located in Amsterdam and connections to other carriers, including PTT Telecom.
Business and residential customers access the VersaTel Network indirectly by
dialing (manually, through an auto-dialer or through pre-programmed PBX's) the
Company's "1611" carrier select code. Wholesale customers access the Network
directly through leased lines. Prior to liberalization and the implementation of
the "1611" code, business and residential customers used the six-digit Virtual
Private Network ("VPN") code or the Company's Direct Inward System Access
("DISA") code, which involves a two stage call set-up. Both the VPN and DISA
codes are currently being phased out as customers are being migrated to the
"1611" carrier select code.
REVENUES
VersaTel currently derives its revenues from the provision of long distance
telecommunications services in The Netherlands. VersaTel provides international
long distance and national long distance services to its customer base of small-
and medium-sized businesses as well as selected residential customers. The
Company also provides wholesale services to other telecommunications service
providers.
VersaTel's revenues are derived from minutes of telecommunications traffic
billed. The following table sets forth the total revenues and billable minutes
of use attributable to VersaTel's operations for the years ended December 31,
1996 and December 31, 1997 and for the three months ended March 31, 1997 and
March 31, 1998 as well as the total number of customers as of December 31, 1996
and December 31, 1997 and as of March 31, 1998. All of VersaTel's 1996 and 1997
revenues were derived from The Netherlands. VersaTel expects to start generating
revenues in Belgium in 1998 and in Luxembourg in 1999.
<TABLE>
<CAPTION>
FISCAL THREE MONTHS
YEARS ENDED ENDED
DECEMBER 31, MARCH 31,
--------------- ---------------
1996 1997 1997 1998
----- ------ ----- ------
(NLG IN THOUSANDS)
<S> <C> <C> <C> <C>
REVENUES
Business customers...................................... 6,143 16,948 3,549 5,620
Residential customers................................... 0 11 0 33
Wholesale customers..................................... 285 1,937 368 749
----- ------ ----- ------
Total........................................... 6,428 18,896 3,917 6,402
(IN THOUSANDS)
BILLABLE MINUTES OF USE
Business customers...................................... 6,237 21,469 3,881 10,355
Residential customers................................... 0 42 0 105
Wholesale customers..................................... 250 1,850 354 1,972
----- ------ ----- ------
Total........................................... 6,487 23,361 4,235 12,432
</TABLE>
37
<PAGE> 43
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
------------------ ---------------
1996 1997 1998
------- ------- ---------------
<S> <C> <C> <C>
CUSTOMERS
Business customers....................................... 669 2,014 2,619
Residential customers.................................... 0 230 617
Wholesale customers...................................... 1 1 3
------ ------ ------
Total............................................ 670 2,245 3,239
</TABLE>
Currently, small- to medium-sized businesses generate the majority of
VersaTel's revenues. VersaTel expects revenues from the residential customer
segment to grow substantially with increased awareness of its "1611" carrier
select code, future introduction of carrier pre-selection, additional marketing
efforts and the introduction of new products and services targeted at
residential customers. In the future, the Company also expects to derive
revenues from monthly charges, incoming calls and new services as a result of
directly connecting business customers to the VersaTel Network. The Company also
derives a limited amount of revenues from switched voice services offered to
other telecommunications service providers on a wholesale basis. As the Benelux
Overlay Network is completed and as the Company has capacity available, it
intends to increase its marketing efforts in the wholesale segment to increase
utilization of the Network. The Company expects to expand its wholesale
offerings to include the sale of dark fiber, conduit and rights-of-way access to
help offset the cost of constructing the Network.
VersaTel generally prices its services at a discount to the local PTTs and
expects to continue this pricing strategy as the Company expands its operations.
In general, PTTs have been reducing their rates over the last few years. As a
result, VersaTel has experienced and expects to continue to experience declining
revenue per minute. PTT Telecom reduced its prices on several occasions in 1997
and most recently in April 1998 with a reduction of approximately 10.0% which
may have an adverse impact on margins. Additionally, the Company expects to
increase its national billable minutes, which are priced at lower rates than
international minutes. As national and wholesale billable minutes increase as a
percentage of total billable minutes, average revenue per billable minute will
further decline. However, due to technological improvements, liberalization of
the European telecommunications market and increased available transmission
capacity, both from third parties and as the VersaTel Network is built out,
VersaTel expects costs per minute to decline as well. Management believes that
the decline of per minute costs will out-pace the decline in per minute prices;
however, there can be no assurances that this will occur. If reductions in costs
do not in fact out-pace reductions in revenues, VersaTel may experience a
substantial reduction in its margins on calls which, absent a significant
increase in billable minutes of traffic carried or increased charges for
additional services, would have a material adverse effect on VersaTel's business
and financial results. See "Risk Factors -- Intense Competition."
COST OF REVENUES
VersaTel's costs of revenues are comprised of origination costs, network
costs and termination costs and are both fixed and variable. Origination costs
represent the cost of carrying traffic from the customer to the VersaTel
Network. Origination charges for calls transported to the VersaTel Network are
variable and are incurred on a per minute basis, including the call set-up
charges. Origination charges for business and residential customers are charged
by the PTT either to VersaTel, in the case of the "1611" and VPN codes, or
directly to customers, in the case of the DISA code. In cases where the business
or residential customer is charged directly by the PTT for the origination
costs, VersaTel reimburses the customer by means of a credit to the customer's
account. The charges credited directly to the customer are a result of the use
of the DISA access code and, as noted above, are being phased out by the
Company.
The Company has experienced a significant decrease in origination costs and
expects that they will continue to decrease significantly over time due to
competition and regulatory orders. In April 1998, the Netherlands regulatory
authority, the Onafhankelijke Post en Telecommunicatie Autoriteit ("OPTA"),
ordered a reduction in origination charges which management estimates could
reduce these charges by up to 40.0%. In addition, as VersaTel builds-out its
Network, it intends to connect as many business customers as economically
feasible directly to the VersaTel Network, thereby eliminating origination
charges for these customers. These decreases would be offset to some extent by
amortization and depreciation charges
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associated with the construction of the Network. There can be no assurance that
the trend in decreasing access costs will continue. As a result, if origination
costs do not continue to decrease, anticipated decreases in revenues per minute
would cause the Company to experience a decline in gross margins per billable
minute which would have a material adverse effect on the Company's business and
financial performance. See "Risk Factors -- Intense Competition."
Currently, network costs represent the cost of transporting traffic between
the VersaTel switch and points of interconnection using leased lines. However,
as VersaTel builds-out the Network, the Company will establish more points of
interconnection and, as a result, expects network costs to rise in the future.
Termination costs are the per minute costs associated with using carriers
to carry a call from the point of interconnection to the final destination.
Through least-cost routing, the VersaTel switch directs calls to the most
cost-efficient carrier for the required destination. As VersaTel builds-out the
Network to new points of interconnection, the Company expects to be able to
reduce average termination costs per minute. For example, once VersaTel
establishes a direct link from Amsterdam to Rotterdam, the Company will no
longer pay for national termination costs on that route and will only pay local
termination costs from the point of interconnection in Rotterdam to the final
destination in that city. The Company also believes that per minute termination
costs will continue to decrease due to several additional factors including: (i)
the incremental build-out of the VersaTel Network which will increase the number
of carriers with which it interconnects; (ii) the increase of minutes originated
by VersaTel should lead to higher volume discounts available to the Company;
(iii) more rigorous implementation of the EC directives requiring cost-based
termination rates and leased line rates; and (iv) emergence of new
telecommunication service providers and the construction of new transmission
facilities resulting in increased competition. There can be no assurance,
however, that the trend in decreasing termination costs will continue.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses are comprised primarily of
salaries, employee benefits, office and administrative expenses, professional
and consulting fees and marketing costs. These expenses have increased as the
Company has developed and expanded its workforce, and are expected to continue
to increase as new operations are established and the Company expands. Selling,
general and administrative expenses as a percentage of revenue will continue to
vary from period to period as a result of start-up costs relating to expansion
into new regions.
The Company has grown substantially since its inception and intends to
continue to grow by adding more sales, marketing and customer support staff. In
addition, the Company expects to establish additional sales offices in the
future. The expansion of its sales, marketing and customer support staff and the
development of additional sales offices involves substantial training costs and
start-up costs, a large portion of which will be reflected as fixed costs and
recorded as selling, general and administrative charges. Accordingly, the
Company's results of operations will vary depending on the timing and speed of
the Company's expansion strategy and, during a period of rapid expansion,
selling, general and administrative expenses will be relatively higher than
during more stable periods of growth. See "Business -- Sales and
Marketing -- Sales and Marketing Staff."
DEPRECIATION AND AMORTIZATION
The Company capitalizes and depreciates its fixed assets, including
switching equipment and fiber-optic cable, over periods ranging from two to
twenty-five years. In addition, the Company capitalizes and amortizes the cost
of installing dialers at customer sites. The development of the VersaTel Network
will require large capital expenditures and larger depreciation charges in the
future. The Company expects that the total cost of construction of the VersaTel
Network through 1999 will be approximately NLG 222.2 million, with approximately
NLG 106.5 million required for the Benelux Overlay Network, approximately NLG
46.6 million required for the Local Access Network, approximately NLG 37.1
million required for the International Network and approximately NLG 32.0
million for switching, network management and billing/back-office support
systems. Increased capital expenditures will adversely affect the Company's
future operating results due to increased depreciation charges and interest
expense. See "Business -- Strategy" and "-- Network."
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FOREIGN EXCHANGE LOSS
Since the Offering, the Company has substantial dollar denominated
indebtedness. Also, as it expands its activities into additional European
countries it will become more exposed to fluctuations in different foreign
currencies which may result in foreign exchange gains and/or losses. To date,
these gains and/or losses have been immaterial as the Company has not had
significant dollar denominated indebtedness or business and conducts its
business only in The Netherlands and largely in Dutch guilders. Only a limited
number of equipment purchases and consultancy activities are billed to the
Company in currencies other than Dutch guilders.
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THE THREE MONTHS ENDED
MARCH 31, 1997
Revenues increased by NLG 2.5 million to NLG 6.4 million for the three
months ended March 31, 1998 from NLG 3.9 million for the three months ended
March 31, 1997, representing an increase of 63.4%. The growth in revenues
resulted primarily from the addition of new customers, the introduction of
national long distance services in The Netherlands and an increase in wholesale
traffic. However, the effects of these factors were partially offset by
declining prices.
Billable minutes of use increased by 8.2 million to 12.4 million for the
three months ended March 31, 1998 from 4.2 million for the three months ended
March 31, 1997, representing an increase of 193.6%. The number of customers
increased by 2,372 to 3,239 as of March 31, 1998 from 867 as of March 31, 1997.
Cost of revenues increased by NLG 2.4 million to NLG 5.5 million for the
three months ended March 31, 1998 from NLG 3.1 million for the three months
ended March 31, 1997, primarily reflecting an increase in billable minutes. This
increase was partially offset by declines in per minute international
termination and origination costs resulting from the migration of customers from
the DISA and VPN codes to the "1611" carrier select code.
Gross margin increased by NLG 0.1 million to NLG 0.9 million for the three
months ended March 31, 1998 from NLG 0.8 million for the three months ended
March 31, 1997. As a percentage of revenues, gross margin decreased to 14.7% for
the three months ended March 31, 1998, from 21.0% in the three months ended
March 31, 1997.
Selling, general and administrative expense increased by NLG 3.4 million to
NLG 5.5 million for the three months ended March 31, 1998 from NLG 2.1 million
for the three months ended March 31, 1997, representing a 169.9% increase. This
primarily resulted from an increase in the cost of staff (including temporary
personnel and consultants) in the areas of network operations, customer service,
sales and marketing, installation services, and accounting personnel.
Depreciation and amortization expenses increased by NLG 0.8 million to NLG
1.1 million for the three months ended March 31, 1998 from NLG 0.3 million for
the three months ended March 31, 1997. This increase was primarily due to
capital expenditures incurred in connection with the deployment of the Nortel
DMS 100 switch in Amsterdam and an increase in the number of dialers installed
due to customer growth.
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE FISCAL YEAR ENDED
DECEMBER 31, 1996
Revenues increased by NLG 12.5 million to NLG 18.9 million in the fiscal
year ended December 31, 1997 from NLG 6.4 million in the fiscal year ended
December 31, 1996, representing a 194.0% increase. The growth in revenue
resulted primarily from an increased number of customers, as well as increased
usage from existing customers. In both years, all revenues were generated in The
Netherlands.
Billable minutes of use increased by 16.9 million to 23.4 million in the
fiscal year ended December 31, 1997 from 6.5 million in the fiscal year ended
December 31, 1996, representing a 260.1% increase. The number of customers
increased by 1,575 to 2,245 as of December 31, 1997, from 670 as of December 31,
1996.
VersaTel's revenues in 1997 were negatively impacted by PTT Telecom's June
1997 introduction of a volume-based business customer discount plan allowing for
discounts of approximately 10.0% and by a general price reduction in October
1997 of approximately 28.0%. In order to maintain VersaTel's price discount
relative to PTT Telecom's prices, VersaTel also introduced a discount plan in
June 1997 and again reduced its
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prices in October 1997. As a result of the overall reduction in prices,
VersaTel's revenues for the fourth quarter of 1997 were 13.0% lower than its
revenues of NLG 5.3 million for the third quarter of 1997. However, billable
minutes of use for the fourth quarter were 14.4% higher than the billable
minutes of use for the third quarter. The Company expects PTT Telecom to
continue to lower its prices and create new discount plans on a regular basis
and the Company expects to adjust its pricing accordingly.
Cost of revenues increased by NLG 12.4 million to NLG 17.4 million in the
fiscal year ended December 31, 1997 from NLG 5.0 million in the fiscal year
ended December 31, 1996, representing a 251.3% increase. As a percentage of
revenues, cost of revenues increased to 92.1% in the fiscal year ended December
31, 1997 from 77.1% in the fiscal year ended December 31, 1996, primarily as a
result of tariff reductions by the Company to respond to those implemented by
PTT Telecom which exceeded reductions in origination and termination costs.
VersaTel's revenues for the three months ended December 31, 1997 were
negatively impacted by a case of fraud in October 1997, which the Company
estimates affected approximately four days of customer traffic. The fraud
involved the unauthorized use of one of the Company's test codes. As a result, a
large number of calls were originated, primarily through ethnic calling shops,
over the course of four days and the associated origination and termination
costs of NLG 0.6 million were expensed as miscellaneous operating expenses. In
addition, as a result of excessive call volumes, some customers were unable to
complete calls through the VersaTel Network and reverted to PTT Telecom for
service. The Company lost revenues from such customers and offered credits to
these customers to cover the price differential between PTT Telecom and VersaTel
retroactively. As a result, VersaTel estimates the total losses from the
incident to be approximately NLG 1,000,000. The Company has filed the case with
the local authorities and is currently determining the possibility of filing a
claim against certain parties for the cost of service and lost revenue. The
Company believes that the risk of future fraud has been reduced with the
introduction of the "1611" access code (which does not allow the type of fraud
that occurred from the unauthorized use of a test code to occur) and by tracking
multiple calls with the same access code.
Gross margin remained relatively unchanged at NLG 1.5 million for the
fiscal year ended December 31, 1997 from NLG 1.5 million in the fiscal year
ended December 31, 1996. As a percentage of revenues, gross margin decreased to
7.9% for the fiscal year ended December 31, 1997 from 22.9% for the fiscal year
ended December 31, 1996. Gross margins were impacted mainly by the three rate
reductions introduced in 1997 without any corresponding access charge
reductions. Since July 1997, the Company has migrated most of its customers to
the "1611" code, resulting in a decrease in per minute access costs. In
addition, in December 1997 the Company installed a DMS 100 switch which allows
for efficient least-cost routing and resulted in decreasing per minute
termination costs.
Selling, general and administrative expenses increased by NLG 12.0 million
to NLG 17.5 million in the fiscal year ended December 31, 1997 from NLG 5.5
million in the fiscal year ended December 31, 1996, primarily as a result of the
Company's increased sales, and an increase in customer service, billing,
collections and accounting staff required to support revenue growth. Staff
levels grew by 38, to 70 employees at December 31, 1997 from 32 employees at
December 31, 1996, an increase of approximately 118.8%. As a percentage of
revenues, selling, general and administrative expenses increased to 92.8% in the
fiscal year ended December 31, 1997 from 85.3% in the fiscal year ended December
31, 1996, as a result of the Company's continuing investments in back-office
infrastructure and in people. Bad debt expense was NLG 81,000 for the fiscal
year ended December 31, 1997, or 0.4% of revenues.
Depreciation and amortization expenses increased by NLG 2.7 million to NLG
3.2 million in the fiscal year ended December 31, 1997, from NLG 0.5 million in
the fiscal year ended December 31, 1996, primarily due to increased capital
expenditures incurred in connection with the expansion and deployment of the
VersaTel Network.
Interest expense, net increased by NLG 0.2 million to NLG 0.5 million in
the fiscal year ended December 31, 1997 from NLG 0.3 million in the fiscal year
ended December 31, 1996, primarily due to increased shareholders' loans.
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LIQUIDITY AND CAPITAL RESOURCES
The Company has incurred significant operating losses and negative cash
flows as a result of the development of its business and Network, including the
recent acquisition of its Nortel DMS 100 switch. The Company has financed its
growth primarily through equity and subordinated convertible loans from its
shareholders. In addition, the Company has made limited use of bank facilities
and capital lease financing. The Company will require substantial additional
capital to fund construction of its Network, operating losses and other general
corporate purposes.
Net cash provided by operating activities was NLG 5.8 million in the fiscal
year December 31, 1997 compared to negative NLG 1.7 million in the fiscal year
ended December 31, 1996. This was primarily the result of an increase in
accounts payable of NLG 18.7 million in the fiscal year ended December 31, 1997.
Net cash used in investing activities was NLG 14.5 million in the fiscal
year ended December 31, 1997 and NLG 2.6 million in the fiscal year ended
December 31, 1996. Substantially all the cash utilized by investing activities
in each fiscal year resulted from an increase in capital expenditures to expand
the VersaTel Network. The Company does not expect any material disruption nor
any material expenditures in connection with the transition of its billing and
information systems to the year 2000.
Net cash provided by financing activities was NLG 5.8 million in the fiscal
year ended December 31, 1997 and NLG 8.6 million in the fiscal year ended
December 31, 1996. Net cash provided by financing activities in the fiscal year
ended December 31, 1997 resulted mainly from NLG 1.5 million of capital
contributions and NLG 4.5 million of subordinated loans obtained from one of the
Company's shareholders. For the fiscal year ended December 31, 1996, net cash
provided by financing activities of NLG 8.6 million resulted from NLG 5.0
million of capital contributions and NLG 3.2 million of subordinated loans
obtained from the Company's shareholders, as well as capital leases to an amount
of NLG 0.4 million.
During the three months ended March 31, 1998, the Company experienced
liquidity difficulties, which resulted in attachments to its bank account by
certain creditors. This situation has now been resolved by the contribution of
new equity by certain of the Company's shareholders and by issuing guarantees
for the benefit of one of the creditors. Additional equity contributions were
made by certain existing shareholders immediately prior to the Offering.
In February 1998, as part of the Recapitalization two of the three
shareholders of the Company, Telecom Founders and NeSBIC, a subsidiary of
Fortis, invested an additional NLG 7.2 million in equity capital in the Company.
In addition, NeSBIC and Cromwilld converted their subordinated convertible notes
totaling NLG 3.6 million into Ordinary Shares of the Company, and NeSBIC
converted its NLG 4.5 million bridge loan into Ordinary Shares of the Company.
The third component of the Recapitalization was comprised of a new equity
investment by Paribas of NLG 12.8 million. Lastly, the Company received from
Telecom Founders, NeSBIC, Paribas and NPM an additional NLG 15.0 million in
equity capital immediately prior to the closing of the Offering. As a result of
the Recapitalization, the Company's share capital has increased from NLG 7.0
million to NLG 50.1 million. See "Capitalization" and "Security Ownership of
Principal Shareholders and Management."
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BUSINESS
OVERVIEW
VersaTel is a rapidly growing alternative telecommunications service
provider based in Amsterdam, The Netherlands. VersaTel's objective is to become
the leading alternative provider of facilities-based national and international
telecommunications services in the Benelux region. The Company, formed on
October 10, 1995, currently provides high quality, competitively priced,
international and increasingly national long distance telecommunications
services in The Netherlands, primarily to small- and medium-sized businesses,
and wholesale telecommunications services to other carriers. With over 2,600
business customers, the Company is a leading alternative to PTT Telecom, the
former monopoly telecommunications carrier of The Netherlands, in the small- and
medium-sized business market. The Company's business customer base has grown
from 669 as of December 31, 1996 to 2,619 as of March 31, 1998. In addition, the
Company has recently begun offering its services to targeted residential
customers. As of March 31, 1998, the Company had 617 residential customers. The
Company's revenues for the year ended December 31, 1997 were approximately NLG
18.9 million and for the three months ended March 31, 1998 were approximately
NLG 6.4 million.
Currently, VersaTel's primary service offerings consist of international
and increasingly national long distance services. VersaTel has recently
introduced services aimed at the residential market including VersaContact, a
dial-around service, and calling cards. In addition to its retail voice and data
services, the Company offers wholesale switched voice services to other
telecommunications service providers. These services include international
gateway and national termination services in The Netherlands. VersaTel plans to
offer additional services, including toll-free, local access, Internet and high
speed data services to its business customers over the next 18 months.
VersaTel was one of the first carriers in The Netherlands to obtain a
carrier select code and to obtain full interconnection with PTT Telecom.
Customers access VersaTel's services by dialing (manually or through an
auto-dialer) the Company's select codes or through leased lines. The Company's
Nortel DMS 100 switch located in Amsterdam connects customers' calls to the
required destination using the most efficient routing. In addition to
interconnection with PTT Telecom, VersaTel has a national carrier agreement with
Castel N.V., one of the largest regional cable television companies in The
Netherlands, and international carrier agreements with companies such as Telfort
B.V., WorldCom Inc., FaciliCom International Inc. and Global One Communications
B.V.
THE BENELUX MARKET OPPORTUNITY
VersaTel was founded to capitalize on the opportunities created by the
liberalization of the telecommunications market in the Benelux region. With a
population of approximately 26.2 million, the Benelux market is characterized by
one of the world's highest population densities (approximately 351 persons per
square kilometer) and relatively high income levels (a per capita GDP of
approximately $25,800 in 1996). Located in the heart of Europe in a relatively
small geographic area, the Benelux region is a major transportation and trade
gateway, generating a relatively high level of telecommunications traffic.
According to EITO (European Information Technology Observatory), the total
Benelux telecommunications services market amounted to approximately $12.7
billion in 1996, and would, according to TeleGeography, if ranked as a single
country, have been the fourth largest market in international outgoing minutes
in Europe behind Germany, the United Kingdom and France. The Company expects
that the importance of telecommunications will continue to increase as the
Benelux market liberalizes, and that telecommunications revenues as a percentage
of GDP in the Benelux region (1.9% in 1996) will increase to levels approaching
those of more liberalized markets such as the United Kingdom (2.3% in 1996) and
the United States (3.2% in 1996). At present, the Benelux market is dominated by
the former monopoly telecommunications carriers, PTT Telecom, Belgacom, and P&T
Luxembourg, in, respectively, The Netherlands, Belgium and Luxembourg. The
Company believes that the Benelux telecommunications market represents a
substantial opportunity which it can capitalize on by capturing a portion of the
incremental growth of the market and by winning market share from the PTTs.
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The following chart illustrates the relative importance of the Benelux
telecommunications market.
[VERSATEL TELECOM GRAPH]
- ---------------
Source: TeleGeography
(1) The Benelux market figure is the aggregate figure of all outgoing
international MiTTs of The Netherlands, Belgium and Luxembourg, net of
intra-Benelux outgoing international MiTTs.
The Company currently operates in The Netherlands and plans to extend its
operations to Belgium in 1998 and Luxembourg by mid-1999. The following is a
brief description of each country comprising the Benelux market.
THE NETHERLANDS
With a population of 15.6 million and a population density of approximately
376 persons per square kilometer, The Netherlands is the most densely populated
country in Europe. This high population density will enable the Company to reach
a larger number of potential customers with a less extensive network and, as a
result, lower capital expenditures. Due to its location in the heart of western
Europe and its connections with the rest of western Europe through major
highways, railroads and waterways, distribution and the export and import of
products and services account for a significant portion of the national economy.
The Netherlands per capita GDP was $25,380 in 1996. Telecommunications
expenditures accounted for approximately 2.0% of the GDP of The Netherlands in
1996.
According to TeleGeography, the Netherlands market for outbound
international telecommunications services accounted for approximately 6.1% of
Europe's MiTTs in 1996, making it the sixth largest market in Europe. According
to EITO, the Netherlands market for telecommunication services has grown at a
rate of 9.2%, 7.6% and 7.1% for the years 1995, 1996 and 1997, respectively.
EITO also estimates that the total size of the Netherlands telecommunications
services market in 1996 was $8.0 billion.
BELGIUM AND LUXEMBOURG
With a population of 10.2 million and a population density of 334 persons
per square kilometer, Belgium is a relatively densely populated country. It is
host to a number of international organizations, including the European
Commission, parts of the European Parliament and NATO Headquarters. Belgian per
capita GDP was $26,380 in 1996.
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According to TeleGeography, the Belgian market for outbound international
telecommunications services accounted for approximately 4.9% of Europe's MiTTs
in calendar 1996, making it the seventh largest market in Europe.
With a population of 400,000, Luxembourg is the smallest Member State of
the European Union ("EU"). According to the Economist Intelligence Unit,
telecommunications revenues are relatively high at 2.8% of GDP, due to its
position as a financial center and host to a large number of EU institutions.
The country has the highest GDP per capita in Europe ($31,303 versus $18,609 for
the EU in 1995). According to EITO, the combined Belgian and Luxembourg market
for telecommunications services has grown at a rate of 11.1%, 11.0% and 11.3%
for the years 1995, 1996 and 1997, respectively. EITO also estimates that the
total size of the combined Belgian and Luxembourg telecommunications services
market in 1996 was $4.7 billion which accounted for approximately 1.7% of the
GDP of the countries.
THE VERSATEL NETWORK
Network Plan. The Company has begun building a network infrastructure
which is designed to connect all major business and population centers in the
Benelux region and provide local access in high density business areas as well
as international connectivity to Germany, France and the United Kingdom.
VersaTel believes that the demographics and high concentration of businesses in
the Benelux market will enable the Company to access a substantial portion of
the business and residential market with relatively low capital expenditures.
The Company plans to establish the first integrated overlay network in the
Benelux region and plans for the Network to connect to most of the PTTs' points
of interconnection, pass within five kilometers of more than 270,000 businesses
and cover all major population centers. VersaTel believes that its Network will
enable the Company to better control costs, ensure access to bandwidth, offer a
broader portfolio of services and improve margins.
The VersaTel Network will consist of three integrated elements:
- Benelux Overlay Network. VersaTel plans to construct the Benelux Overlay
Network that will connect the major commercial centers in the Benelux
region, including most interconnection points with the PTTs and other
telecommunications service providers. The Company has contracted to
acquire fiber-ready conduit between Rotterdam, The Netherlands and
Antwerp, Belgium. The Company is also negotiating to acquire dark fiber
and rights-of-way from a number of utilities and has contracted to build
fiber-optic rings. The initial phase of the Benelux Overlay Network will
consist of a fiber-optic ring connecting The Netherlands Randstad and a
fiber-optic link extending to Antwerp and Brussels. This initial phase is
expected to be completed by the end of 1998. The remainder of the Benelux
Overlay Network is expected to connect an additional 23 major business
centers in the Benelux by the end of 1999. Upon completion, the Company
expects that the Benelux Overlay Network will consist of approximately
2,200 route kilometers of fiber-optic rings.
- Local Access Network. VersaTel intends to establish local access
infrastructure in areas with high business concentrations along the
Benelux Overlay Network. The Local Access Network will connect business
customers directly to the VersaTel Network. The Local Access Network will
consist of both fiber-optic cable and radio links. The Company intends to
start implementing local access early in 1999, shortly after the first
segment of the Benelux Overlay Network becomes operational. The Company
plans to install up to 1,500 route kilometers of local access
infrastructure over the next 18 months.
- International Network. VersaTel intends to build or acquire direct
fiber-optic links connecting the Benelux Overlay Network to
interconnection points in Germany, France and the United Kingdom.
Approximately 55.3% of the Benelux region's outbound traffic currently
terminates in these three countries. VersaTel expects to complete
fiber-optic links to its initial interconnection points in Dusseldorf,
Lille, Paris and London in 1999.
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The figure below sets forth the elements of the Company's Network.
[NETWORK DESIGN GRAPH]
Network Design and Implementation. VersaTel's Network will utilize
advanced technology to achieve high reliability, low operating costs and rapid
capacity expansion. The key attributes of the network architecture include
self-healing, shared protection rings, diverse routing and separate paths into
redundant network nodes and interconnection points.
The Company's network architecture is designed to allow for substantial
expansion in capacity. The Company will provide for future capacity by
installing additional underground ducts, fiber pairs, building space and
building systems (such as power equipment) when building out the VersaTel
Network, since the marginal
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<PAGE> 52
construction costs associated with providing future capacity are low. For
example, three ducts will be installed along most fiber-optic routes -- one for
the initial cable installation, one as back-up and maintenance space and a third
as growth or trading currency. Each duct can hold two fiber cables, which will
each contain 48 fibers. In addition, the Company intends to implement management
systems that will have the capacity, flexibility and design architecture to
support anticipated expansion.
The Company intends to use advanced network equipment and management
systems to maintain low operating costs. These technologies automate many of the
functions for both network and service management. In addition, the Network will
be controlled from a single network management center, supported by a redundant
backup center. Having a single center controlling the entire Network, including
local access links, will minimize the staff required to manage network and
service operations.
The Network will use SDH transmission equipment, the industry standard for
creating bandwidth from the underlying transmission medium whether microwave,
fiber-optic cable or satellite. SDH equipment automates most of the functions of
defining, routing and connecting service bandwidth and reroutes these channels
in the event failures occur. The Company intends to continue to use Nortel DMS
switching equipment for its voice-grade circuit-switching network. The Nortel
DMS 100 switch is capable of supporting all "intelligent network" and
value-added services common in the industry. The Company intends to establish
data communications and Internet service networks utilizing the Benelux Overlay
Network.
The Company expects to develop the first STM-64 (10 Gbps) fiber network in
the Benelux region (20 Gbps including back-up capacity). This high capacity is
expected to provide a very competitive, low cost per bit transmitted. In the
future, capacity could be expanded to 80 Gbps per fiber pair with existing WDM
technology and even further as this technology is improved. In addition,
VersaTel intends to have the first deployment of Nortel's Reunion broadband
radio system in the Benelux region. This will provide high speed Internet access
as well as low cost customer access to all the services VersaTel plans to offer.
The Company has tailored the proposed routing of the Benelux Overlay
Network to support its strategy of targeting small- and medium-sized businesses.
The Company expects that the Network will pass more businesses within five
kilometers than the networks of most other carriers. The Company believes that
although this plan will increase route length and construction costs, it will
lower the costs of local access substantially and will, ultimately, minimize the
total cost of serving its target market.
To provide local access, the Network has been designed with physical access
points at intervals averaging one kilometer. All aspects of network planning
will integrate local customer access with the Benelux Overlay Network. The
Company believes centralized control of both local access and overlay
infrastructure as well as integrated network and service management systems will
allow the Company to deliver faster service provisioning and fault repair,
better service management and lower cost. As a result, the Company believes that
its network implementation will provide it with an advantage over most of its
competitors.
The Local Access Network will consist of both fiber-optic links and
point-to-multipoint radio connections to customers. VersaTel will decide the
means of local access based primarily on the density of the customers
anticipated in an area and the customers' distance from the Benelux Overlay
Network. Fiber-optic cables will be used to connect to office buildings and
business parks near the Benelux Overlay Network. Radio technology, which is
evolving rapidly as a capital efficient means of providing flexible bandwidth,
will be used to connect to more dispersed customers. VersaTel is working with
Nortel, a world leader in this point-to-multipoint radio technology, to become a
pioneer in implementing this technology in Europe. The Company recently received
a license which allows it to test this point-to-multipoint technology in The
Netherlands. VersaTel intends to begin a trial in the third quarter of 1998 in
which selected business customers will be connected to the Benelux Overlay
Network via wideband and broadband wireless access. The Company believes it will
be able to offer local access customers a broader range of services, higher
service quality, faster service provisioning and lower costs than its
competitors.
The International Network will include links from the Benelux Overlay
Network to the main interconnection points in Germany, France and the United
Kingdom. These countries accounted for approximately 55.3% of the outbound
international traffic from the Benelux region in 1996. Interconnection locations
will
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initially be Dusseldorf, Lille, Paris and London. Later, Aachen, Cologne and
Metz are expected to be added. The international links will also employ design
principles of diverse routing, as well as redundant and self-healing rings. The
Company intends to build the international links by purchasing or leasing dark
fiber, swapping capacity with alternative carriers and building its own
infrastructure.
VersaTel intends to build-out the Network by entering into agreements for
the supply of transmission equipment and engineering and construction services
with several companies. VersaTel has entered into a framework agreement with
Nortel to supply all initial transmission equipment and network management
systems through a turn-key project. VersaTel also has a similar arrangement with
Detron, a Benelux contractor for the engineering and construction of the fiber
network. Both companies have completed initial engineering steps, including
capacity sizing. The two companies anticipate working with a single project
management office and with common contract incentives. In addition, pursuant to
the agreement with Nortel, the Company is in the process of negotiating
contracts with Nortel to provide implementation and operations services as well
as vendor financing. See "Risk Factors -- Development, Expansion and Operation
of the Network."
The civil engineering and construction companies that are engaged will be
responsible for obtaining rights-of-way, civil engineering, physical
construction and testing of the Benelux Overlay Network. The Benelux Overlay
Network could utilize rights-of-way of public authorities, pipeline companies,
power and gas companies and others. Under the new telecommunications
legislation, the Company expects to have rights-of-way on public lands in The
Netherlands. The Company also expects to have rights-of-way on public lands in
Belgium, upon obtaining its license. Separately, the Company may also negotiate
rights-of-way from private landowners. VersaTel has already identified readily
available rights-of-way, trenches, empty ducts and dark fiber for over 700 km of
the planned route. See "Risk Factors -- Development, Expansion and Operation of
the Network" and "-- Regulation."
The Company expects to operate the entire Network and to own substantially
all of the network equipment and most fiber-optic links. The Company plans to
utilize fiber-optic cable for most of the Benelux Overlay Network. To accelerate
implementation, VersaTel intends to acquire trench space ducts, dark fiber and
leased capacity from other infrastructure operators, particularly on
international links. The Company has entered into preliminary discussions with
potential partners to acquire or construct portions of the VersaTel Network.
These potential partners are interested in obtaining dark fiber capacity and, in
some cases, will trade fiber capacity on routes already constructed.
BUSINESS STRATEGY
VersaTel's objective is to become the leading alternative provider of
facilities-based national and international telecommunications services in the
Benelux region. The principal elements of the Company's strategy are:
- Targeted Network Roll-out. The Benelux Overlay Network's routing is
designed to cover the major business and population centers in the
Benelux region and pass as many businesses as economically feasible. As
individual segments of the Benelux Overlay Network are completed, the
Company intends to connect business customers directly via the Local
Access Network. For example, the first segment of the Benelux Overlay
Network, when completed, will connect the Netherlands Randstad, Antwerp
and Brussels and will pass within five kilometers of approximately
100,000 businesses. The Company believes that this targeted network
roll-out strategy will allow it to gain market share rapidly, increase
revenues and improve margins.
- Grow Customer Base. The Company intends to leverage the growth of its
facilities-based Network, its product and service offerings and its sales
and marketing capabilities to expand its customer base. The Company
believes it has developed strong brand recognition in its target market
of small- and medium-sized businesses and intends to capitalize on this
by increasing its direct sales force, introducing new distribution
channels and targeting new customer segments, including high-usage
residential customers.
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- Increase Product and Service Offerings. The Company intends to provide
new products and services in order to attract additional customers,
enhance customer loyalty and increase network utilitization by its
existing customer base. In addition to international long distance,
VersaTel has also introduced national long distance, dial-around services
and calling cards to its customers. The Company also expects to introduce
toll-free, local access, Internet and high speed data services over the
next 18 months.
- Focus on Superior Customer Service. VersaTel strives to maintain a
competitive advantage over its competitors in its target markets by
providing superior customer service. The Company believes that its target
market of small- and medium-sized businesses has been particularly
underserved by the PTTs and that providing a high level of customer
service is a key element to establishing customer loyalty and attracting
new customers. The Company has dedicated customer service representatives
who initiate contact with customers on a routine basis to ensure
satisfaction and market new products. In addition, the Company provides
detailed monthly billing statements and monthly call management reports
which identify savings to customers and enable them to manage their
telecommunications expenditures more effectively.
- Expand Facilities-Based Wholesale Services. The Company currently offers
international gateway services as well as domestic termination services
for both international and national carriers. In addition, as VersaTel
deploys its Network, the Company intends to offer additional wholesale
services, including leased lines, conduits, dark fiber and managed
bandwidth in order to increase network utilization and to offset the cost
of network construction. The Company expects the creation of network
capacity in the form of dark fiber, conduits and rights-of-way will
provide a trading currency to be used with other carriers as a means of
accelerating the deployment of the VersaTel Network.
- Pursue Selective Acquisitions and Strategic Relationships. The Company
seeks to acquire other alternative telecommunications service providers
and Internet service providers in order to accelerate the growth of its
customer base, Network and service portfolio. In addition, the Company is
actively pursuing strategic relationships with alternative carriers in
Germany, France and the United Kingdom in order to establish
interconnection agreements, to partner on infrastructure projects and to
expand its geographic reach.
PRODUCTS AND SERVICES
CURRENT PRODUCTS AND SERVICES OFFERINGS
The Company currently offers the following products and services:
Long Distance. VersaTel offers international and increasingly national
long distance telecommunications services to over 3,200 customers in The
Netherlands. The Company began offering switched-based international long
distance services to business customers in 1995, to telecommunication services
providers in 1996 and to residential customers in December 1997. Historically,
the Company has focused primarily on the sale of international voice and data
services to small- and medium-sized businesses; however, with the liberalization
of the Netherlands telecommunications market, the Company has expanded its
service offerings to include national long distance services. The Company will
complete its roll-out of national long distance service to its existing customer
base during the third quarter of 1998 as PTT Telecom provides additional
interconnect capacity to VersaTel. As a result, the Company expects that
revenues from national long distance voice services as a percentage of total
revenues will increase significantly. International and national long distance
services are the Company's core products as it expands in other markets. The
Company plans to begin offering international and national long distance
services in Belgium in the third quarter of 1998 and throughout the Benelux
region by the end of 1998.
Calling Cards. In The Netherlands, the Company currently offers post-paid
calling cards and plans to offer pre-paid calling cards in the second half of
1998. The Company's post-paid calling card is provided to the Company's business
customers and high international volume residential customers. The post-paid
calling card provides international and national call access in all countries
where available through one toll-free
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number worldwide. Call charges are itemized and appear on the call management
report. The Company expects to offer pre-paid calling cards in The Netherlands
in the third quarter of 1998 and throughout the Benelux region by the third
quarter of 1998.
Wholesale Switched Voice Services. In addition to its retail switched
voice and data services, the Company offers wholesale switched services to other
telecommunications service providers. These services include international
gateway and national termination services in The Netherlands. The increase in
traffic volume generated by offering these services allows the Company to obtain
greater volume discounts. As the Company completes its Network, it will be able
to offer wholesale services over its own Network throughout the Benelux region,
Germany, France and the United Kingdom, thus increasing network utilization and
improving gross margins.
FUTURE PRODUCTS AND SERVICE OFFERINGS
VersaTel continually evaluates potential product and service offerings as
well as competitors' offerings in order to retain and expand its customer base
and to increase revenue per customer. The Company places a high priority on the
development of new products and services and expects to introduce the following:
Toll-free Services. The Company plans to offer toll-free services to its
customers in the Benelux region by the third quarter of 1998. This service will
target business and residential customers who have a high volume of incoming
international and national long distance calls, such as import and export
companies. Customers of VersaTel's toll-free services will be assigned a
proprietary toll-free number that will route calls to the VersaTel switch and
from there to the customer.
Local Services. VersaTel plans to offer local services to its small and
medium-sized business customers in the first quarter of 1999 when the Company's
local access facilities are installed. The Company will provide subscriber
access service, local calling, data communications and valued-added services.
Enhanced Switched Voice Services. The Company is developing advanced call
service offerings that are expected to appeal to its core customer segment,
including voice mail, fax mail, voice response, personal numbering and automated
secretary. VersaTel's present switched voice system is capable of supporting
most of these enhanced services. The remaining equipment required to offer these
enhanced services is expected to be installed in 1999. These services are
expected to aid in customer retention and increase network utilization and
average revenue per customer.
Managed Bandwidth Services. With the completion of the initial links in
the Benelux Overlay Network and its International Network, the Company will be
able to participate in the market for selling bandwidth capacity. The Company is
planning service offerings beginning with E1 channels (2 Mbps) up to STM-1
channels (155 Mbps). The Company expects to provide these services primarily to
its wholesale customers, particularly at locations where the Company is the only
alternative to the PTT.
Data Communication Services. VersaTel plans to offer high-speed data
communications services to its small- and medium-sized business customers
beginning in the third quarter of 1999. The Company believes that there is a
growing market for high-speed data communications services, such as frame relay,
Ethernet, and ATM services in the small- and medium-sized business market. Data
communications services and the specific protocols are evolving rapidly and the
Company is currently developing its portfolio of data communications services
and the roll-out sequence.
Internet Services. VersaTel plans to acquire Internet service providers to
accelerate the introduction of Internet services to its target market. Demand
for Internet services is growing rapidly in the Benelux region, as small- and
medium-sized businesses are starting to use these services for e-mail, data
retrieval, information services and electronic commercial transactions. The
Company expects that Internet services will generate an increasingly large share
of telecommunications industry revenue as a result of both the introduction of
new applications and substitution for various existing services.
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SALES AND MARKETING
VersaTel seeks to capitalize on its position as a leading alternative
telecommunications services provider that offers comprehensive customer service
and low-cost communications services in The Netherlands with a focus on small-
and medium-sized businesses and residential customers. VersaTel believes that it
has created a prominent brand name in its target market that it expects to
successfully apply throughout the Benelux region. The Company brands all of its
products and services offerings with "Versa," such as VersaBizz (post-paid
calling cards), VersaCall (voice services), VersaFax (facsimile services) and
VersaData (data communications). VersaTel markets its products and services
through several marketing channels, including database marketing, targeted
telemarketing, brand and promotional advertising, direct mail and the Company's
direct sales force.
CUSTOMERS
The Company markets its services on a retail basis to its business and
residential customers and on a wholesale basis to other carriers.
Small- and Medium-sized Businesses. The Company's target customers are
small- and medium-sized businesses (under 100 employees). The Company focuses
particularly on those business and industry segments which have historically
generated significant volumes of national and international traffic, such as
shipping, transport, import and export and agri/horti culture. The Company
believes that the small- and medium-sized business segment has been underserved
by the PTTs and the major alternative service providers. Traditionally, the PTTs
and the other major carriers have focused on offering their lowest rates and
best services primarily to larger, higher volume business customers.
Residential Customers. VersaTel has recently begun targeting residential
customers. The Company's initial focus is to market its services to employees of
its business customers and residential customers in certain niche markets
characterized by high volume calling patterns. In addition, the Company markets
its services to residential customers in The Netherlands via marketing
communications methods such as direct mail, multi-level marketing and
telemarketing. The Company believes that this approach is a cost-effective way
of targeting the residential market segment.
Wholesale Customers. The Company markets its wholesale services to
international and domestic carriers. The wholesale sales effort is supported by
senior management's existing relationships in the industry. The Company intends
to establish a carrier sales force with account managers focusing on specific
carrier customers.
SALES AND MARKETING STAFF
The Company's sales force is composed of direct sales personnel,
telemarketers and independent sales agents. Marketing to small- and medium-sized
businesses is currently conducted by over 20 direct sales personnel in
Amsterdam. In the future, the Company expects to significantly expand its direct
sales force and open sales offices in Antwerp, Rotterdam and Brussels. The
Company's sales personnel make direct calls to prospective and existing business
customers, analyze business customers' usage and service needs, and demonstrate
how the Company's service package will improve a customer's communications
capabilities and costs. Each member of the Company's sales force is required to
complete the Company's intensive training program. In addition, the Company has
a telemarketing group that screens prospective customers and verifies call
volumes.
VersaTel recently established a sales agents program under which sales
agents receive commissions, but are not employed by the Company. Agents are
provided with an advertising and sales promotion budget based on the volume of
their sales. The Company currently has over 70 such sales agents and intends to
continue to increase this program.
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CUSTOMER SERVICE
VersaTel strives to maintain a competitive advantage over its competitors
in its target markets by providing superior customer service. The Company
believes that providing a high level of customer service is a key element to
establishing customer loyalty and attracting new customers. The Company has
dedicated customer service representatives who initiate contact with its
customers on a routine basis to ensure customer satisfaction and market new
products. In addition, the Company provides detailed monthly billing statements
and monthly call management reports which identify savings to customers and
enable them to manage their telecommunications expenditures more effectively.
VersaTel also believes that technology plays an important role in customer
satisfaction. Advanced technological equipment is crucial to enabling the
Company to provide a high quality of service to its customers. The Company has
installed sophisticated status-monitoring and diagnostic equipment on its NOC
and plans to install similar units on its SDH network. This equipment allows the
Company to identify and remedy network problems before they are detected by
customers. By providing superior customer service and through the effective use
of technology, VersaTel expects to maintain a competitive advantage in its
target markets.
BILLING AND INFORMATION SYSTEMS
The Company must process millions of call detail records quickly and
accurately in order to produce customer bills in a timely and efficient manner.
Call detail records are collected, backed-up, processed and verified by VersaTel
on a daily basis. This data is then transmitted electronically to a printing
company for printing and then returned to VersaTel for verification and
distribution. The Company is currently reviewing its billing systems in
anticipation of continued growth and anticipates replacing its current billing
system by the end of 1998. The Company does not expect any material disruption
in its billing or information systems as a result of the year 2000. In addition,
the Company has planned and budgeted replacements and enhancements to its
information systems to handle growth in the size and complexity of the Company,
its customer base and its product portfolio in areas such as work flow, fixed
asset management, sales support and service provisioning. See "Risk
Factors -- Ability to Manage Growth."
COMPETITION
Until recently, the telecommunications market in each EU Member State has
been dominated by the national PTT. Since the implementation of a series of EC
directives beginning in 1990, the EU Member States have started to liberalize
their respective telecommunications markets, thus permitting alternative
telecommunications providers to enter the market. Liberalization has coincided
with technological innovation to create an increasingly competitive market,
characterized by still-dominant PTTs as well as an increasing number of new
market entrants. Competition in the European long distance telecommunications
industry is driven by numerous factors, including price, customer service, type
and quality of services and customer relationships.
In The Netherlands, Belgium and Luxembourg the Company competes or will
compete primarily with the national PTTs. As the former monopolist providers of
telecommunications services in these countries, the PTTs have an established
market presence, fully-built networks and financial and other resources that are
substantially greater than those of the Company. In addition, the national PTTs
own and operate virtually all of the infrastructure which the Company must
currently access to provide its services. The Company estimates that in each of
these countries the national PTT still controls the vast majority of the
telecommunications market.
In addition, various new providers of telecommunications services have
entered the market in each of these countries, targeting various segments of the
market in these countries. Companies such as EnerTel, a consortium of
Netherlands utility companies, Telfort B.V., a company formed by British Telecom
and Nederlandse Spoorwegen N.V., the Netherlands railroad company, as well as
Global One Communications, Worldcom Inc. and Esprit Telecom plc compete with PTT
Telecom in The Netherlands for contracts with large multinational companies.
Unisource N.V., Concert, France Telecom, AT&T, Worldcom, Esprit
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Telecom plc. and Telenet N.V. compete with Belgacom in Belgium for contracts
with large multinational companies. The Company does not currently serve this
segment of the business market, as the Company believes that it does not
presently have a competitive advantage to successfully target large corporate
customers.
In VersaTel's primary target market of small- and medium-sized businesses,
competitors include RSL Communications Ltd. and Viatel, Inc. in both The
Netherlands and in Belgium. In the residential customer market, the Company
competes with companies such as EnerTel N.V., Tele2 A.B., Telegroup, Inc.,
Viatel, Inc. and callback operators in The Netherlands. In Belgium, the
residential customer market has only recently been aggressively targeted by
service providers such as Tele2 A.B., Telenet N.V. and Telegroup, Inc.
REGULATION
In Europe, the traditional system of monopoly PTTs has ensured the
development of broad access to telecommunications services; however, it has also
restricted the growth of high quality and competitively priced voice and data
services. The liberalization in European telecommunications market is intended
to address these market deficiencies by ending PTTs' monopolies, allowing new
telecommunications service providers to enter the market and increasing the
competition within the European telecommunications market. The inefficiencies of
the traditional monopoly system combined with the EU liberalization initiatives
have created the current market opportunity for the Company's product and
service offerings.
The current regulatory framework in the EU and in the countries in which
the Company provides its services or intends to provide its services is briefly
described below. There can be no assurance that future regulatory, judicial and
legislative changes will not have a material adverse effect on the Company, that
national or international regulators or third parties will not raise material
issues with regard to the Company's compliance or noncompliance with applicable
regulations or that any changes in applicable laws or regulations will not have
a material adverse effect on the Company. See "Risk Factors -- Regulation."
EUROPEAN UNION
Starting in 1987, 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 infrastructure networks and the liberalization of services. In 1990,
the EU Member States approved two directives that established these principles
in EU law: the Open Network Provision ("ONP") Framework Directive and the EC
Services Directive. These two directives set forth the basic rules for access to
the PTT public networks and the liberalization of the provision of all
telecommunications services within the EU except for "voice telephony."
The ONP Framework Directive established the conditions under which
competitors and users could gain cost-oriented access to the PTTs' public
networks. The EC Services Directive abolished the existing monopolies on, and
permitted the competitive provision of, all telecommunications services with the
exception of "voice telephony." The intended effect of the Services Directive
was to permit the competitive provision of all services, other than voice
telephony, including value-added services and voice services to closed user
groups ("CUGs"). As a result, many new entrants entered the market, labeling
their services as CUG services, while in fact providing voice telephony
services.
In 1992, the EC approved the ONP Leased Line Directive, which required the
PTTs to lease lines to competitors and end users, and to establish cost
accounting systems for those products by the end of 1993. The national
regulatory authorities were to use this cost information to set cost-oriented
tariffs for leased lines. This Directive has recently been amended. The purpose
of the revised ONP Leased Lines Directive is to ensure that, in a competitive
market, all users continue to have access to leased lines from at least one
operator, under harmonized conditions of access and use.
In 1996, the EU issued the Full Competition Directive, which requires EC
Member States to permit alternative infrastructure providers, such as existing
networks of cable companies, railroads, electric and other
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utility companies, to resell capacity on these networks for the provision of
services other than voice telephony from July 1996. This allows the Company to
lease transmission capacity from companies other than the PTTs. The Full
Competition Directive also established January 1, 1998 as the date by which all
EU Member States (with the exception of Spain, Greece, Portugal, Ireland and
Luxembourg, each of which may delay implementation for various periods) must
establish a legal framework which removes all remaining restrictions on the
provision of telecommunications services, including "voice telephony." Subject
to the foregoing, each EU Member State is obliged, under EU law, to enforce the
terms of the Full Competition Directive. Enforceability of the Full Competition
Directive may be challenged at the EU level or at the EU Member State level. See
"Risk Factors -- Regulation."
In addition to the Full Competition Directive, the EU issued the Licensing
Directive in April 1997 and the Interconnection Directive in June 1997. The
Licensing Directive establishes a common framework for general authorizations
and individual licenses in the field of telecommunication services. The
Licensing Directive is intended to allow telecommunications operators to benefit
from an EU-wide market for telecommunications and establish a common framework
for national authorization regimes and seeks to facilitate cross-border networks
and services. The Interconnection Directive standardizes regulatory frameworks
to be implemented by EU Member States and their national regulatory authorities,
including the regulation of public telecommunications networks and services. The
Interconnection Directive governs the manner in which alternative network
operators and service providers are permitted to interconnect with the PTTs'
public networks. The Interconnection Directive requires national regulators to
ensure that interconnection agreements provide for access at cost-oriented
rates.
The Interconnection Directive has been amended to provide for carrier
selection (ensuring that end users can on a call-by-call basis select the long
distance or international carrier of their choice) as of January 1, 1998, and
carrier pre-selection (ensuring end users can prior to the time calls are made
select the long distance or international carrier of their choice) and number
portability (the ability of end users to keep their numbers when changing
operators) by January 1, 2000. Carrier selection and carrier pre-selection are
required to be made available by carriers with significant market power. The
Interconnection Directive indicates that significant market power could be
assumed if the carrier's market share exceeds 25%, but Member States may adopt
different standards.
Despite these regulatory initiatives supporting the liberalization of the
telecommunications market, most EU Member States are still in the initial stages
of liberalizing their telecommunications markets and establishing competitive
regulatory structures to replace the monopolistic environment in which the PTTs
previously operated. For example, most EU Member States have only recently
established a national regulatory authority. In addition, the implementation,
interpretation and enforcement of these EC directives differ 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 maintain several levels of
restrictions on full competition.
An overview of the regulatory framework in the individual markets where the
Company operates or intends to operate is described 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 these
jurisdictions. VersaTel requires licenses, authorizations or registrations in
all countries in which it operates to provide its services. Licenses,
authorizations and/or registrations have been obtained in The Netherlands and
Belgium. The Company intends to apply for such licenses and registrations in
Luxembourg in the future. The Company has applied for an International
Facilities License (IFL) in the United Kingdom. Although the Company expects
that these licenses and registrations will be granted, there can be no assurance
that VersaTel will be able to obtain such licenses, authorizations or
registrations or that VersaTel's operations will not become subject to other
regulatory authorization or registration requirements in the countries in which
it operates or plans to operate.
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THE NETHERLANDS
The Telecommunications Act of 1988 provides the current regulatory
framework in The Netherlands. Due to a series of EC directives, numerous
provisions of this Act have been amended. Most notably in July 1996, an
amendment to a certain extent liberalized telecommunications infrastructure and
the supply of leased lines. The rules for granting licenses for "alternative"
infrastructure and the provision of leased lines were laid down in a separate
act. Other significant amendments took effect on July 1, 1997. They led to the
full liberalization of public voice telephony, thereby complying with the Full
Competition Directive six months ahead of schedule. To remedy the present
legislative and regulatory patchwork, a new telecommunications bill is currently
pending in The Netherlands Parliament. This bill is expected to take effect in
the final quarter of 1998. The current draft of the Telecommunications Act in
consideration by The Netherlands Parliament also contains provisions that will
give registered telecommunication services providers rights-of-way, subject to
certain conditions, thereby facilitating the construction of the Network. In
addition, The Netherlands may require PTT Telecom to offer access to local
customer access lines at the Main Distributing Frame (MDF) in PTT Telecom's
central exchange offices.
As part of the liberalization of the Netherlands telecommunications market,
a new independent supervisory authority, the Onafhankelijke Post en
Telecommunicatie Autoriteit ("OPTA"), was established by the Ministry of Traffic
and Waterways. OPTA started its activities on August 1, 1997. OPTA's main tasks
include ensuring compliance with the telecommunications laws and regulations in
The Netherlands, granting licenses for telecommunications activities and
resolving disputes among market participants, such as disputes regarding
interconnection rates. Although no assurances can be given, the initial rulings
of OPTA have given the Company confidence that new providers of
telecommunications services will be granted fair and equal access to the market
in The Netherlands.
In August 1997, VersaTel obtained one of the first Netherlands
authorizations to operate as a telecommunications service provider of public
voice telephony (other than PTT Telecom). In September 1997, VersaTel obtained
an infrastructure license with rights-of-way for the construction and operation
of telecommunications facilities in a limited geographic area. However, as
described above, the new Telecommunications Act is expected to grant VersaTel
and other telecommunications services providers rights-of-way throughout The
Netherlands subject to their registration as a public telecommunications service
provider.
Since its start in October 1995, VersaTel has adopted a proactive
regulatory strategy. In October 1996, VersaTel successfully challenged PTT
Telecom's use of its invoice records to offer VersaTel's customers additional
discounts. In a warning letter to PTT Telecom, the Directorate for Competition
(DG IV) of the EC held this to be an abuse of power by PTT Telecom. Not only did
the EC require PTT Telecom to stop using information regarding the calling
behavior of customers for competitive activities, such as approaching VersaTel's
customers with discounts and other special offers, it also questioned the
legitimacy of PTT Telecom's discount plans for business customers. The EC
requires that such discounts be based on actual cost savings and not on
predatory pricing tactics. OPTA, to whom the European Commission had delegated
this matter, has recently ruled that these discount plans indeed violate
competition law principles and has required PTT Telecom to change them.
The Company's legal and regulatory strategy has enabled VersaTel to become
one of the first voice telephony competitors in The Netherlands to interconnect
with PTT Telecom and to implement a carrier select code in all of PTT Telecom's
telephone switches. The introduction of carrier pre-selection in The
Netherlands, which is expected to be introduced in January 2000 will allow
customers the option to pre-select a carrier other than PTT Telecom for all
their international and national long distance calls. The Company continues to
seek to obtain lower interconnection rates from PTT Telecom. In April 1998, OPTA
ordered a reduction in origination charges which management estimates amounts to
approximately 40.0%. The terms and conditions of interconnection have had and
will continue to have a material effect on the competitive position of the
Company. See "Risk Factors -- Dependence on Facilities Providers and
Interconnect Arrangements."
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BELGIUM
Belgium started the liberalization of its telecommunications market in 1991
with an amendment to the Belgian public post and telecommunications act. It
provided the basis for the privatization of Belgacom, and allowed new entrants
to the telecommunications services market to provide all services, with the
exception of voice telephony, upon obtaining a license. At the same time a new
regulatory entity was introduced, the Belgisch Instituut voor Post en
Telecommunicatie, under the Ministry of Economy and Telecommunications.
A further amendment to this Act was adopted by the Belgian Parliament in
December 1997, to implement the liberalization of voice telephony and
infrastructure. The amended Act was published in the Belgian Official Journal on
January 19, 1998 but in order to implement the amended act certain
administration regulations are required. To prevent any delays in providing
access to the market for new entrants, the Ministry of Economy and
Telecommunications issued a notice which opened the way for temporary licenses
for service providers and infrastructure operators. It is expected that the
definitive regulatory framework will be in place within the next few months.
VersaTel has obtained licenses to operate facilities and provide
telecommunications services in Belgium. For marketing purposes VersaTel has
reserved the same carrier select code "1611" as it currently uses in The
Netherlands. VersaTel has started the process to interconnect with Belgacom for
carrier selection and call termination services.
LUXEMBOURG
Pending the adoption of a new telecommunication law, P&T Luxembourg, a 100%
state-owned public company, has a monopoly in the provision of basic voice
communications and telecommunication infrastructure. The new law is designed to
liberalize the Luxembourg telecommunications market and to implement various EC
Directives. It also provides for a new regulatory entity, the Institut
Luxembourgeois des Telecommunications and provides for licensing of
telecommunications carriers. The EU has granted Luxembourg an extension to July
1, 1998 to liberalize its market.
PROPERTY
The Company's principal executive offices are located at Paalbergweg 36,
Amsterdam-Zuidoost, The Netherlands. The office space currently leased by the
Company at this location will expire in May 2001.
EMPLOYEES
As of March 31, 1998, the Company had 67 full-time employees and 8
full-time contractors and consultants. In addition, the Company employs
approximately 20 temporary employees at any given time. None of the Company's
employees is represented by a labor union or covered by a collective bargaining
agreement, and the Company has never experienced a work stoppage. The Company
considers its employee relations to be good.
INTELLECTUAL PROPERTY
The Company has registered the trademark (woordmerk) "VersaTel" with the
Benelux trademark bureau (Benelux Merkenbureau).
LEGAL PROCEEDINGS
The Company has filed complaints in the past with the European Commission,
OPTA and the Minister of Transport and Waterways of The Netherlands, as part of
its regulatory strategy. See "-- Regulation." The Company also makes routine
filings with the regulatory agencies and governmental authorities in the
countries in which the Company operates or intends to operate. In addition,
Cromwilld, one of the Shareholders has objected to the Recapitalization and the
Offering and has threatened to challenge in court certain of the Company's
actions in connection therewith.
The Company is from time to time involved in routine litigation in the
ordinary course of business. The Company believes that no currently pending
litigation to which it is a party will have a material adverse effect on the
Company's financial position or results of operations.
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MANAGEMENT
The members of the Supervisory Board and the Management Board of the
Company and certain other significant employees of the Company and their
respective ages and positions with the Company are set forth below.
MANAGEMENT BOARD
R. Gary Mesch is the sole managing director (statutair directeur) of the
Company.
SUPERVISORY BOARD
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Leopold W.A.M. van Doorne.................... 38 Chairman
Denis O'Brien................................ 39 Member
Hans Wackwitz................................ 43 Member
James Meadows................................ 45 Member
EXECUTIVE OFFICERS
NAME
- --------------------------------------------- AGE POSITION
--- ------------------------------------------
R. Gary Mesch................................ 44 Managing Director
W. Greg Mesch................................ 38 Chief Operations Officer
Raj Raithatha................................ 35 Chief Financial Officer
Larry Hendrickson............................ 55 Chief Technology Officer(1)
Marc A.J.M. van der Heijden.................. 39 Legal Counsel
Maurice J.J.J.M. Bergmans.................... 32 Manager Belgium Operations
John J.L. de Rooij........................... 39 Sales Manager
Leo Y.J. van der Veen........................ 42 Finance Manager
Andy Cooper.................................. 35 Network Manager(1)
L. Michiel van Dis........................... 34 Manager Customer Care
</TABLE>
- ---------------
(1) Messrs. Hendrickson and Cooper serve in these positions as consultants to
the Company.
SUPERVISORY BOARD
Under Netherlands law and the Articles of Association of the Company, the
management of the Company is entrusted to the Management Board (Directie) under
the supervision of the Supervisory Board (Raad van Commissarissen). Under the
laws of The Netherlands, Supervisory Directors cannot at the same time be
Managing Directors of the same company. The primary responsibility of the
Supervisory Board is to supervise the policies pursued by the Management Board
and the general course of affairs of the Company and its business. In fulfilling
their duties, the members of the Supervisory Board are required to act in the
best interests of the Company and its business.
Pursuant to the Articles of Association, the Supervisory Board consists of
such number of members as may be determined by the general meeting of
shareholders. The December 1996 Shareholders Agreement (the "Shareholders'
Agreement") specifies that the Supervisory Board shall consist of four members.
See "Certain Relationships and Related Transactions -- Shareholders' Agreement."
The members of the Supervisory Board are appointed by the general meeting of
shareholders. Resolutions of the Supervisory Board require the approval of a
majority of the members. The Shareholders' Agreement sets out the specific rules
for voting. The Supervisory Board meets each time this is deemed necessary by
one of its members. Members of the Supervisory Board shall periodically retire
in accordance with a roster drawn up by the general meeting of shareholders.
Every retiring Supervisory Director may be reappointed, provided that such
Supervisory Director has not attained the age of 72. A member of the Supervisory
Board must retire not later than on the day of the general meeting of
shareholders held in the fiscal year in which such member reaches the age of 72.
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<PAGE> 63
A member of the Supervisory Board may at all times be suspended or removed
by the general meeting of shareholders, at any time. The members of the
Supervisory Board may receive such compensation as may be determined by the
general meeting of shareholders.
MANAGEMENT BOARD
The management of the Company is entrusted to the Management Board under
the supervision of the Supervisory Board. The Articles of Association provide
that the Management Board may from time to time adopt written policies governing
its internal organization. Such written policies require the approval of the
Supervisory Board. In addition, the Articles of Association list certain actions
which require prior approval of the Supervisory Board. Such actions include,
inter alia: (i) borrowing or lending money; (ii) participating directly or
indirectly in the capital of another company; (iii) making any investments; and
(iv) providing security in personam or in rem.
The Management Board consists of such number of members as may be
determined by the general meeting of shareholders. In addition, the general
meeting of shareholders appoint the members of the Management Board.
The general meeting of shareholders has the power to suspend or dismiss
members of the Management Board. The Supervisory Board also has the power to
suspend members of the Management Board. If a member of the Management Board is
temporarily prevented from acting, the remaining members of the Management Board
shall temporarily be responsible for the management of the Company. If all
members of the Management Board are prevented from acting, a person appointed by
the Supervisory Board (who may be a member of the Supervisory Board) will be
temporarily responsible for the management of the Company. The compensation and
other terms and conditions of employment of the members of the Management Board
are determined by the general meeting of shareholders.
BIOGRAPHIES
R. GARY MESCH has served as Managing Director of VersaTel individually or
through his position as President of Open Skies International, Inc. ("Open
Skies") since October 1995. In 1991 he founded and became President of Open
Skies, a telecommunications consultancy with operations based in Amsterdam,
which provided consulting for early stage development of competitive European
telecommunications businesses. From 1991 to 1995 Open Skies advised such clients
as Unisource, PTT Telecom International, Inmarsat, NEC and Eurocontrol. In 1984
he founded and until 1990 managed the commercial operations of NovaNet, a
Denver-based regional provider of satellite-based long distance networks.
NovaNet was acquired by ICG Communications in 1993. From 1981 to 1983 he served
as director of sales for Otrona Advanced Systems, a Colorado-based manufacturer
of high performance computer systems. From 1975 to 1981 he served as a senior
systems engineer with Westinghouse Electric. Mr. Gary Mesch holds a B.S. in
Electrical Engineering from the University of Colorado and an M.B.A. from Denver
University.
LEOPOLD W.A.M. VAN DOORNE has served as Chairman of the Supervisory Board
of the Company on behalf of NeSBIC since December 1995. Since 1996, Mr. van
Doorne is the Managing Director of NeSBIC Groep B.V., a venture capital company
and a subsidiary of Fortis, an international group of more than 100 companies
operating in the fields of insurance, banking and investments. Worldwide, Fortis
has over 35,000 employees. From 1994 to 1996 he served as Managing Director of
NeSBIC Venture Management B.V. From 1990 to 1994 he was Regional Director of
Banque de Suez Nederland N.V. Mr. van Doorne serves as a member of the
supervisory board of various other companies. Mr. van Doorne holds a degree in
law from the University of Utrecht.
DENIS O'BRIEN, JR. has served as a member of the Supervisory Board of the
Company on behalf of Cromwilld since December, 1996. Mr. O'Brien is Chairman of
the Board and Chief Executive Officer of Esat Telecom Group Plc, a public
company listed on NASDAQ. In addition to his positions with Esat, Mr. O'Brien
has been the Chairman of the Board of Esat Digifone since 1996, and the Chairman
of the Board and Chief Executive Officer of Esat Telecom, which he founded in
1991. Prior to that time, he was employed
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<PAGE> 64
by Guinness Peat Aviation ("GPA Group"), from 1983 to 1985. Mr. O'Brien holds an
M.B.A. from Boston College.
HANS WACKWITZ has served as a member of the Supervisory Board of the
Company on behalf of Paribas since August 1998. Mr. Wackwitz is a member of the
management board of COBEPA S.A. and Paribas Deelnemingen N.V. From 1991 to 1993
he was employed by Paribas Capital Markets and responsible for the Benelux
region within the investment banking group. From 1986 to 1991 he served at
various management positions at Bankers Trust Company, including vice president
corporate finance, vice president short term finance and vice president money
market. Mr. Wackwitz holds a degree in economics from the Rijks Universiteit
Groningen and an M.B.A. from Columbia University.
JAMES R. MEADOWS has served as a member of the Supervisory Board of the
Company on behalf of Telecom Founders since August 1998. Mr. Meadows is Senior
Vice-President and co-founder of PrimeTEC International, Inc., a U.S.-based
international telecommunications services provider, since 1997. From 1989 to
1997 he served as Director Government Affairs at Capital Network System, Inc.
(CNSI), a telecommunications services provider. Mr. Meadows is the President of
America's Carriers Telecommunications Association (ACTA) and is a member of the
Board of Directors of Lone Star 2000, a public policy foundation. Mr. Meadows
holds a degree in history from the University of Texas at Austin.
W. GREG MESCH has served as Chief Operations Officer of VersaTel since
April 1998. From the Company's inception in 1995 until August 1998, he served as
a member of the Supervisory Board of the Company on behalf of Telecom Founders
and has performed operations consulting roles for the Company. From 1993 to
1997, Mr. Greg Mesch was a consultant to Esat Telecom in Ireland serving in the
role of Chief Operations Officer. From 1986 to 1992, he served as Chief
Executive Officer of Nova-Net. Nova-Net was a company he founded with his
brother Mr. Gary Mesch. Mr. Mesch has been a Director of In-Touch Associates
Ltd., a U.K.-based telecommunications consulting firm, since 1997. Mr. Mesch has
an M.B.A. from Denver University.
RAJ RAITHATHA has served as Chief Financial Officer of the Company since
April 1998. From 1994 to April 1998 he has served as Chief Financial Officer and
Director of Business Development of ACC Corp.'s European Operations. From 1992
to 1994 he served as Finance Director of Bay Trading Company. From 1989 to 1992
he served as divisional finance director at Securiguard Group Plc and from 1987
to 1989 he was financial controller at Harrison Willis. From 1983 to 1987 he was
employed by KPMG Peat Marwick. Mr. Raithatha holds a degree in economics and
mathematics from the University of Cardiff, England.
LARRY HENDRICKSON has served as Chief Technology Officer of the Company
since April 1998. From 1994 to 1998 he was senior consultant and partner of DDV
Telecommunications Strategies, a Benelux-based telecommunications consulting
company, and from 1993 to 1994 he was an independent telecommunications
consultant. From 1986 to 1993 he served at various management positions at
Cincinnati Bell, including President of Europe Group, President and Chief
Executive Officer of LDN Communications (Cincinnati Bell) and President of the
Mobile Communications Division of Cincinnati Bell Information Systems. From 1964
to 1986 he was employed by AT&T. Mr. Hendrickson holds a B.S. in management from
the Massachusetts Institute of Technology and completed the Advanced Management
Program at Harvard Business School.
MARC A.J.M. VAN DER HEIJDEN has served as Legal Counsel to the Company
since June 1998. Mr. van der Heijden served as regulatory counsel to the Company
on matters of telecommunications law and regulatory policy since October 1995 as
an independent consultant. As an independent consultant on telecommunications
law he has acted as advisor to the European Commission, the Governments of The
Netherlands and the United Kingdom and various telephone companies, such as
France Telecom and PTT Telecom and financial institutions, such as ABN AMRO and
Nederlandse Investerings Bank. He worked as an expert for KPMG Peat Marwick on
bidding processes for mobile telephony and sale of cable companies.
MAURICE J.J.J.M. BERGMANS has served as Manager Belgium Operations of the
Company since April 1998. He joined the Company in 1997 and he served as
business development manager of the Company since November 1997. From 1989 to
1996 he worked at Koning en Hartman B.V., a business unit of Getronics N.V., a
publicly traded company in The Netherlands. At Koning en Hartman B.V. he held
several positions in
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<PAGE> 65
product marketing and management in the area of telephony and interactive voice
response activities and services. Mr. Bergmans holds a degree in computer
science.
JOHN J.L. DE ROOIJ has served as Sales Manager of the Company since October
1995. From 1989 to 1995 he served as sales manager at Lanier Office Products,
initially as sales manager for fax and copier products for The Netherlands and
subsequently for the entire Benelux region. The last three years at Lanier's he
acted as the European Training Manager. From 1986 to 1989 he served as account
manager for Wang Laboratories The Netherlands. Mr. de Rooij holds a degree in
biology.
LEO Y.J. VAN DER VEEN has served as Finance Manager of the Company since
November 1997. From 1995 to 1997 he worked as European Finance Manager at Morton
Automotive Safety Products. From 1994 to 1995 he served as controller Benelux of
Stratus Computers. From 1983 to 1993 he served as Director Finance &
Administration Benelux and in various other financial positions at NCR Benelux.
Mr. van der Veen holds a masters degree in international management from the
American Graduate School of International Management and degrees in business
administration and mechanical engineering.
ANDY COOPER has served as Network Manager of the Company since June 1997 as
an independent consultant. From 1985 to 1997, he worked at Mercury
Communications Ltd. in the United Kingdom. From 1993 to 1994, he was seconded to
Cable and Wireless Plc., Mercury's parent. His responsibilities included network
development, transmission systems maintenance, switch operations, VPN, ISDN,
Centrex and intelligent networking.
L. MICHIEL VAN DIS has served as Manager Customer Care of the Company since
May 1997. From 1991 to 1992 he worked at KLM (Royal Dutch Airlines). In 1992, he
joined Independent Mail B.V. as operations manager and subsequently became
general manager of this company. Independent Mail B.V., a re-mail house for DHL,
was taken over by KPN N.V., the holding company of PTT Telecom and the Dutch
Postal Service, in 1996. From 1996 to 1997 he worked as an independent
consultant, primarily for Independent Mail B.V. Mr. van Dis holds a degree in
business administration.
EXECUTIVE COMPENSATION
The total aggregate compensation for the Supervisory Board of the Company
as a group for 1997 was NLG 37,500. The total aggregate compensation (including
amounts paid pursuant to management and consulting agreements) of all executive
officers (including the Managing Director) of the Company as a group for 1997
was NLG 2,108,619. See "Certain Relationships and Related
Transactions -- Additional Agreements."
During 1997, VersaTel did not accrue any amounts to provide pension,
retirement and similar benefits to the executive officers of the Company or to
any of the Managing or Supervisory Directors of the Company.
STOCK OPTION PLANS
1997 STOCK OPTION PLAN
In December 1996, VersaTel's shareholders approved the 1997 Stock Option
Plan (the "1997 Plan"). The 1997 Plan provides for the grant of options to
certain key employees of the Company to purchase depositary receipts issued for
Ordinary Shares of the Company. Under the 1997 Plan, no options have been
granted with an expiration date of more than five years after the granting of
the option. The option exercise price is determined in the particular grant of
the option.
The option holder is not entitled to retain any depositary receipts
received by the option holder as a result of the exercise of its option. Upon
exercise of its option by the option holder, the option holder is required to
offer the depositary receipts received by it to the Company or to another party
designated by the Company at the Purchase Price (as defined in the 1997 Plan).
Unless otherwise specified in the particular grant of the option, the Purchase
Price will be the fair market value of the Ordinary Shares minus a penalty
discount. The 1997 Plan contains provisions in the event of a dispute regarding
the fair market value of the Ordinary Shares. The penalty discount, if any, is
determined by the length of employment of the particular option holder.
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<PAGE> 66
Pursuant to the Shareholders' Agreement, Telecom Founders, Cromwilld and
NeSBIC must make available the shares underlying the depositary receipts to be
issued under the 1997 Plan. As of the date of this Prospectus 199,000 options to
purchase 199,000 depositary receipts had been granted under the 1997 Plan and
the Company does not intend to grant any more options under the 1997 Plan.
1998 STOCK OPTION PLAN
In March 1998, VersaTel's shareholders approved the 1998 Stock Option Plan
(the "1998 Plan"). The 1998 Plan allows the Company to grant options to
employees to purchase depositary receipts issued for Ordinary Shares of the
Company. The option period will commence at the date of the grant and will last
five years. The option exercise price shall be the economic value of the
depositary receipt at the date of the grant of the option. The 1998 Plan
contains specific provisions for the determination of the economic value of the
depositary receipts.
The option holder is not entitled to retain any depositary receipts
received by the option holder as a result of the exercise of its option. Upon
exercise of its option by the option holder, the option holder is required to
offer the depositary receipts received by it, within one year after the end of
the option period, to the Company or to another party designated by the Company,
at a purchase price equal to the economic value of the depositary receipts.
As of the date of this Prospectus, 2,500,000 options to purchase 2,500,000
depositary receipts have been granted under the 1998 Plan.
The depositary receipts issued under both the 1997 Plan and the 1998 Plan
will be administered by the Stichting Administratiekantoor VersaTel.
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SECURITY OWNERSHIP OF PRINCIPAL
SHAREHOLDERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Ordinary Shares of the Company, as of March 31, 1998, by each
beneficial owner of 5.0% or more of the Ordinary Shares and by executive
officers and directors of the Company as a group. The pro forma beneficial
ownership gives effect to the issuance of Ordinary Shares under the
Recapitalization.
<TABLE>
<CAPTION>
PRO FORMA
NUMBER OF NUMBER OF
SHARES PERCENT(1) SHARES PERCENT(1)
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Telecom Founders B.V.(2)...................... 2,698,000 28.2% 3,377,313 17.4%
NeSBIC Venture Fund C.V. ..................... 3,775,643 39.4 7,581,448 39.0
Cromwilld Limited(3) ......................... 3,106,000 32.4 3,653,024 18.8
Paribas Deelnemingen N.V. .................... -- -- 3,639,149 18.7
Nederlandse Participatie Maatschappij N.V. ... -- -- 1,176,471 6.1
All directors and executive officers as a
group(4).................................... 5,804,000 60.6 7,030,336 36.2
</TABLE>
- ---------------
(1) Does not give effect to dilution from the exercise of the Warrants (covering
Ordinary Shares) or of options granted to employees (covering 2,329,000
Ordinary Shares). See "Management -- Stock Option Plans."
(2) Telecom Founders B.V., a Netherlands company is a wholly-owned subsidiary of
Relyt Holdings N.V., a Netherlands Antilles company owned by R. Gary Mesch.
The Shareholders' Agreement requires Mr. Mesch to own more than 50.0% of the
shares of Telecom Founders B.V. Certain of the officers and directors of the
Company have beneficial interests in Telecom Founders B.V.
(3) Cromwilld Limited, an Isle of Man company, is controlled by Denis O'Brien, a
member of the Supervisory Board of the Company. The Shareholders' Agreement
requires Mr. O'Brien to own more than 90.0% of the shares of Cromwilld
Limited.
(4) Reflects the 2,698,000 shares held by Telecom Founders B.V., beneficial
ownership of which may be attributed to Mr. Mesch, and 3,106,000 shares held
by Cromwilld Limited, beneficial ownership of which may be attributed to Mr.
O'Brien.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SHAREHOLDERS' AGREEMENT
In December 1996, Telecom Founders, NeSBIC and Cromwilld entered into a
participation and shareholders' agreement (the "Shareholders' Agreement"), which
contains, inter alia, provisions restricting the transfer of shares of the
Company, provisions relating to appointment of members of the Management Board
and the Supervisory Board and provisions with respect to the funding of the
Company. The Shareholders' Agreement superseded a prior shareholders' agreement
among VersaTel's initial shareholders. Pursuant to the Shareholders' Agreement,
the Company issued new shares to the shareholders and certain shareholders
provided subordinated convertible loans to the Company. These subordinated
convertible loans have been converted into equity as part of the
Recapitalization. As part of the Recapitalization, Paribas and NPM have agreed
to be bound by the terms of the Shareholders' Agreement pursuant to deeds of
accession and acknowledgment.
The Shareholders' Agreement contains provisions restricting the transfer of
shares of the Company (such provisions also provided for an amendment of the
Articles of Association of the Company containing similar transfer
restrictions). If a shareholder wishes to transfer its shares, it must first
offer the other shareholders the right to purchase such shares. See "Description
of Capital Stock -- Restriction on Transfer of Shares." In addition, no
shareholder may transfer its shares unless the transferee has accepted and
agreed to be bound by the provisions of the Shareholders' Agreement, nor will
the Company issue shares to any person unless such person accepts and agrees to
be bound by the Shareholders' Agreement.
The Shareholders' Agreement provides that the Supervisory Board of the
Company shall be composed of four members. NeSBIC and Cromwilld each have the
right to nominate one member of the Supervisory Board, whereas Telecom Founders
will have the right to nominate two members of the Supervisory Board, one of
which will have to be reasonably acceptable to both NeSBIC and Cromwilld. As
part of the Recapitalization and pursuant to an agreement between Paribas and
Telecom Founders, Telecom Founders has agreed with Paribas to nominate the
person to be designated from time to time by Paribas as one of its members of
the Supervisory Board. The member of the Supervisory Board appointed upon
nomination of NeSBIC shall have a deciding vote in case of a tie in votes.
Pursuant to the Shareholders' Agreement, the Management Board requires the prior
approval of the Supervisory Board for certain transactions. See "Management --
Management Board."
The Shareholders' Agreement will terminate upon any of the following
events: (i) by written agreement of all the parties thereto or (ii) upon the
joint sale and transfer by the parties to the Shareholders' Agreement of the
entire share capital of the Company or (iii) the listing of the entire share
capital of the Company on any securities market.
RECENT DEVELOPMENTS
In February 1998, as part of the Recapitalization, two of the three
shareholders of the Company, Telecom Founders and NeSBIC, a subsidiary of
Fortis, invested an additional NLG 7.2 million in equity capital in the Company.
In addition, NeSBIC and Cromwilld, the third shareholder of the Company,
converted their subordinated convertible notes totaling NLG 3.6 million into
Ordinary Shares of the Company; and NeSBIC converted its NLG 4.5 million bridge
loan into Ordinary Shares of the Company. The third component of the
Recapitalization was comprised of a new equity investment by Paribas of NLG 12.8
million. Lastly, the Company received from Telecom Founders, NeSBIC, Paribas and
NPM an additional NLG 15.0 million in equity capital immediately prior to the
closing of the Offering. As a result of the Recapitalization, the invested
equity in the Company has increased from NLG 7.0 million to NLG 50.1 million.
ADDITIONAL AGREEMENTS
Mr. Greg Mesch is also a director of In-Touch Associates Ltd., a
London-based telecommunications consulting company that performs services for
the Company. The amounts paid by the Company in respect of these services are
not material.
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<PAGE> 69
DESCRIPTION OF THE EXCHANGE NOTES
The Outstanding Notes were issued under an Indenture (the "Indenture")
dated as of May 27, 1998 between the Company and the United States Trust Company
of New York, as trustee (the "Trustee"). The Exchange Notes will be issued under
the Indenture, 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 and the United Kingdom). 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 Indenture 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 Indenture, the Escrow
Agreement 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 Indenture, the Escrow
Agreement and the Registrations Rights Agreement, including the definitions of
certain terms therein and those terms made a part of the Indenture by reference
to the Trust Indenture Act. Copies of the Indenture, the Escrow Agreement and
the Registration Rights Agreement have been filed with the Commission as an
Exhibit to the Registration Statement of which this Prospectus is a part. The
definitions of certain terms used in the following summary are set forth under
"-- Certain Definitions."
GENERAL
The Outstanding Notes have been issued by the Company pursuant to the
Indenture between the Company and United States Trust Company of New York, as
trustee (the "Trustee"). The Indenture will be qualified under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), upon issuance of
the Exchange Notes or the effectiveness of the Shelf Registration Statement. See
"-- Exchange Offer and Registration Rights." Holders of Notes are referred to
the Indenture and the Trust Indenture Act for a statement thereof. The following
summary of certain provisions of the Indenture does not purport to be complete
and is qualified in its entirety by reference to the Indenture, including the
definitions therein of certain terms used below. The definitions of certain
terms used in the following summary are set forth below under "-- Certain
Definitions."
The Company expects to make an application to list the Notes on the
Luxembourg Stock Exchange after the Separation Date. If and so long as the Notes
are listed on the Luxembourg Stock Exchange, the Company will maintain a special
agent or, as the case may be, a paying and transfer agent in Luxembourg. See
"Listing and General Information."
RANKING
The Notes will be general unsecured obligations of the Company and will
rank senior in right of payment to all future Indebtedness of the Company that
is, by its terms or by the terms of the agreement or instrument governing such
Indebtedness, expressly subordinated in right of payment to the Notes and pari
passu in right of payment with all existing and future unsecured liabilities of
the Company that are not so subordinated.
The Company intends to transfer all or substantially all of its assets and
liabilities (other than the Notes) to certain of its Restricted Subsidiaries.
After such transfer, the Company will be a holding company with limited assets
and will operate its business through its Restricted 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
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<PAGE> 70
payables, of the Company's Subsidiaries. At March 31, 1998, after giving pro
forma effect to the Recapitalization and the transfer of all or substantially
all of the Company's assets and liabilities (other than the Notes) to certain of
its Restricted Subsidiaries as described above, the Company's Subsidiaries would
have had total liabilities of $16.9 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 of Indebtedness
by Restricted Subsidiaries."
PRINCIPAL, MATURITY AND INTEREST
The Notes will be limited to $225,000,000 in aggregate principal amount and
will mature on May 15, 2008. The Notes will bear interest at the rate of 13 1/4%
per annum, payable semi-annually in arrears on each May 15 and November 15 (each
an "Interest Payment Date"), commencing on November 15, 1998 to the Person in
whose name the Note (or any predecessor Note) is registered at the close of
business on the preceding May 1 or November 1, as the case may be. Interest will
be computed on the basis of a 360-day year of twelve 30-day months. Principal
of, premium, if any, interest, Additional Amounts, if any, and Liquidated
Damages, if any, on the Notes will be payable at the office or agency of the
Company maintained for such purpose within the City and State of New York or, at
the option of the Company, payment of interest, Additional Amounts, if any, and
Liquidated Damages, if any, may be made by check mailed to the holders of the
Notes at their respective addresses set forth in the register of holders of
Notes. Until otherwise designated by the Company, the Company's office or agency
in New York will be the office of the Trustee maintained for such purpose. The
Notes will be issued in minimum denominations of $1,000 (in principal amount)
and integral multiples thereof. If Definitive Notes are issued, the Company will
appoint Kredietbank S.A. Luxembourgeoise, or such other Person located in
Luxembourg and reasonably acceptable to the Trustee, as an additional paying and
transfer agent. Upon the issuance of Definitive Notes, Holders will be able to
receive principal, interest, Additional Amounts, if any, and Liquidated Damages,
if any, on the Notes and will be able to transfer Definitive Notes at the
Luxembourg office of such paying and transfer agent, subject to the right of the
Company to mail payments in accordance with the terms of the Indenture.
ESCROW ACCOUNT
Concurrently with the consummation of the Offering, pursuant to the Escrow
Agreement, the Company purchased, pledged and transferred to the Escrow Agent,
for the benefit of the holders of the Notes, U.S. Government Securities in such
amounts as will be sufficient upon scheduled interest payments of such
securities to provide for the payment in full of the first six scheduled
interest payments on the Notes (excluding, in each case, any Additional Amounts
and any Liquidated Damages). The Company used approximately $81.6 million of the
net proceeds of the Offering to acquire the Pledged Securities. The Pledged
Securities were pledged to the Escrow Agent for the benefit of the Holders of
the Notes and deposited in the Escrow Account held by the Escrow Agent for the
benefit of the Trustee and the Holders of the Notes in accordance with the
Escrow Agreement. The Escrow Agreement provides, among other things, that funds
may be disbursed from the Escrow Account for interest payments on the Notes. The
Escrow Agent has been instructed to cause any uninvested funds in the Escrow
Account to be invested, pending disbursement, in cash equivalents (as provided
in the Escrow Agreement). Interest earned on the Pledged Securities and any such
cash equivalents will be added to the related Escrow Account.
Under the Escrow Agreement, the Company has granted to the Trustee, for the
benefit of the Holders, a first priority and exclusive security interest in the
Escrow Collateral. The Escrow Agreement provides that the Trustee may foreclose
on the Escrow Collateral upon acceleration of the maturity of the Notes. Under
the terms of the Indenture, the proceeds of the Escrow Collateral will be
applied, first, to amounts owing to the Trustee in respect of fees and expenses
of the Trustee, and second, to amounts owing on the Notes as provided in the
Indenture. The ability of Holders to realize upon the Escrow Collateral may be
subject to certain bankruptcy law limitations in the event of the bankruptcy of
the Company.
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Upon payment in full of the first six scheduled interest payments
(including any Additional Amounts and any Liquidated Damages), if no Default has
occurred and is continuing, the Escrow Collateral will be released to the
Company.
MANDATORY REDEMPTION
The Company will not be required to make mandatory redemptions or sinking
fund payments prior to maturity of the Notes.
OPTIONAL REDEMPTION
Except as described below and in the following paragraph or under
"Redemption for Taxation Reasons," the Notes will not be redeemable at the
Company's option prior to May 15, 2003. On or after May 15, 2003, the Notes will
be subject to redemption at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days' prior notice, published in a leading
newspaper having a general circulation in New York (which is expected to be The
Wall Street Journal) and in Amsterdam (which is expected to be Het Financieele
Dagblad) (and, if and so long as the Notes are listed on the Luxembourg Stock
Exchange and the rules of such Stock Exchange shall so require, a newspaper
having a general circulation in Luxembourg (which is expected to be the
Luxemburger Wort)) or, in the case of Definitive Notes, mailed by first-class
mail to each Holder's registered address, at the redemption prices (expressed as
a percentage of principal amount) set forth below, plus accrued and unpaid
interest, Additional Amounts, if any, and Liquidated Damages, if any, to the
applicable redemption date (and, in the case of Definitive Notes, subject to the
right of Holders of record on the relevant record date to receive interest and
Additional Amounts, if any, and Liquidated Damages, if any, due on the relevant
interest payment date in respect thereof), if redeemed during the twelve-month
period beginning on May 15 of each of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2003........................................................ 106.625%
2004........................................................ 104.417%
2005........................................................ 102.208%
2006 and thereafter......................................... 100.000%
</TABLE>
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee in compliance with the requirements of
the principal securities exchange, if any, on which such Notes are listed or, if
such Notes are not so listed or such exchange prescribes no method of selection,
on a pro rata basis, by lot or by such other method as the Trustee in its sole
discretion shall deem to be fair and appropriate, although no Note of $1,000 in
original principal amount or less shall be redeemed in part. If any Note is to
be redeemed in part only, the notice of redemption relating to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be issued and
delivered to the Depositary, or, in the case of Definitive Notes, issued in the
name of the Holder thereof in each case upon cancellation of the original Note.
On and after the redemption date, interest ceases to accrue on the Notes or
portions thereof called for redemption.
REDEMPTION FOR TAXATION REASONS
The Notes may be redeemed, at the option of the Company in whole but not in
part, at any time upon giving not less than 30 nor more than 60 days' notice to
the Holders (which notice shall be irrevocable), at a redemption price equal to
the aggregate principal amount thereof, plus Liquidated Damages, if any, to the
date fixed by the Company for redemption (a "Tax Redemption Date"), and all
Additional Amounts (see "-- Withholding Taxes"), if any, then due and which will
become due on the Tax Redemption Date as a result of the redemption or
otherwise, if the Company determines that, as a result of (i) any change in, or
amendment to, the laws or treaties (or any regulations or rulings promulgated
thereunder) of The Netherlands (or any political subdivision or taxing authority
of The Netherlands) affecting taxation which becomes effective on or after the
Issue Date, or (ii) any change in position regarding the application,
administration or
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any new or different interpretation of such laws, treaties, regulations or
rulings (including a holding, judgment or order by a court of competent
jurisdiction), which change, amendment, application or interpretation becomes
effective on or after the Issue Date, the Company is, or on the next Interest
Payment Date would be, required to pay Additional Amounts, and the Company
determines that such payment obligation cannot be avoided by the Company taking
reasonable measures. Notwithstanding the foregoing, no such notice of redemption
shall be given earlier than 90 days prior to the earliest date on which the
Company would be obligated to make such payment or withholding if a payment in
respect of the Notes were then due. Prior to the publication or, where relevant,
mailing of any notice of redemption of the Notes pursuant to the foregoing, the
Company will deliver to the Trustee an opinion of an independent tax counsel of
recognized standing to the effect that the circumstances referred to above
exist. The Trustee shall accept such opinion as sufficient evidence of the
satisfaction of the conditions precedent described above, in which event it
shall be conclusive and binding on the Holders.
CERTAIN COVENANTS
LIMITATION ON INDEBTEDNESS
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness; provided, however, that if no Default
or Event of Default shall have occurred and be continuing at the time, or would
occur as a consequence, of the Incurrence of any such Indebtedness, the Company
may Incur Indebtedness if immediately thereafter the ratio of (i) the aggregate
principal amount of Indebtedness of the Company and its Restricted Subsidiaries
on a consolidated basis outstanding as of the Transaction Date to (ii) the pro
forma Consolidated Cash Flow (the "Indebtedness to Consolidated Cash Flow
Ratio") for the preceding two full fiscal quarters multiplied by two, determined
on a pro forma basis as if any such Indebtedness had been Incurred and the
proceeds thereof had been applied at the beginning of such two fiscal quarters,
would be greater than zero and less than or equal to 5.0 to 1.
(b) Notwithstanding the foregoing, (except for Indebtedness under
subsection (vii) below) the Company and (except for Indebtedness under
subsections (v), (vi) and (x) (A) below) any Restricted Subsidiary may Incur
each and all of the following:
(i) Indebtedness (other than Acquired Indebtedness) Incurred to finance
the cost (provided that such Indebtedness is Incurred at any time on or before,
or within 90 days following, the incurrence of such cost) (including the cost of
design, development, construction, acquisition, installation or integration) of
assets used in the Permitted Business or Equity Interests of (A) a Restricted
Subsidiary that owns principally such assets from a Person other than the
Company or a Restricted Subsidiary of the Company or (B) any Person that is
principally engaged in the Permitted Business, that would become a Restricted
Subsidiary and owns principally such assets; provided that (x) any such
Indebtedness of a Restricted Subsidiary must be Incurred under one or more
Credit Facilities, under one or more Capitalized Leases or from the vendor of
the assets, property or services acquired with the proceeds of such
Indebtedness, (y) the amount of such Indebtedness of a Restricted Subsidiary may
not exceed the Fair Market Value of the assets so acquired and (z) the amount of
such Indebtedness of the Company, Incurred to acquire Equity Interests under
clauses (A) and (B) above, may not exceed the Fair Market Value of such assets
of any Restricted Subsidiary or any such Person so acquired;
(ii) Indebtedness of any Restricted Subsidiary to the Company or
Indebtedness of the Company or any Restricted Subsidiary to any other Restricted
Subsidiary; provided that any subsequent issuance or transfer of any Capital
Stock which results in any such Restricted Subsidiary ceasing to be a Restricted
Subsidiary or any subsequent transfer of such Indebtedness not permitted by this
clause (ii) (other than to the Company or another Restricted Subsidiary) shall
be deemed, in each case, to constitute the Incurrence of such Indebtedness; and
provided, further, that Indebtedness of the Company to a Restricted Subsidiary
must be unsecured and subordinated in right of payment to the Notes;
(iii) Indebtedness issued in exchange for, or the net proceeds of which
are used to refinance or refund, then outstanding Indebtedness of the Company or
a Restricted Subsidiary, other than Indebtedness Incurred under clauses (ii),
(iv), (vii), (viii) and (xii) of this paragraph, and any refinancings thereof in
an
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amount not to exceed the amount so refinanced or refunded (plus premiums,
accrued interest, and reasonable fees and expenses); provided that such new
Indebtedness shall only be permitted under this clause (iii) if (A) in case the
Notes are refinanced in part or the Indebtedness to be refinanced or refunded is
pari passu with the Notes, such new Indebtedness, by its terms or by the terms
of any agreement or instrument pursuant to which such new Indebtedness is issued
or remains outstanding, is expressly made pari passu with, or subordinate in
right of payment to, the remaining Notes, (B) in case the Indebtedness to be
refinanced is subordinated in right of payment to the Notes, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is issued or remains outstanding, is
expressly made subordinate in right of payment to the Notes at least to the
extent that the Indebtedness to be refinanced or refunded is subordinated to the
Notes, (C) the Stated Maturity of such new Indebtedness, determined as of the
date of Incurrence of such new Indebtedness, is no earlier than the Stated
Maturity of the Indebtedness being refinanced or refunded and (D) such new
Indebtedness, determined as of the date of Incurrence of such new Indebtedness,
has a Weighted Average Life to Maturity which is not less than the remaining
Weighted Average Life to Maturity of the Indebtedness to be refinanced or
refunded; and provided, further, that in no event may Indebtedness of the
Company be refinanced or refunded by means of any Indebtedness of any Restricted
Subsidiary pursuant to this clause (iii);
(iv) Indebtedness (A) in respect of performance, surety or appeal bonds
or letters of credit supporting Trade Payables, in each case provided in the
ordinary course of business, (B) under Currency Agreements and Interest Rate
Agreements; provided that such agreements do not increase the Indebtedness of
the obligor outstanding at any time other than as a result of fluctuations in
foreign currency exchange rates or interest rates or by reason of fees,
indemnities and compensation payable thereunder, and (C) arising from agreements
providing for indemnification, adjustment of purchase price or similar
obligations, or from Guarantees or letters of credit, surety bonds or
performance bonds securing any obligations of the Company or any of its
Restricted Subsidiaries pursuant to such agreements, in any case Incurred in
connection with the disposition of any business, assets or Restricted Subsidiary
of the Company (other than Guarantees of Indebtedness Incurred for the purpose
of financing such acquisition by the Person acquiring all or any portion of such
business, assets or Restricted Subsidiary), in a principal amount not to exceed
the gross proceeds actually received by the Company or any Restricted Subsidiary
in connection with such disposition;
(v) Indebtedness, to the extent that the net proceeds thereof are
promptly (A) used to repurchase Notes tendered in a Change of Control Offer or
(B) deposited to defease all of the Notes as described below under "Legal
Defeasance and Covenant Defeasance";
(vi) Indebtedness of the Company represented by the Notes;
(vii) Indebtedness represented by a Guarantee of the Notes and
Guarantees of other Indebtedness of the Company by a Restricted Subsidiary, in
each case permitted by and made in accordance with the "Limitation on Issuances
of Guarantees of Indebtedness by Restricted Subsidiaries" covenant;
(viii) Indebtedness under one or more Credit Facilities, in an
aggregate principal amount at any one time outstanding not to exceed the greater
of (x) NLG 70.0 million and (y) 80.0% of Eligible Accounts Receivable at any one
time outstanding, subject to any permanent reductions required by any other
terms of the Indenture;
(ix) Acquired Indebtedness; provided that the aggregate amount of such
Acquired Indebtedness (other than the Indebtedness Incurred under one or more
Credit Facilities, under one or more Capitalized Leases or from the vendor of
assets, property or services acquired with the proceeds of such Indebtedness) of
the Person 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 does not
exceed the Fair Market Value of the plant, property and equipment (excluding
property, plant and equipment securing any of the Credit Facilities or vendor
financings or subject to any Capital Leases referred to in this clause (ix)) of
any Restricted Subsidiary so acquired;
(x) Indebtedness of (A) the Company not to exceed, at any one time
outstanding, 2.00 times the Net Cash Proceeds from (1) the issuance and sale,
other than to a Subsidiary, of Equity Interests (other than
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Redeemable Stock and excluding any Ordinary Shares issued in connection with the
Recapitalization) of the Company and (2) capital contributions made in the
Company (other than by a Subsidiary) less, in each case, the amount of such
proceeds used to make Restricted Payments as provided in clause (C)(2) of the
first paragraph or clause (iii) or (iv) of the second paragraph of the
"Limitation on Restricted Payments" covenant and (B) the Company or Acquired
Indebtedness of a Restricted Subsidiary (provided that any such Indebtedness of
such Restricted Subsidiary must be incurred under one or more Credit Facilities,
under one or more Capitalized Leases or from the vendor of the assets, property
or services acquired with the proceeds of such Indebtedness) not to exceed, at
any one time outstanding, the fair market value of any Telecommunications Assets
acquired by the Company or such Restricted Subsidiary in exchange for Equity
Interests of the Company issued after the Issue Date; provided, however, that in
determining the fair market value of any such Telecommunications Assets so
acquired, if the estimated fair market value of such Telecommunications Assets
exceeds (x) $2.0 million (as estimated in good faith by the Board of Directors),
then the fair market value of such Telecommunications Assets will be determined
by a majority of the Board of Directors of the Company, which determination will
be evidenced by a resolution thereof, and (y) $10.0 million (as estimated in
good faith by the Board of Directors), then the Company will deliver the Trustee
a written appraisal as to the fair market value of such Telecommunications
Assets prepared by an internationally recognized investment banking or public
accounting firm (or, if no such investment banking or public accounting firm is
qualified to prepare such an appraisal, by an internationally recognized
appraisal firm); and provided further that such Indebtedness (other than the
Indebtedness Incurred under one or more Credit Facilities, under one or more
Capitalized Leases or from the vendor of assets, property or services acquired
with the proceeds of such Indebtedness) does not mature prior to the Stated
Maturity of the Notes and the Weighted Average Life to Maturity of such
Indebtedness is longer than that of the Notes;
(xi) Indebtedness outstanding as of the Issue Date; and
(xii) Indebtedness (in addition to Indebtedness permitted under clauses (i)
through (x) above) in an aggregate principal amount outstanding at any one time
not to exceed the greater of (A) NLG 100 million and (B) an amount equal to 5%
of the Company's consolidated net tangible assets as of such date.
(c) For purposes of determining any particular amount of Indebtedness under
this "Limitation on Indebtedness" 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 forgoing shall not in any way be deemed to limit the
provisions of "-- Limitation on Issuances of Guarantees of Indebtedness by
Restricted Subsidiaries". For purposes of determining compliance with this
"Limitation on Indebtedness" covenant, (A) in the event that an item of
Indebtedness meets the criteria of more than one of the types of Indebtedness
described in the above clauses, the Company, in its sole discretion, shall
classify (or from time to time reclassify) such item of Indebtedness and only be
required to include the amount and type of such Indebtedness in one of such
clauses and (B) the principal amount of Indebtedness issued at a price that is
less than the principal amount thereof shall be equal to the amount of the
liability in respect thereof determined in conformity with U.S. GAAP.
LIMITATION ON RESTRICTED PAYMENTS
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, (i) declare or pay any dividend or make any distribution
on account of any Equity Interest in the Company or any Restricted Subsidiary to
the holders thereof, including any dividend or distribution payable in
connection with any merger or consolidation (other than (A) dividends or
distributions payable solely in Equity Interests (other than Redeemable Stock)
of the Company, (B) dividends or distributions made only to the Company or a
Restricted Subsidiary and (C) pro rata dividends or distributions on Capital
Stock of a Restricted Subsidiary held by Persons other than the Company or a
Restricted Subsidiary), (ii) purchase, redeem, retire or otherwise acquire for
value any Equity Interests of the Company or any Equity Interests of any
Restricted Subsidiary (other than any such Equity Interests owned by the Company
or any Restricted Subsidiary), (iii) make any principal payment or redeem,
repurchase, defease, or otherwise acquire or retire for value, in each case,
prior to any scheduled repayment, or maturity, any Indebtedness of the Company
that is subordinated in right of payment to the Notes, or (iv) make any
Investment, other than a Permitted
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Investment, in any Person (all such payments or any other actions described in
clauses (i) through (iv) above being collectively referred to as "Restricted
Payments") unless, at the time of, and after giving effect to, the proposed
Restricted Payment:
(A) no Default or Event of Default shall have occurred and be continuing;
(B) the Company could Incur at least $1.00 of additional Indebtedness under
the first paragraph of the "Limitation on Indebtedness" covenant; and
(C) the aggregate amount expended for all Restricted Payments (the amount
so expended, if other than in cash, to be determined in good faith by the Board
of Directors, whose determination shall be conclusive and evidenced by a Board
Resolution) after the Issue Date is less than the sum of (1) Cumulative
Consolidated Cash Flow minus 150% of Cumulative Consolidated Fixed Charges plus
(2) 100% of the aggregate Net Cash Proceeds received by the Company after the
Issue Date as a capital contribution or from the issuance and sale of its Equity
Interests (other than Redeemable Stock, and excluding any Ordinary Shares issued
in connection with the Offering or the Recapitalization) to a Person (other than
a Restricted Subsidiary of the Company), plus (3) the aggregate amount by which
Indebtedness (other than any Indebtedness subordinated in right of payment to
the Notes) of the Company or any Restricted Subsidiary is reduced on the
Company's balance sheet upon the conversion or exchange (other than by a
Restricted Subsidiary of the Company) subsequent to the Issue Date into Equity
Interests (other than Redeemable Stock and 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) and plus (4) without duplication of any amount
included in the calculation of Consolidated Net Income, in the case of repayment
of, or return of capital in respect of, any Investment constituting a Restricted
Payment made after the Issue Date, an amount equal to the lesser of the
repayment of, the return of capital with respect to, such Investment and the
cost of such Investment, in either case less the cost of the disposition of such
Investment and net of taxes.
The foregoing provisions shall not prohibit: (i) the payment of any
dividend within 60 days after the date of declaration thereof if, at said date
of declaration, such payment would comply with the provisions of the Indenture;
(ii) the redemption, repurchase, defeasance or other acquisition or retirement
for value of Indebtedness that is subordinated in right of payment to the Notes
including premium, if any, and accrued and unpaid interest, with the proceeds
of, or in exchange for, Indebtedness Incurred under clause (iii) of paragraph
(b) of the "Limitation on Indebtedness" covenant; (iii) the repurchase,
redemption or other acquisition of Equity Interests in the Company in exchange
for, or out of the Net Cash Proceeds of, a substantially concurrent capital
contribution or offering of Equity Interests (other than Redeemable Stock) in
the Company to any Person (other than a Restricted Subsidiary); (iv) the
repurchase, redemption or other acquisition of Indebtedness of the Company which
is subordinated in right of payment to the Notes in exchange for, or out of the
Net Cash Proceeds of, a substantially concurrent capital contribution or
offering of Equity Interests (other than Redeemable Stock) in the Company to any
Person (other than a Restricted Subsidiary); (v) the purchase of any
subordinated Indebtedness at a purchase price not greater than 101% of the
principal amount thereof following a Change of Control pursuant to an obligation
in the instruments governing such subordinated Indebtedness to purchase or
redeem such subordinated Indebtedness as a result of such Change of Control;
provided, however, that no such purchase or redemption shall be permitted until
the Company has completely discharged its obligations described under
"-- Repurchase of Notes upon a Change of Control" (including the purchase of all
Notes tendered for purchase by holders) arising as a result of such Change of
Control; (vi) repurchases of the Warrants in accordance with the provisions set
forth in the applicable warrant agreement; and (vii) repurchases of Equity
Interests of the Company from employees of the Company or any of its Restricted
Subsidiaries deemed to occur upon exercise of stock options if such Equity
Interests represent a portion of the exercise price of such options; provided
that any payments made pursuant to this clause (vii) may not exceed in aggregate
$500,000 in any fiscal year of the Company; provided that, in the case of
clauses (ii) through (vii), no Default or Event of Default shall have occurred
and be continuing or occur as a consequence of the actions or payments set forth
therein.
Each Restricted Payment permitted pursuant to the immediately preceding
paragraph (other than the Restricted Payment referred to in clause (ii) thereof)
and the Net Cash Proceeds from any capital
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contribution or issuance of Equity Interests referred to in clauses (iii) and
(iv), shall be included in calculating whether the conditions of clause (C) of
the first paragraph of this "Limitation on Restricted Payments" covenant have
been met with respect to any subsequent Restricted Payments. In the event the
proceeds of an issuance of Equity Interests (other than Redeemable Stock) of the
Company are used for the redemption, repurchase or other acquisition of the
Notes, then the Net Cash Proceeds of such issuance shall be included in clause
(C) of the first paragraph of this "Limitation on Restricted Payments" covenant
only to the extent such proceeds are not used for such redemption, repurchase or
other acquisition of the Notes.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING RESTRICTED SUBSIDIARIES
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any Restricted Subsidiary to (i) pay dividends or make any other
distributions permitted by applicable law on any Equity Interests of such
Restricted Subsidiary owned by the Company or any other Restricted Subsidiary,
(ii) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary, (iii) make loans or advances to the Company or any other Restricted
Subsidiary, or (iv) transfer any of its property or assets to the Company or any
other Restricted Subsidiary.
The foregoing provisions shall not prohibit any encumbrances or
restrictions: (i) existing under or by reason of any agreement in effect on the
Issue Date, and any amendments, supplements, extensions, refinancings, renewals
or replacements of such agreements; provided that the encumbrances and
restrictions in any such amendments, supplements, extensions, refinancings,
renewals or replacements are no more restrictive than those encumbrances or
restrictions that are then in effect and that are being amended, supplemented,
extended, refinanced, renewed or replaced; (ii) existing under or by reason of
applicable law; (iii) existing with respect to any Restricted Subsidiary
acquired by the Company or any Restricted Subsidiary after the Issue Date, or
the property or assets of such Restricted Subsidiary, and existing at the time
of such acquisition and not incurred in contemplation thereof, which
encumbrances or restrictions are not applicable to any Person or the property or
assets of any Person other than such Person or the property or assets of such
Person so acquired, and any amendments, supplements, extensions, refinancings,
renewals or replacements of agreements containing such encumbrances or
restrictions; provided that the encumbrances and restrictions in any such
amendments, supplements, extensions, refinancings, renewals or replacements are
no more restrictive than those encumbrances or restrictions that are then in
effect and that are being amended, supplemented, extended, refinanced, renewed
or replaced; (iv) in the case of clause (iv) of the first paragraph of this
"Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries" covenant, (A) that restrict in a customary manner the subletting,
assignment or transfer of any property or asset that is, or is subject to, a
lease, purchase mortgage obligation, license, conveyance or contract or similar
property or asset, (B) existing by virtue of any transfer of, agreement to
transfer, option or right with respect to, or Lien on, any property or assets of
the Company or any Restricted Subsidiary not otherwise prohibited by the
Indenture or (C) arising or agreed to in the ordinary course of business, not
relating to any Indebtedness, and that do not, individually or in the aggregate,
materially detract from the value of property or assets of the Company or any
Restricted Subsidiary to the Company or any Restricted Subsidiary; (v) with
respect to a Restricted Subsidiary and imposed pursuant to an agreement that has
been entered into for the sale or disposition of all or substantially all of the
Capital Stock in, or property and assets of, such Restricted Subsidiary;
provided that such restriction shall terminate if such transaction is abandoned
or if such transaction is not consummated within six months of the date such
agreement was entered into; or (vi) contained in the terms of any Indebtedness
or any agreement pursuant to which such Indebtedness was issued if (A) the
encumbrance or restriction applies only in the event of a payment default or a
default with respect to a financial covenant contained in such Indebtedness or
agreement, (B) the encumbrance or restriction is not materially more
disadvantageous to the holders of the Notes than is customary in comparable
financings (as determined by the Board of Directors) and (C) the Board of
Directors determines that any such encumbrance or restriction will not
materially affect the Company's ability to make principal or interest payments
on the Notes. Nothing contained in this "Limitation on Dividend and Other
Payment Restrictions Affecting Restricted Subsidiaries" covenant shall prevent
the Company or any Restricted Subsidiary from
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creating, incurring, assuming or suffering to exist any Liens otherwise
permitted in the "Limitation on Liens" covenant that limit the right of the
debtor to dispose of the assets securing such Indebtedness.
LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES
The Company will not, and will not permit any Restricted Subsidiary,
directly or indirectly, to issue, transfer, convey, sell, lease or otherwise
dispose of any shares of Capital Stock (including options, warrants or other
rights to purchase shares of such Capital Stock) of such Restricted Subsidiary
or any other Restricted Subsidiary to any Person (other than (i) to the Company
or a Wholly Owned Restricted Subsidiary, (ii) issuances of director's qualifying
shares or sales to foreign nationals of shares of Capital Stock of foreign
Restricted Subsidiaries, in each case, to the extent required by applicable law
and (iii) Strategic Minority Capital Stock Issues), unless (A) immediately after
giving effect to such issuance, transfer, conveyance, sale, lease or other
disposition, such Restricted Subsidiary would no longer constitute a Restricted
Subsidiary and (B) any Investment in such Person remaining after giving effect
to such issuance, transfer, conveyance, sale, lease or other disposition would
have been permitted to be made under the "Limitation on Restricted Payments"
covenant if made on the date of such issuance, transfer, conveyance, sale, lease
or other disposition (valued as provided in the definition of "Investment").
LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into, renew or extend any transaction or series of
transactions (including, without limitation, the purchase, sale, lease or
exchange of property or assets, or the rendering of any service) with any direct
or indirect holder (or any Affiliate of such holder) of 5% or more of any class
of Capital Stock of the Company or with any Affiliate of the Company or any
Restricted Subsidiary, unless (i) such transaction or series of transactions is
on terms that are no less favorable to the Company or such Restricted Subsidiary
than could reasonably be obtained in a comparable arm's-length transaction with
a Person that is not such a holder or Affiliate, (ii) if such transaction or
series of transactions involves aggregate consideration in excess of $2.0
million, then the Company shall deliver to the Trustee a resolution set forth in
an Officers' Certificate adopted by a majority of the Board of Directors,
including a majority of the independent, disinterested directors, approving such
transaction or series of transactions and certifying that such transaction or
series of transactions comply with clause (i) above, and (iii) if such
transaction or series of transactions involves aggregate consideration in excess
of $5.0 million, then the Company will deliver to the Trustee a written opinion
as to the fairness to the Company or such Restricted Subsidiary of such
transaction or series of transactions from a financial point of view from an
internationally recognized investment banking firm (or, if an investment banking
firm is generally not qualified to give such an opinion, by an internationally
recognized appraisal firm or accounting firm).
The foregoing limitation does not limit and will not apply to (i) any
transaction between the Company and any of its Restricted Subsidiaries or
between Restricted Subsidiaries; (ii) the payment of reasonable and customary
regular fees to directors of the Company who are not employees of the Company;
and (iii) payment of dividends or other distributions in respect of Equity
Interests of the Company or any Restricted Subsidiary permitted by the
"Limitation on Restricted Payments" covenant.
LIMITATION ON LIENS
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, create, incur, assume or suffer to exist any Lien (other
than Permitted Liens) on any asset or property of the Company or any Restricted
Subsidiary without making effective provisions for all of the Notes and all
other amounts due under the Indenture to be directly secured equally and ratably
with (or, if the obligation or liability to be secured by such Lien is
subordinated in right of payment to the Notes, prior to) the obligation or
liability secured by such Lien.
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LIMITATION ON ASSET SALES
The Company will not, and will not permit any Restricted Subsidiary to,
make any Asset Sale unless (i) the Company or the 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 disposed of and (ii) at
least 80% of the consideration received for such Asset Sale consists of cash or
Cash Equivalents or Replacement Assets or the assumption of Indebtedness which
ranks pari passu in right of payment with the Notes.
The Company shall, or shall cause the relevant Restricted Subsidiary to,
apply the Net Cash Proceeds from an Asset Sale within 270 days of the receipt
thereof to (A) permanently repay unsubordinated Indebtedness of the Company or
Indebtedness of any Restricted Subsidiary, in each case owing to a Person other
than the Company or any of its Restricted Subsidiaries, (B) invest in
Replacement Assets, or (C) in any combination of repayment, prepayment, and
reinvestment permitted by the foregoing clauses (A) and (B).
The Indenture will provide that any Net Cash Proceeds from the Asset Sale
that are not invested as provided and within the time period set forth in the
second paragraph of this "Limitation on Asset Sales" covenant will be deemed to
constitute "Excess Proceeds." If at any time the aggregate amount of Excess
Proceeds exceeds $5.0 million, the Company shall, within 30 business days
thereafter, make an offer to all Holders of Notes (an "Asset Sale Offer") to
purchase on a pro rata basis the maximum principal amount of Notes, that is an
integral multiple of $1,000 that may be purchased out of the Excess Proceeds at
an offer price in cash in an amount equal to 100% of the outstanding principal
amount thereof, plus accrued and unpaid interest thereon, plus Additional
Amounts, if any, and Liquidated Damages, if any, to the date fixed for the
closing of such offer (and, in the case of Definitive Notes, subject to the
right of a Holder of record on the relevant record date to receive interest and
Liquidated Damages, if any, due on the relevant interest payment date and
Additional Amounts, if any, in respect thereof), in accordance with the
procedures set forth in the Indenture. The Company will commence an Asset Sale
Offer with respect to Excess Proceeds within thirty business days after the date
that Excess Proceeds exceeds $5.0 million by publishing or, where relevant,
mailing the notice required pursuant to the terms of the Indenture, with a copy
to the Trustee. To the extent that the aggregate amount of Notes tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, subject to
applicable law, the Company may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the selection of such
Notes for purchase will be made by the Trustee in the same manner as the Notes
are redeemed, as described under "-- Optional Redemption." Upon completion of
any such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder and will
comply with the applicable laws of any non-U.S. jurisdiction in which an Asset
Sale Offer is made, in each case, to the extent such laws or regulations are
applicable in connection with the repurchase of the Notes pursuant to an Asset
Sale Offer. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the Indenture, the Company will
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations described in the Indenture by virtue
thereof.
LIMITATION ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS BY RESTRICTED
SUBSIDIARIES
The Company will not permit any Restricted Subsidiary, directly or
indirectly, to guarantee, assume or in any other manner become liable with
respect to any Indebtedness of the Company unless (i) such Restricted Subsidiary
simultaneously executes and delivers a supplemental indenture to the Indenture
providing for a Guarantee of all of the Company's obligations under the Notes
and the Indenture on terms substantially similar to the guarantee of such
Indebtedness, except that if such Indebtedness is by its express terms
subordinated in right of payment to the Notes, any such assumption, Guarantee or
other liability of such Restricted Subsidiary with respect to such Indebtedness
shall be subordinated in right of payment to such Restricted Subsidiary's
assumption, Guarantee or other liability with respect to the Notes substantially
to the same extent as such Indebtedness is subordinated to the Notes 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,
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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 Guarantee; provided any Restricted Subsidiary may guarantee
Indebtedness of the Company under a Credit Facility if such Indebtedness is
Incurred in accordance with the "-- Limitation on Indebtedness" covenant.
Notwithstanding the foregoing, any Guarantee of all of the Company's
obligations under the Notes and the Indenture by a Restricted Subsidiary may
provide by its terms that it will 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 Company's and each Restricted
Subsidiary's Equity Interests in, or all or substantially all of the assets of,
such Restricted Subsidiary (which sale, exchange or transfer is not prohibited
by the Indenture) or (ii) the release or discharge of the guarantee which
resulted in the creation of such Guarantee, except a discharge or release by or
as a result of payment under such guarantee.
BUSINESS OF THE COMPANY; RESTRICTION ON TRANSFERS OF EXISTING BUSINESS
The Company will not, and will not permit any Restricted Subsidiary to, be
principally engaged in any business or activity other than a Permitted Business.
In addition, the Company and any Restricted Subsidiary will not be permitted to,
directly or indirectly, transfer to any Unrestricted Subsidiary (i) any of the
licenses, permits or authorizations used in the Permitted Business of the
Company and any Restricted Subsidiary or (ii) any material portion of the
"property and equipment" (as such term is used in the Company's consolidated
financial statements) of the Company or any Restricted Subsidiary used in the
licensed service areas of the Company and any Restricted Subsidiary.
PROVISION OF FINANCIAL STATEMENTS AND REPORTS
The Company will file on a timely basis with the Commission, to the extent
such filings are accepted by the Commission and whether or not the Company has a
class of securities registered under the Exchange Act, (i) all annual and
quarterly financial statements and other financial information that would be
required to be contained in a filing with the Commission on Forms 20-F and 10-Q
if the Company were required to file such Forms (which financial statements
shall be prepared in accordance with U.S. GAAP), including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual financial information, a report thereon by the
Company's certified independent accountants and (ii) all current reports that
would be required to be filed with the Commission on Form 8-K if the Company
were required to file such reports. Such quarterly financial information shall
be filed with the Commission within 45 days following the end of each fiscal
quarter of the Company, and such annual financial information shall be furnished
within 90 days following the end of each fiscal year of the Company. Such annual
financial information shall include the geographic segment financial information
required to be disclosed by the Company under Item 101(d) of Regulation S-K
under the Securities Act. The Company will also be required (a) to file with the
Trustee, and provide to each holder, without cost to such holder, copies of such
reports and documents within 15 days after the date on which the Company files
such reports and documents with the Commission or the date on which the Company
would be required to file such reports and documents if the Company were so
required, and (b) if filing such reports and documents with the Commission is
not accepted by the Commission or is prohibited under the Exchange Act, to
supply at the Company's cost copies of such reports and documents to any
prospective holder promptly upon request. In addition, for so long as the Notes
remain outstanding and the Company is not subject to the reporting requirements
of Section 13 or 15(d) of the Exchange Act nor exempt from reporting under Rule
12g3-2(b) of the Exchange Act, the Company shall furnish to the Holders and to
securities analysts and prospective investors, upon their request, any
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act and, to any beneficial holder of Notes, information of the type
that would be filed with the Commission pursuant to the foregoing provisions,
upon the request of any such holder, if and so long as the Notes are listed on
the Luxembourg Stock Exchange and the rules of such stock exchange shall
require, copies of all reports and information described above will be available
for inspection during normal business hours at the office of the listing agent
in the Luxembourg.
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REPURCHASE OF NOTES UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will make an offer
to purchase all or any part (equal to $1,000 aggregate principal amount and
integral multiples thereof) of the Notes pursuant to the offer described below
(the "Change of Control Offer") at a price in cash (the "Change of Control
Payment") equal to 101% of the aggregate principal amount thereof plus accrued
and unpaid interest thereon to the date of repurchase, plus Additional Amounts,
if any, and Liquidated Damages, if any, to the date of repurchase (and in the
case of Definitive Notes, subject to the right of Holders of record on the
relevant record date to receive interest and Liquidated Damages, if any, due on
the relevant interest payment date and Additional Amounts, if any, in respect
thereof). The Indenture provides that within 30 days following any Change of
Control, the Company will publish notice of such in a leading newspaper having a
general circulation in New York (which is expected to be the Wall Street
Journal) and in Amsterdam (which is expected to be Het Financieele Dagblad)
(and, if and so long as the Notes are listed on the Luxembourg Stock Exchange
and the rules of such Stock Exchange shall so require, a newspaper having a
general circulation in Luxembourg (which is expected to be the Luxemburger
Wort)) or, in the case of Definitive Notes, mail a notice to each Holder (and if
and so long as the Notes are listed on the Luxembourg Stock Exchange and the
rules of such Stock Exchange shall so require, will publish notice in a
newspaper having a general circulation in Luxembourg (which is expected to be
the Luxemburger Wort)), with a copy to the Trustee, with the following
information: (i) a Change of Control Offer is being made pursuant to the
covenant entitled "Repurchase of Notes upon a Change of Control" and all Notes
properly tendered pursuant to such Change of Control Offer will be accepted for
payment; (ii) the purchase price and the purchase date, which will be no earlier
than 30 days nor later than 60 days from the date such notice is published, or
where relevant, mailed, except as may be otherwise required by applicable law
(the "Change of Control Payment Date"); (iii) any Note not properly tendered
will remain outstanding and continue to accrue interest and Liquidated Damages,
if any; (iv) unless the Company defaults in the payment of the Change of Control
Payment, all Notes accepted for payment pursuant to the Change of Control Offer
will cease to accrue interest, as the case may be, and to accrue Liquidated
Damages, if any, on the Change of Control Payment Date; (v) Holders electing to
have any Notes purchased pursuant to a Change of Control Offer will be required
to surrender the Notes, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Notes completed, to the paying agent and at the
address specified in the notice prior to the close of business on the third
Business Day preceding the Change of Control Payment Date; (vi) Holders will be
entitled to withdraw their tendered Notes and their election to require the
Company to purchase such Notes; provided, however, that the Paying Agent
receives, not later than the close of business on the last day of the offer
period, a facsimile transmission or letter setting forth the name of the Holder,
the principal amount of Notes tendered for purchase, and a statement that such
Holder is withdrawing his tendered Notes and his election to have such Notes
purchased; and (vii) that Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased portion of
the principal amount of the Notes surrendered, which unpurchased portion must be
equal to $1,000 in principal amount or an integral multiple thereof.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder and will
comply with the applicable laws of any non-U.S. jurisdiction in which a Change
of Control Offer is made, in each case, to the extent such laws or regulations
are applicable in connection with the repurchase of the Notes pursuant to a
Change of Control Offer. To the extent that the provisions of any securities
laws or regulations conflict with the provisions of the Indenture, the Company
will comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations contained in the Indenture by virtue
thereof. The provisions relating to the Company's obligation to make an offer to
repurchase the Notes as a result of a Change of Control may be waived or
modified with the written consent of the Holders of a majority in principal
amount of the Notes.
The Indenture will provide that on the Change of Control Payment Date, the
Company will, to the extent permitted by law, (i) accept for payment all Notes
or portions thereof properly tendered pursuant to the Change of Control Offer,
(ii) deposit with the paying agent an amount equal to the aggregate Change of
Control Payment in respect of all Notes or portions thereof so tendered and
(iii) deliver, or cause to be delivered, to the Trustee for cancellation the
Notes so accepted together with an Officers' Certificate stating
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that such Notes or portions thereof have been tendered to and purchased by the
Company. The Indenture will provide that the paying agent will promptly either
(x) pay to the Holder against presentation and surrender (or, in the case of
partial payment, endorsement) of the Global Notes or (y) in the case of
Definitive Notes, mail to each Holder of Notes the Change of Control Payment for
such Notes, and the Trustee will promptly authenticate and deliver to the Holder
of the Global Notes a new Global Note or Notes or, in the case of Definitive
Notes, mail to each Holder a new Definitive Note, as applicable, equal in
principal amount to any unpurchased portion of the Notes surrendered, if any;
provided, however, that each new Definitive Note will be in a principal amount
of $1,000 or an integral multiple thereof. The Company will publicly announce
the results of the Change of Control Offer on or as soon as practicable after
the Change of Control Payment Date.
If the Company is unable to repay all of its Indebtedness that would
prohibit repurchase of the Notes or is unable to obtain the consents of the
holders of Indebtedness, if any, of the Company outstanding at the time of a
Change of Control whose consent would be so required to permit the repurchase of
Notes, then the Company will have breached such covenant. This breach will
constitute an Event of Default under the Indenture if it continues for a period
of 30 consecutive days after written notice is given to the Company by the
Trustee or the holders of at least 25% in aggregate principal amount of the
Notes outstanding. In addition, the failure by the Company to repurchase Notes
at the conclusion of the Change of Control Offer will constitute an Event of
Default without any waiting period or notice requirements.
There can be no assurances that the Company will have sufficient funds
available at the time of any Change of Control to make any debt payment
(including repurchases of Notes) required by the foregoing covenant (as well as
may be contained in other securities of the Company which might be outstanding
at the time). The above covenant requiring the Company to repurchase the Notes
will, unless the consents referred to above are obtained, require the Company to
repay all Indebtedness then outstanding which by its terms would prohibit such
Note repurchase, either prior to or concurrently with such Note repurchase.
The existence of a Holder's right to require the Company to repurchase such
Holder's Notes upon the occurrence of a Change of Control may deter a third
party from seeking to acquire the Company in a transaction that would constitute
a Change of Control.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company will not consolidate with, merge with or into, or sell, convey,
transfer, lease or otherwise dispose of all or substantially all of its property
and assets (as an entirety or substantially an entirety in one transaction or in
a series of related transactions) to, any Person or permit any Person to merge
with or into the Company and the Company will not permit any of its Restricted
Subsidiaries to enter into any such transaction or series of transactions if
such transaction or series of transactions, in the aggregate, would result in
the sale, assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the properties and assets of the Company or the Company and
its Restricted Subsidiaries, taken as a whole, to any other Person or Persons,
unless: (i) the Company will be the continuing Person, or the Person (if other
than the Company) (the "Surviving Entity") formed by such consolidation or into
which the Company is merged or that acquired or leased such property and assets
of the Company will be a corporation organized and validly existing under the
laws of The Netherlands, Germany, France, Belgium, the United Kingdom or the
United States of America, any state thereof or the District of Columbia and
shall expressly assume, by a supplemental indenture, executed and delivered to
the Trustee, all of the obligations of the Company with respect to the Notes and
under the Indenture, the Escrow Agreement and the Registration Rights Agreement;
(ii) immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; (iii) immediately after giving
effect to such transaction on a pro forma basis, the Company, or any Person
becoming the successor obligor of the Notes, shall have a Consolidated Net Worth
equal to or greater than the Consolidated Net Worth of the Company immediately
prior to such transaction; (iv) immediately after giving effect to such
transaction on a pro forma basis the Company, or any Person becoming the
successor obligor of the Notes, as the case may be, (A) prior to the third
anniversary of the Issue Date, would have an Indebtedness to Consolidated Cash
Flow Ratio no greater than such ratio immediately prior to such transaction or
(B) on or after the third anniversary of the Issue Date, could Incur at least
$1.00 of Indebtedness under the first paragraph of the "Limitation on
Indebtedness" covenant; (v) the
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Company delivers to the Trustee an Officers' Certificate (attaching the
arithmetic computations to demonstrate compliance with clauses (iii) and (iv))
and an Opinion of Counsel, in each case stating that such consolidation, merger
or transfer and such supplemental indenture complies with the Indenture and (vi)
the Company shall have delivered to the Trustee an opinion of tax counsel
reasonably acceptable to the Trustee stating that (A) Holders will not recognize
income, gain or loss for U.S. federal or Netherlands income tax purposes as a
result of such transaction and (B) no taxes on income (including taxable capital
gains) will be payable under the tax laws of the Relevant Taxing Jurisdiction by
a Holder who is or who is deemed to be a non-resident of the Relevant Taxing
Jurisdiction in respect of the acquisition, ownership or disposition of the
Notes, including the receipt of principal of, premium and interest paid pursuant
to such Notes.
EVENTS OF DEFAULT
The following constitute "Events of Default" under the Indenture: (a)
default for 30 days or more in the payment when due of interest on the Notes or
Additional Amounts, if any, or Liquidated Damages, if any, with respect to the
Notes; (b) default in the payment of principal of (or premium, if any, on) any
Note when the same becomes due and payable at maturity, upon acceleration,
redemption or otherwise; (c) default in the payment of principal or interest on
Notes required to be purchased pursuant to an Asset Sale Offer as described
under "Limitation on Asset Sales" or pursuant to a Change of Control Offer as
described under "Repurchase of Notes upon a Change of Control"; (d) failure to
perform or comply with the provisions described under "Consolidation, Merger and
Sale of Assets"; (e) default in the performance of or breach of any other
covenant or agreement of the Company in the Indenture or the Escrow Agreement or
under the Notes and such default or breach continues for a period of 30
consecutive days after written notice by the Trustee or the holders of 25% or
more in aggregate principal amount of the Notes; (f) a default occurs on any
other Indebtedness of the Company or any Restricted Subsidiary if either (x)
such default is a failure to pay principal of such Indebtedness when due after
any applicable grace period and the principal amount of such Indebtedness is in
excess of $5.0 million or (y) as a result of such default, the maturity of such
Indebtedness has been accelerated prior to its scheduled maturity and such
default has not been cured within the shorter of (i) 60 days and (ii) the
applicable grace period, and such acceleration has not been rescinded, and the
principal amount of such Indebtedness together with the principal amount of any
other Indebtedness of the Company and its Restricted Subsidiaries that is in
default as to principal, or the maturity of which has been accelerated,
aggregates $5.0 million or more; (g) failure to pay final judgments and orders
against the Company or any Restricted Subsidiary (not covered by insurance)
aggregating in excess of $5.0 million (treating any deductibles, self-insurance
or retention as not so covered), which final judgments remain unpaid,
undischarged and unstayed for a period in excess of 30 consecutive days
following entry of the final judgment or order that causes the aggregate amount
for all such final judgments or orders outstanding and not paid, discharged or
stayed to exceed $5.0 million; (h) a court having jurisdiction in the premises
enters a decree or order for (A) relief in respect of the Company or any of its
Significant Subsidiaries in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (B) appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Company or any of its Significant Subsidiaries or for all or
substantially all of the property and assets of the Company or any of its
Significant Subsidiaries or (C) the winding up or liquidation of the affairs of
the Company or any of its Significant Subsidiaries and, in each case, such
decree or order shall remain unstayed and in effect for a period of 30
consecutive days; (i) the Company or any of its Significant Subsidiaries (A)
commences a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case under any such law, (B) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or any of
its Significant Subsidiaries or for all or substantially all of the property and
assets of the Company or any of its Significant Subsidiaries or (C) effects any
general assignment for the benefit of creditors; or (j) the Company challenges
the Lien on the Escrow Collateral under the Escrow Agreement prior to such time
as the Escrow Collateral is to be released to the Company, or the Escrow
Collateral shall become subject to any Lien other than the Lien under the Escrow
Agreement.
If an Event of Default (other than an Event of Default specified in clauses
(h) or (i) above) occurs and is continuing under the Indenture, the Trustee or
the Holders of at least 25% in aggregate principal amount of
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the Notes, then outstanding, by written notice to the Company, may declare the
principal of, premium, if any, interest and other monetary obligations
(including Additional Amounts, if any, and Liquidated Damages, if any,) on all
the then outstanding Notes to be immediately due and payable. Upon such a
declaration, such principal of, premium, if any, interest and other monetary
obligations on the Notes shall be immediately due and payable. In the event of a
declaration of acceleration because an Event of Default set forth in clause (f)
above has occurred and is continuing, such declaration of acceleration shall be
automatically rescinded and annulled if the event of default triggering such
Event of Default pursuant to clause (f) shall be remedied or cured by the
Company and/or the relevant Restricted Subsidiaries or waived by the holders of
the relevant Indebtedness within 60 days after the declaration of acceleration
with respect thereto. If an Event of Default specified in clauses (h) or (i)
above occurs, the principal of, premium, if any, accrued interest and other
monetary obligations on the Notes then outstanding shall ipso facto become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any Holder. Holders of at least a majority in principal amount
of the outstanding Notes by written notice to the Company and to the Trustee,
may waive all past defaults and rescind and annul a declaration of acceleration
and its consequences if (i) all existing Events of Default, other than the
nonpayment of the principal of, premium, if any, interest and other monetary
obligations on the Notes that have become due solely by such declaration of
acceleration, have been cured or waived and (ii) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction. For
information as to the waiver of defaults, see "-- Amendment, Supplement and
Waiver".
Holders of Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Indenture will provide that the Trustee may
withhold from Holders of Notes notice of any continuing Default (except a
Default relating to the payment of principal, premium, if any, interest,
Additional Amounts, if any, or Liquidated Damages, if any) if it determines that
withholding notice is in their interest. The Indenture will further provide that
the Trustee shall have no obligation to accelerate the Notes if in the best
judgment of the Trustee acceleration is not in the best interest of the Holders.
The Indenture will require that the Company will deliver annually an
Officers' Certificate to the Trustee certifying that a review has been conducted
of the activities of the Company and the Company's performance under the
Indenture and that the Company has fulfilled all obligations thereunder or, if
there has been a default in the fulfillment of any such obligation, specifying
each such default and the nature and status thereof. The Company will also be
obligated to notify the Trustee of any default or defaults in the performance of
any covenants or agreements under the Indenture within five business days of
becoming aware of any such default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
shall have any liability for any obligations of the Company under the Notes or
the Indenture or for any claim based on, in respect of, or by reason of such
obligations or their creation. Each Holder of the Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver and release may not be
effective to waive liabilities under the U.S. federal securities laws, and it is
the view of the Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The obligations of the Company under the Indenture will terminate (other
than certain obligations) and will be released upon payment in full of all of
the Notes. The Company may, at its option and at any time, elect to have all of
its obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") and cure all then existing Events of Default except for (i) the
rights of holders of outstanding Notes to receive payments in respect of the
principal of, premium, if any, interest, Additional Amounts, if any, and
Liquidated Damages, if any, on such Notes when such payments are due or on the
redemption date solely out of the trust created pursuant to the Indenture, (ii)
the Company's obligations with respect to Notes concerning issuing temporary
Notes, or, where relevant, registration of such Notes, mutilated, destroyed,
lost or stolen Notes and
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the maintenance of an office or agency for payment and money for security
payments held in trust, (iii) the rights, powers, trusts, duties and immunities
of the Trustee, and the Company's obligations in connection therewith and (iv)
the Legal Defeasance provisions of the Indenture. In addition, the Company may,
at its option and at any time, elect to have the obligations of the Company
released with respect to certain covenants that are described in the Indenture
("Covenant Defeasance"), and thereafter any omission to comply with such
obligations shall not constitute a Default with respect to the Notes. In the
event Covenant Defeasance occurs, certain events (not including non-payment on
other indebtedness, bankruptcy, receivership, rehabilitation and insolvency
events) described under "Events of Default" will no longer constitute an Event
of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance with
respect to the Notes,
(i) the Company must irrevocably deposit, or cause to be irrevocably
deposited, with the Trustee, in trust, for the benefit of the Holders of the
Notes, cash in U.S. dollars, U.S. Government Securities or a combination thereof
and, in such amounts as will be sufficient, in the opinion of an internationally
recognized firm of independent public accountants, to pay the principal of,
premium, if any, interest, Additional Amounts, if any, and Liquidated Damages,
if any, due on the outstanding Notes on the stated maturity date or on the
applicable redemption date, as the case may be, of such principal, premium, if
any, interest, Additional Amounts, if any, and Liquidated Damages, if any, due
on the outstanding Notes;
(ii) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee (A) an opinion of counsel in the United States reasonably acceptable
to the Trustee confirming that, subject to customary assumptions and exclusions,
(1) the Company has received from, or there has been published by, the U.S.
Internal Revenue Service a ruling or (2) since the Issue Date, there has been a
change in the applicable U.S. federal income tax law, in either case to the
effect that, and based thereon such opinion of counsel in the United States
shall confirm that, subject to customary assumptions and exclusions, the Holders
of the outstanding Notes will not recognize income, gain or loss for U.S.
federal income tax purposes as a result of such Legal Defeasance and will be
subject to U.S. federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Legal Defeasance had not
occurred and (B) an opinion of counsel in The Netherlands reasonably acceptable
to the Trustee to the effect that (1) Holders will not recognize income, gain or
loss for Netherlands income tax purposes as a result of such Legal Defeasance
and will be subject to Netherlands income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred and (2) payments from the defeasance trust will be
free and exempt from any and all withholding and other income taxes of whatever
nature imposed or levied by or on behalf of The Netherlands or any political
subdivision thereof or therein having the power to tax;
(iii) in the case of Covenant Defeasance, the Company shall have delivered
to the Trustee (A) an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that, subject to customary assumptions and
exclusions, the Holders of the outstanding Notes will not recognize income, gain
or loss for U.S. federal income tax purposes as a result of such Covenant
Defeasance and will be subject to such tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred and (B) an opinion of counsel in The Netherlands
reasonably acceptable to the Trustee to the effect that (1) Holders will not
recognize income, gain or loss for Netherlands income tax purposes as a result
of such Covenant Defeasance and will be subject to Netherlands income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred and (2) payments from the
defeasance trust will be free and exempt from any and all withholding and other
income taxes of whatever nature imposed or levied by or on behalf of The
Netherlands or any political subdivision thereof or therein having the power to
tax;
(iv) no Default or Event of Default shall have occurred and be continuing
with respect to certain Events of Default on the date of such deposit;
(v) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under any material agreement or
instrument to which the Company is a party or by which the Company is bound;
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(vi) the Company shall have delivered to the Trustee an opinion of counsel
to the effect that, as of the date of such opinion and subject to customary
assumptions and exclusions following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally under any applicable
Netherlands and U.S. federal or state law, and that the Trustee has a perfected
security interest in such trust funds for the ratable benefit of the Holders;
(vii) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of defeating, hindering, delaying or defrauding any creditors of the Company or
others; and
(viii) the Company shall have delivered to the Trustee an Officers'
Certificate and an opinion of counsel in the United States (which opinion of
counsel may be subject to customary assumptions and exclusions) each stating
that all conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance, as the case may be, have been complied with.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect as
to all Notes issued thereunder when either (i) all such Notes theretofore
authenticated and delivered (except lost, stolen or destroyed Notes which have
been replaced or paid and Notes for whose payment money has theretofore been
deposited in trust and thereafter repaid to the Company) have been delivered to
the Trustee for cancellation; or (ii) (A) all such Notes not theretofore
delivered to such Trustee for cancellation have become due and payable by reason
of the making of a notice of redemption or otherwise or will become due and
payable within one year and the Company has irrevocably deposited or caused to
be deposited with such Trustee as trust funds in trust an amount of money
sufficient to pay and discharge the entire indebtedness on such Notes not
theretofore delivered to the Trustee for cancellation for principal, premium, if
any, and accrued and unpaid interest and Additional Amounts, if any, and
Liquidated Damages, if any, to the date of maturity or redemption; (B) no
Default with respect to the Indenture or the Notes shall have occurred and be
continuing on the date of such deposit or shall occur as a result of such
deposit and such deposit will not result in a breach or violation of, or
constitute a default under, any other instrument to which the Company is a party
or by which it is bound; (C) the Company has paid, or caused to be paid, all
sums payable by it under such Indenture; and (D) the Company has delivered
irrevocable instructions to the Trustee under such Indenture to apply the
deposited money toward the payment of such Notes at maturity or the redemption
date, as the case may be. In addition, the Company must deliver an Officers'
Certificate and an opinion of counsel to the Trustee stating that all conditions
precedent to satisfaction and discharge have been satisfied.
WITHHOLDING TAXES
All payments made by the Company on the Notes (whether or not in the form
of Definitive Notes) will be made without withholding or deduction for, or on
account of, any present or future taxes, duties, assessments or governmental
charges of whatever nature (collectively, "Taxes") imposed or levied by or on
behalf of The Netherlands or any jurisdiction in which the Company or any
Surviving Entity is organized or is otherwise resident for tax purposes or any
political subdivision thereof or any authority having power to tax therein or
any jurisdiction from or through which payment is made (each a "Relevant Taxing
Jurisdiction"), unless the withholding or deduction of such Taxes is then
required by law. If any deduction or withholding for, or on account of, any
Taxes of any Relevant Taxing Jurisdiction, shall at any time be required on any
payments made by the Company with respect to the Notes, including payments of
principal, redemption price, interest or premium, the Company will pay such
additional amounts (the "Additional Amounts") as may be necessary in order that
the net amounts received in respect of such payments by the Holders of the Notes
or the Trustee, as the case may be, after such withholding or deduction, equal
the respective amounts which would have been received in respect of such
payments in the absence of such withholding or deduction; except that no such
Additional Amounts will be payable with respect to:
(i) any payments on a Note held by or on behalf of a Holder or beneficial
owner who is liable for such Taxes in respect of such Note by reason of the
Holder or beneficial owner having some connection with the
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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 by the
mere holding of such Note or enforcement of rights thereunder or the receipt of
payments in respect thereof;
(ii) any Taxes that are imposed or withheld as a result of a change in law
after the Issue Date where such withholding or imposition is by reason of the
failure of the Holder or beneficial owner of the Note to comply with any request
by the Company to provide information concerning the nationality, residence or
identity of such Holder or beneficial owner or to make any declaration or
similar claim or satisfy any information or reporting requirement, which is
required or imposed by a statute, treaty, regulation or administrative practice
of the Relevant Taxing Jurisdiction as a precondition to exemption from all or
part of such Taxes;
(iii) except in the case of the winding up of the Company, any Note
presented for payment (where presentation is required) in the Relevant Taxing
Jurisdiction; or
(iv) any Note presented for payment (where presentation is required) more
than 30 days after the relevant payment is first made available for payment to
the Holder.
Such Additional Amounts will also not be payable where, had the beneficial
owner of the Note been the Holder of the Note, he would not have been entitled
to payment of Additional Amounts by reason of clauses (i) to (iv) inclusive
above.
Upon request, the Company will provide the Trustee with documentation
satisfactory to the Trustee evidencing the payment of Additional Amounts. Copies
of such documentation will be made available to the Holders upon request.
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, the
United States of America or any jurisdiction in which a Paying Agent is located,
other than 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.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture and
the Notes issued thereunder may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of Notes then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for the Notes), and any existing Default or Event of Default and its
consequences or compliance with any provision of the Indenture or the Notes may
be waived with the consent of the Holders of a majority in principal amount of
the outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for the Notes).
The Indenture will provide that without the consent of each Holder
affected, an amendment or waiver may not (with respect to any Notes held by a
nonconsenting Holder of the Notes): (i) reduce the principal amount of the Notes
whose Holders must consent to an amendment, supplement or waiver, (ii) reduce
the principal of or change the fixed maturity of any such Note or alter or waive
the provisions with respect to the redemption of the Notes with respect to the
timing or amount of payment thereof, (iii) reduce the rate of or change the time
for payment of interest on any Note, (iv) waive a Default in the payment of
principal of, premium, if any, interest, Additional Amounts, if any, or
Liquidated Damages, if any, on the Notes (except a rescission of acceleration of
the Notes by the Holders of at least a majority in aggregate principal amount of
either series of such Notes and a waiver of the payment default that resulted
from such acceleration with respect to such series of Notes), or in respect of a
covenant or provision contained in the Indenture which cannot be amended or
modified without the consent of all Holders, (v) make any Note payable in money
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other than that stated in such Notes, (vi) make any change in the provisions of
the Indenture relating to waivers of past Defaults or the rights of Holders of
such Notes to receive payments of principal, premium, if any, interest,
Additional Amounts, if any, or Liquidated Damages, if any, on such Notes, (vii)
make any change in the amendment and waiver provisions in the Indenture, (viii)
make any change in the provisions of the Indenture described under "--
Withholding Taxes" that adversely affects the rights of any Holder of the Notes,
(ix) amend the terms of the Notes or the Indenture in a way that would result in
the loss of an exemption from any of the Taxes described thereunder or an
exemption from any obligation to withhold or deduct Taxes as described
thereunder unless the Company agrees to pay Additional Amounts, if any, in
respect thereof, (x) modify the provisions of the Escrow Agreement or the
Indenture relating to the Escrow Collateral in any manner adverse to the Holders
or release the Escrow Collateral from the Lien under the Escrow Agreement or
permit any other obligation to be secured by the Escrow Collateral or (xi)
impair the right of any Holder of the Notes to receive payment of principal of,
interest, Liquidated Damages, if any, on such Holder's Notes on or after the due
dates therefor or to institute suit for the enforcement of any payment on or
with respect to such Holder's Notes.
The Indenture will provide that, notwithstanding the foregoing, without the
consent of any Holder of Notes, the Company and the Trustee together may amend
or supplement the Indenture or the Notes (i) to cure any ambiguity, omission,
defect or inconsistency, (ii) to provide for uncertificated Notes in addition to
or in place of certificated Notes, (iii) to comply with the covenant relating to
mergers, consolidations and sales of assets, (iv) to provide for the assumption
of the Company's obligations to Holders of such Notes, (v) to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, (vi) to add covenants for the benefit of the Holders or to
surrender any right or power conferred upon the Company, (vii) to comply with
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act, (viii) to provide for the
issuance of the Exchange Notes or (ix) to execute and deliver any documents
necessary or appropriate to release Liens or any Escrow Collateral as permitted
by the Escrow Agreement.
The consent of the Holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
NOTICES
Notices regarding the Notes will be (i) published in a leading newspaper
having a general circulation in New York (which is expected to be The Wall
Street Journal) and in Amsterdam (which is expected to be Het Financieele
Dagblad) and, if and so long as the Notes are listed on the Luxembourg Stock
Exchange and the rules of such Stock Exchange shall so require, a newspaper
having a general circulation in Luxembourg (which is expected to be the
Luxemburger Wort)) or (ii) in the case of Definitive Notes, mailed to Holders by
first-class mail at their respective addresses as they appear on the
registration books of the Registrar (and, if and so long as the Notes are listed
on the Luxembourg Stock Exchange and the rules of such Stock Exchange shall so
require, published in a newspaper having a general circulation in Luxembourg
(which is expected to be the Luxemburger Wort)). Notices given by publication
will be deemed given on the first date on which publication is made and notices
given by first-class mail, postage prepaid, will be deemed given five calendar
days after mailing.
CONCERNING THE TRUSTEE
The Indenture will contain certain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain payment of claims
in certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other transactions; provided, however, if it acquires any conflicting interest
it must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
The Indenture will provide that the Holders of a majority in principal
amount of the outstanding Notes issued thereunder will have the right to direct
the time, method and place of conducting any proceeding for
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exercising any remedy available to the Trustee, subject to certain exceptions.
The Indenture will provide that in case an Event of Default shall occur (which
shall not be cured), the Trustee will be required, in the exercise of its power,
to use the degree of care of a prudent person in the conduct of his own affairs.
Subject to such provisions, the Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request of any Holder of
such Notes, unless such Holder shall have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense.
GOVERNING LAW
The Indenture and the Notes will be, subject to certain exceptions,
governed by and construed in accordance with the internal laws of the State of
New York.
ENFORCEABILITY OF JUDGMENTS
Since most of the operating assets of the Company and its Subsidiaries are
outside the United States, any judgment obtained in the United States against
the Company or a Subsidiary, including judgments with respect to the payment of
principal, premium, if any, interest, Additional Amounts, if any, Liquidated
Damages, if any, redemption price and any purchase price with respect to the
Notes, may not be collectible within the United States.
The Company has been informed by its Netherlands counsel, Stibbe Simont
Monahan Duhot, that in such counsel's opinion the laws of The Netherlands
applicable therein permit an action to be brought in a court of competent
jurisdiction in The Netherlands on a judgment of a United States federal court
or a court of the State of New York sitting in the borough of Manhattan in the
City of New York respecting the enforcement of the Notes and the Indenture;
subject to certain exceptions the principal of which may be summarized as
follows: 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 or relitigation on 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.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
terms as well as any other capitalized term used herein for which no definition
is provided. For purposes of the Indenture, unless otherwise specifically
indicated, the term "consolidated" with respect to any Person refers to such
Person consolidated with its Restricted Subsidiaries, and excludes from such
consolidation any Unrestricted Subsidiary as if such Unrestricted Subsidiary
were not an Affiliate of such Person. For purposes of the following definitions
and the Indenture generally, all calculations and determinations shall be made
in accordance with U.S. GAAP and shall be based upon the consolidated financial
statements of the Company and its subsidiaries prepared in accordance with U.S.
GAAP.
"Acquired Indebtedness" is defined to mean 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 or assumed in
connection with an Asset Acquisition by the Company or a Restricted Subsidiary
and not incurred in connection with, or in anticipation of, such Person becoming
a Restricted Subsidiary, such merger or consolidation or such Asset Acquisition;
provided that Indebtedness of such Person which is redeemed, defeased, retired
or otherwise repaid at the time of or immediately upon the consummation of the
transactions by which such Person becomes a Restricted Subsidiary or is merged
or consolidated with or into the Company or any Restricted Subsidiary or such
Asset Acquisition shall not be Indebtedness.
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"Affiliate" is defined to mean, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, is defined to mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Asset Acquisition" is defined to mean (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) an acquisition by the Company or any of its
Restricted Subsidiaries of the property and assets of any Person (other than the
Company or any of its Restricted Subsidiaries) that constitute substantially all
of an operating unit or line of business of such Person or which is otherwise
outside the ordinary course of business.
"Asset Disposition" is defined to mean the sale or other disposition by the
Company or any of its Restricted Subsidiaries (other than to the Company or
another Restricted Subsidiary of the Company) of (i) all or substantially all of
the Equity Interests in any Restricted Subsidiary of the Company or (ii) all or
substantially all of the assets that constitute an operating unit or line of
business of the Company or any of its Restricted Subsidiaries or which is
otherwise outside the ordinary course of business.
"Asset Sale" is defined to mean any sale, transfer or other disposition
(including by way of merger, consolidation or sale-leaseback transactions) in
one transaction or a series of related transactions by the Company or any of its
Restricted Subsidiaries to any Person (other than the Company or any of its
Restricted Subsidiaries) of (i) all or any of the Equity Interests in any
Subsidiary, (ii) all or substantially all of the property and assets of an
operating unit or line of business of the Company or any of its Restricted
Subsidiaries or (iii) any other property and assets of the Company or any of its
Restricted Subsidiaries outside 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 "-- Consolidation, Merger and Sale of Assets" and the creation of any Lien
not prohibited by "-- Certain Covenants -- Limitation on Liens"; provided,
however, that any transaction consummated in compliance with such "--
Consolidation, Merger and Sale of Assets" description involving a sale,
conveyance, assignment, transfer, lease or other disposal of less than all of
the properties or assets of the Company and the Restricted Subsidiaries shall be
deemed to be an Asset Sale with respect to the properties or assets of the
Company and Restricted Subsidiaries that are not so sold, conveyed, assigned,
transferred, leased or otherwise disposed of in such transaction; (b) sales of
property or equipment that has become worn out, obsolete or damaged or otherwise
unsuitable for use in connection with the business of the Company or any
Restricted Subsidiary, as the case may be; and (c) any transaction consummated
in compliance with "-- Certain Covenants -- Limitation on Restricted Payments."
In addition, solely for purposes of "-- Certain Covenants -- Limitation on Asset
Sales," any sale, conveyance, transfer, lease or other disposition of any
property or asset, whether in one transaction or a series of related
transactions, involving assets with a Fair Market Value not in excess of $1.0
million in any fiscal year shall be deemed not to be an "Asset Sale."
"Board of Directors" is defined to mean the Supervisory Board of the
Company.
"Board Resolution" is defined to mean a duly authorized resolution of the
Board of Directors.
"Capital Stock" is defined to mean, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) in equity of such Person, including, without
limitation, if such Person is a partnership, partnership interests (whether
general or limited) and any other interest or participation that confers on a
Person the right to receive a share of the profits and losses of, or
distributions of assets of, such partnership.
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"Capitalized Lease" is defined to mean, as applied to any Person, any lease
of any property (whether real, personal or mixed) of which the discounted
present value of the rental obligations of such Person as lessee, in conformity
with U.S. GAAP, is required to be capitalized and reflected as a liability on
the balance sheet of such Person; and "Capitalized Lease Obligation" is defined
to mean, at the time any determination thereof is to be made, the discounted
present value of the rental obligations under such lease.
"Cash Equivalents" is defined to mean, (a) securities issued or directly
and fully guaranteed or insured by the U.S. government or any agency or
instrumentality thereof having maturities of not more than 360 days from the
date of acquisition; (b) certificates of deposit and eurodollar time deposits
with maturities of 360 days or less from the date of acquisition, bankers'
acceptances with maturities not exceeding 360 days and overnight bank deposits,
in each case with any commercial bank having capital and surplus in excess of
$500 million; provided, however, that securities deposited in the Escrow Account
may have a Stated Maturity as late as May 15, 2001; (c) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clauses (a) and (b) entered into with any financial institution
meeting the qualifications specified in clause (b) above; (d) commercial paper
rated P-1, A-1 or the equivalent thereof by Moody's Investors Service, Inc. or
Standard & Poor's Ratings Group, respectively, and in each case maturing within
six months after the date of acquisition; (e) marketable direct obligations of
the United Kingdom, The Netherlands, Belgium, Germany or France or obligations
fully and unconditionally guaranteed by such sovereign nation (or any agency
thereof), of the type and maturity described in clauses (a) through (d) above of
foreign obligors, which have ratings described in such clauses or equivalent
ratings from comparable foreign rating agencies; and (f) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (a) through (e) above.
"Change of Control" is defined to mean such time as (i) a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
(other than a Permitted Holder) becomes the ultimate "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of more than 50% of the total
voting power of the then outstanding Voting Stock of the Company on a fully
diluted basis; (ii) individuals who at the beginning of any period of two
consecutive calendar years constituted the Board of Directors (together with any
directors who are members of the Board of Directors on the date hereof and any
new directors whose election by the Board of Directors or whose nomination for
election by the Company's stockholders was approved by a vote of at least two
thirds of the members of the Board of Directors then still in office who either
were members of the Board of 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 members of such Board of Directors then
in office; (iii) the sale, lease, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company to any
such "person" or "group" (other than to a Restricted Subsidiary); or (iv) the
merger or consolidation of the Company with or into another corporation or the
merger of another corporation with or into the Company with the effect that
immediately after such transaction any such "person" or "group" of persons or
entities shall have become the beneficial owner of securities of the surviving
corporation of such merger or consolidation representing a majority of the total
voting power of the then outstanding Voting Stock of the surviving corporation;
"Consolidated Cash Flow" is defined to mean with respect to any Person for
any period, the (i) Consolidated Net Income of such Person for such period plus,
to the extent deducted in computing such Consolidated Net Income (and without
duplication) Consolidated Fixed Charges, (ii) any provision for taxes (other
than taxes (either positive or negative) attributable to extraordinary and non
recurring gains or losses or sales of assets), (iii) any amount attributable to
depreciation and amortization expense and (iv) all other non-cash items reducing
Consolidated Net Income (excluding any non-cash charge to the extent that it
requires or represents an accrual of, or reserve for, cash charges in any future
period), less all non-cash items increasing Consolidated Net Income (excluding
any items which represent the reversal of an accrual of, or reserve for,
anticipated cash charges at any prior period), all as determined on a
consolidated basis for such Person and its Restricted Subsidiaries in accordance
with U.S. GAAP; provided, however, that there shall be excluded therefrom the
Consolidated Cash Flow of (if positive) of any Restricted Subsidiary (calculated
separately for such Restricted Subsidiary in the same manner as provided above)
that is subject to a restriction
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which prevents the payment of dividends or the making of distributions to the
Company or another Restricted Subsidiary to the extent of such restriction.
"Consolidated Fixed Charges" is defined to mean, with respect to any Person
for any period, Consolidated Interest Expense plus dividends declared and
payable on Preferred Stock.
"Consolidated Interest Expense" is defined to mean with respect to any
Person for any period, the aggregate amount of interest in respect of
Indebtedness (including capitalized interest, amortization of original issue
discount on any Indebtedness and the interest portion of any deferred payment
obligation) calculated in accordance with U.S. GAAP; all commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financing; the net costs associated with Interest Rate Agreements;
and interest on Indebtedness that is Guaranteed or secured by such Person or any
of its Restricted Subsidiaries), less the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid
or to be accrued by such Person and its Restricted Subsidiaries during such
period; excluding, however, any amount of such interest of any Restricted
Subsidiary to the extent the net income of such Restricted Subsidiary is
excluded in the calculation of Consolidated Net Income pursuant to the last
proviso of such definition.
"Consolidated Net Income" is defined to mean with respect to any Person for
any period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period determined on a consolidated basis and in
conformity with U.S. GAAP; provided that the following items shall be excluded
in computing Consolidated Net Income (without duplication): (i) the net income
(or loss) of any Restricted Subsidiary accrued prior to the date it becomes a
Restricted Subsidiary or is merged into or consolidated with such Person or any
of its Restricted Subsidiaries or all or substantially all of the property and
assets of such Restricted Subsidiary are acquired by such Person or any of its
Restricted Subsidiaries; (ii) any gains or losses (on an after-tax basis) but
not losses attributable to Asset Sales; (iii) all extraordinary gains and gains
from Currency Agreements or Interest Rate Agreements and gains from the
extinguishment of debt; (iv) the net income (or loss) of any other Person (other
than net income (or loss) attributable to a Restricted Subsidiary) in which such
other Person (other than such Person or any of its Restricted Subsidiaries) has
a joint interest, except to the extent of the amount of dividends or other
distributions actually paid to such Person or any of its Restricted Subsidiaries
by such other Person during such period; (v) net gains attributable to write-ups
of assets or write-downs of liabilities (determined after taking into account
losses attributable to write-downs of assets or write-ups of liabilities up to
but not in excess of such gains); and (vi) the cumulative effect of a change in
accounting principles after the Issue Date; and provided, further, that there
shall be further excluded therefrom the net income (but not the net loss) of any
Restricted Subsidiary (calculated separately for such Restricted Subsidiary in
the same manner as provided above) that is subject to a restriction which
prevents the payment of dividends or the making of distributions to the Company
or another Restricted Subsidiary to the extent of such restriction.
"Consolidated Net Worth" is defined to mean, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly or
annual consolidated balance sheet of such Person and its Restricted Subsidiaries
(which shall be as of a date not more than 90 days prior to the date of
determination), less any amounts attributable to Redeemable Stock or any equity
security convertible into or exchangeable for Indebtedness, the cost of treasury
stock and the principal amount of any promissory notes receivable from the sale
of Equity Interests in the Company or any of its Restricted Subsidiaries, each
item to be determined in conformity with U.S. GAAP (excluding the effects of
foreign currency exchange adjustments under Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 52).
"Credit Facilities" is defined to mean one or more senior credit
agreements, senior loan agreements or similar senior facilities with banks or
other institutional lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.
"Cumulative Consolidated Cash Flow" is defined to mean, for the period
beginning on the Issue Date through and including the end of the last fiscal
quarter (taken as one accounting period) preceding the date of
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any proposed Restricted Payment, Consolidated Cash Flow of the Company and its
Restricted Subsidiaries for such period determined on a consolidated basis in
accordance with U.S. GAAP.
"Cumulative Consolidated Fixed Charges" is defined to mean, for the period
beginning on the Issue Date through and including the end of the last fiscal
quarter (taken as one accounting period) preceding the date of any proposed
Restricted Payment, Consolidated Fixed Charges of the Company and its Restricted
Subsidiaries for such period determined on a consolidated basis in accordance
with U.S. GAAP.
"Currency Agreement" is defined to mean any foreign exchange contract,
currency swap agreement and any other arrangement or agreement designed to
provide protection against fluctuations in currency values.
"Default" is defined to mean any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Eligible Accounts Receivable" is defined to mean the accounts receivables
(net of any reserves and allowances for doubtful accounts in accordance with
U.S. GAAP) of any Person that are not more than 60 days past their due date and
that were entered into in the ordinary course of business on normal payment
terms as shown on the most recent consolidated balance sheet of such Person
filed with the Commission, all in accordance with U.S. GAAP.
"Equity Interests" is defined to mean Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"Escrow Account" is defined to mean the account established by the Escrow
Agent pursuant to the terms of the Escrow Agreement for the deposit of the U.S.
Government Securities purchased by, or purchased at the direction of, the
Company with a portion of the net proceeds from the Offering.
"Escrow Agent" is defined to mean United States Trust Company of New York,
as escrow agent under the Escrow Agreement.
"Escrow Agreement" is defined to mean the Escrow Agreement, dated as of the
date of the Indenture, among the Escrow Agent, the Trustee and the Company,
governing the disbursement of funds from the Escrow Account.
"Escrow Collateral" is defined to mean all funds and securities in the
Escrow Account and the proceeds thereof.
"Fair Market Value" is defined to mean, with respect to any asset or
property, 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 acting in good faith, which determination
shall be evidenced by a resolution of such Board delivered to the Trustee.
"Guarantee" is defined to mean any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness or other
obligation in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof) of any other Person; provided that
the term "Guarantee" shall not include endorsements for collection or deposit in
the ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Incur" is defined to mean, with respect to any Indebtedness, to incur,
create, issue, assume, Guarantee or otherwise become liable for or with respect
to, or become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including an Incurrence of Indebtedness by reason of the
acquisition of more than 50% of the Equity Interests in any Person; provided
that neither the accrual of interest shall be considered an Incurrence of
Indebtedness.
"Indebtedness" is defined to mean, with respect to any Person at any date
of determination (without duplication), (i) all indebtedness of such Person,
whether or not contingent (A) in respect of borrowed money, (B) evidenced by
bonds, debentures, notes or other similar instruments or letters of credit or
other
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similar instruments (including reimbursement obligations with respect thereto),
(C) representing the balance deferred and unpaid of the purchase price of
property or services, which purchase price is due more than six months after the
date of placing such property in service or taking delivery and title thereto or
the completion of such services, except Trade Payables, (D) representing
Capitalized Lease Obligations, (ii) all Indebtedness of other Persons secured by
a Lien on any asset of such Person, whether or not such Indebtedness is assumed
by such Person; provided that the amount of such Indebtedness shall be the
lesser of (A) the fair market value of such asset at such date of determination
and (B) the amount of such Indebtedness, (iii) all Indebtedness of other Persons
Guaranteed by such Person to the extent such Indebtedness is Guaranteed by such
Person, (iv) the maximum fixed redemption or repurchase price of Redeemable
Stock of such Person at the time of determination and (v) to the extent not
otherwise included in this definition, obligations under Currency Agreements and
Interest Rate Agreements. The amount of Indebtedness of any Person at any date
shall be the outstanding balance at such date of all unconditional obligations
as described above and, with respect to contingent obligations, the maximum
liability upon the occurrence of the contingency giving rise to the obligation;
provided (x) that the amount outstanding at any time of any Indebtedness issued
with original issue discount is the face amount of such Indebtedness less the
remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in conformity with U.S. GAAP and (y)
that Indebtedness shall not include any liability for federal, state, local or
other taxes.
"Interest Rate Agreement" is defined to mean any interest rate swap
agreement, interest rate cap agreement, interest rate insurance, and any other
arrangement or agreement designed to provide protection against fluctuations in
interest rates.
"Investment" in any Person is defined to mean any direct or indirect
advance, loan or other extension of credit (including, without limitation, by
way of Guarantee or similar arrangement; but excluding advances to customers in
the ordinary course of business that are, in conformity with U.S. GAAP, recorded
as accounts receivable on the balance sheet of such Person or its Restricted
Subsidiaries) or capital contribution to (by means of any transfer of cash or
other tangible or intangible property to others or any payment for any property
or services for the account or use of others), or any purchase or acquisition of
Equity Interests, bonds, notes, debentures, or other similar instruments issued
by, any other Person. For purposes of the definition of "Unrestricted
Subsidiary," the "Limitation on Restricted Payments" covenant and the
"Limitation on Issuance and Sale of Capital Stock of Restricted Subsidiaries"
covenant described above, (i) "Investment" shall include (a) the Fair Market
Value of the assets (net of liabilities) of any Restricted Subsidiary of the
Company at the time that such Restricted Subsidiary of the Company is designated
an Unrestricted Subsidiary and shall exclude the Fair Market Value of the assets
(net of liabilities) of any Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Restricted Subsidiary of the Company and
(b) the Fair Market Value, in the case of a sale of Equity Interests in
accordance with the "Limitation on the Issuance and Sale of Capital Stock of
Restricted Subsidiaries" covenant such that a Person no longer constitutes a
Restricted Subsidiary, of the remaining assets (net of liabilities) of such
Person after such sale, and shall exclude the fair market value of the assets
(net of liabilities) of any Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Restricted Subsidiary of the Company and
(ii) any property transferred to or from an Unrestricted Subsidiary shall be
valued at its Fair Market Value at the time of such transfer.
"Issue Date" is defined to mean the date on which the Notes were originally
issued under the Indenture.
"Lien" is defined to mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind in respect of an asset, whether or not
filed, recorded or otherwise perfected under applicable law (including, without
limitation, any conditional sale or other title retention agreement or lease in
the nature thereof, any sale with recourse against the seller or any Affiliate
of the seller, or any option or other agreement to sell or give any security
interest).
"Most Recent Balance Sheet" is defined to mean, with respect to any Person,
the most recent consolidated balance sheet of such Person reported on by a
recognized firm of independent accountants without qualification as to scope.
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"Net Cash Proceeds" is defined to mean, (a) with respect to any Asset Sale,
the proceeds of such Asset Sale in the form of cash or Cash Equivalents,
including payments in respect of deferred payment obligations (to the extend
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or Cash Equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary of the Company) and proceeds from the conversion of other property
received when converted to cash or Cash Equivalents, net of (i) brokerage
commissions and other fees and expenses (including fees and expenses of counsel
and investment bankers) related to such Asset Sale, (ii) taxes paid or payable
as a result thereof (after taking into account any available tax credits or
deductions and any tax sharing agreements), (iii) payments made to repay
Indebtedness or any other obligation outstanding at the time of such Asset Sale
that either (A) is secured by a Lien on the property or assets sold or (B) is
required to be paid as a result of such sale and (iv) appropriate amounts to be
provided by the Company or any Restricted Subsidiary of the Company as a reserve
against any liabilities associated with such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as determined in conformity
with U.S. GAAP; provided that such amounts which cease to be held as reserves
shall be deemed Net Cash Proceeds; and (b) with respect to any capital
contribution or any issuance or sale of Equity Interests (other than Redeemable
Stock), the proceeds of such capital contribution, issuance or sale in the form
of cash or Cash Equivalents, including payments in respect of deferred payment
obligations (to the extent corresponding to the principal, but not interest,
component thereof) when received in the form of cash or Cash Equivalents (except
to the extent (1) such obligations are financed, directly or indirectly, with
money borrowed from the Company or any Restricted Subsidiary or otherwise
financed or sold with recourse to the Company or any Restricted Subsidiary or
(2) the capital contribution or purchase of the Equity Interests is otherwise
financed, directly or indirectly, by the Company or any Restricted Subsidiary,
including through funds contributed, extended, guaranteed or otherwise advanced
by the Company or any Affiliate) and proceeds from the conversion of other
property received when converted to cash or Cash Equivalents, net of attorney's
fees, accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees incurred in connection with
such issuance or sale and net of taxes paid or payable as a result thereof.
"Officers' Certificate" is defined to mean a certificate signed on behalf
of the Company by two officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company that meets the requirements set
forth in the Indenture.
"Permitted Business" is defined to mean the business of (i) transmitting,
or providing services relating to the transmission of, voice, video or data
through owned or leased transmission facilities, (ii) constructing, creating,
developing or marketing communications related network equipment, software and
other devices for use in a telecommunications business or (iii) evaluating,
participating or pursuing any other activity or opportunity that is primarily
related to those identified in clause (i) or (ii) above.
"Permitted Holder" is defined to collectively mean Telecom Founders B.V.,
NeSBIC Venture Fund C.V., Cromwilld Limited, Paribas Deelnemingen N.V.,
Nederlandse Participatie Maatschappij N.V. and any Affiliate of the foregoing
Persons.
"Permitted Investment" is defined to mean (i) an Investment in a Restricted
Subsidiary or a Person which will, upon the making of such Investment, become a
Restricted Subsidiary or be merged or consolidated with or into or transfer or
convey all or substantially all its assets to, the Company or a Restricted
Subsidiary; (ii) payroll, travel and similar advances to cover matters that are
expected at the time of such advance ultimately to be treated as expenses in
accordance with U.S. GAAP; (iii) stock, obligations or securities received in
satisfaction of judgments; (iv) Investments in any Person (the primary business
of which is related, ancillary or complementary to the business of the Company
on the date of such Investment) at any one time outstanding (measured on the
date each such Investment was made without giving effect to subsequent changes
in value) in an aggregate amount not to exceed the greater of (x) $10.0 million
and (y) 5.0% of the Company's total consolidated assets as of the end of the
most recently completed fiscal quarter; (v) Investments in Cash Equivalents;
(vi) Investments made as a result of the receipt of noncash consideration from
any Asset Sale made in compliance with the "Limitation on Asset Sales" covenant;
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(vii) Investments made in the ordinary course of the telecommunications business
in the Permitted Business and on ordinary business terms in the Permitted
Business in consortia formed to construct transmission infrastructure for use
primarily in the Permitted Business, provided such Investment entitles the
Company to rights of way or rights of use on such transmission infrastructure;
(viii) Investments made in the ordinary course of the telecommunications
business and on ordinary business terms as partial payment for constructing a
network relating principally to the Permitted Business; and (ix) any Investment
in Pledged Securities.
"Permitted Liens" is defined to mean (i) Liens for taxes, assessments,
governmental charges or claims that are being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
for which a reserve or other appropriate provision, if any, as shall be required
in conformity with U.S. GAAP shall have been made; (ii) statutory Liens of
landlords and carriers, warehousemen, mechanics, suppliers, materialmen,
repairmen or other similar Liens arising in the ordinary course of business and
with respect to amounts not yet delinquent or being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
for which a reserve or other appropriate provision, if any, as shall be required
in conformity with U.S. GAAP shall have been made; (iii) Liens incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security; (iv)
easements, rights-of-way, municipal and zoning ordinances and similar charges,
encumbrances, title defects or other irregularities that do not materially
interfere with the ordinary course of business of the Company or any of its
Restricted Subsidiaries; (v) Liens (including extensions and renewals thereof)
upon real or personal property of a Restricted Subsidiary purchased or leased
after the Issue Date; provided that (a) such Lien is created solely for the
purpose of securing Indebtedness Incurred by such Restricted Subsidiary in
compliance with the "Limitation on Indebtedness" covenant (1) to finance the
cost of the item of property or assets subject thereto and such Lien is created
prior to, at the time of or within six months after the later of the acquisition
and the Incurrence of such Indebtedness or (2) to refinance any Indebtedness of
a Restricted Subsidiary previously so secured, (b) the principal amount of the
Indebtedness secured by such Lien does not exceed 100% of such cost and (c) any
such Lien shall not extend to or cover any property or assets other than such
item of property or assets; (vi) any interest or title of a lessor in the
property subject to any Capitalized Lease or operating lease of a Restricted
Subsidiary which, in each case, is permitted under the Indenture; (vii) Liens on
property of, or on Equity Interests in or Indebtedness of, any Person existing
at the time such Person becomes, or becomes a part of, any Restricted
Subsidiary; provided that such Liens were not created, incurred or assumed in
contemplation of such transaction and do not extend to or cover any property or
assets of the Company or any Restricted Subsidiary other than the property or
assets so acquired; (viii) Liens arising from the rendering of a final judgment
or order against the Company or any Restricted Subsidiary of the Company that
does not give rise to an Event of Default; (ix) Liens encumbering customary
initial deposits and margin deposits and other Liens that are either within the
general parameters customary in the industry or incurred in the ordinary course
of business, in each case, securing Indebtedness under Interest Rate Agreements
and Currency Agreements; (x) Liens arising out of conditional sale, title
retention, consignment or similar arrangements for the sale of goods entered
into by the Company or any of its Restricted Subsidiaries in the ordinary course
of business in accordance with the past practices of the Company and its
Restricted Subsidiaries prior to the Issue Date; (xi) Liens existing on the
Issue Date or securing the Notes or any Guarantee of the Notes; (xii) Liens
granted after the Issue Date on any assets or Equity Interests in the Company or
its Restricted Subsidiaries created in favor of the Holders; (xiii) Liens
created in connection with the incurrence of any Indebtedness permitted to be
Incurred under clause (iii) of paragraph (b) of the "Limitation on Indebtedness"
covenant; provided that the Indebtedness which it refinances is secured by
similar Liens; (xiv) Liens securing Indebtedness under Credit Facilities
incurred in compliance with clause (viii) of paragraph (b) of the "Limitation on
Indebtedness" covenant; and (xv) Liens with respect to the Escrow Account
arising under the Escrow Agreement.
"Pledged Securities" is defined to mean the U.S. Government Securities
purchased by the Company with a portion of the net proceeds from the Offering
and deposited in the Escrow Account.
"Preferred Stock" is defined to mean, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) which is preferred as to
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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.
"Pro forma Consolidated Cash Flow" is defined to mean with respect to any
Person for any period, the Consolidated Cash Flow of such Person for such period
calculated on a pro forma basis to give effect to any Asset Disposition or Asset
Acquisition (including acquisitions of other Persons by merger, consolidation or
purchase of Equity Interests) during such period as if such Asset Disposition or
Asset Acquisition had taken place on the first day of such period and income (or
losses) ceased to accrue or accrued, as the case may be, therefrom from such
date.
"Public Equity Offering" is defined to mean an underwritten primary public
offering of Ordinary Shares of the Company pursuant to an effective registration
statement under the Securities Act.
"Redeemable Stock" is defined to mean, with respect to any Person, any
Capital Stock which by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable) or upon the happening of any
event (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Redeemable Stock or (iii) is redeemable or must be purchased, upon the
occurrence of certain events or otherwise, by such Person at the option of the
holder thereof, in whole or in part, in each case on or prior to the first
anniversary of the Stated Maturity of the Notes; provided, however, that any
Capital Stock that would not constitute Redeemable Stock but for provisions
thereof giving holders thereof the right to require such Person to purchase or
redeem such Capital Stock upon the occurrence of an "asset sale" or "change of
control" occurring prior to the first anniversary of the Stated Maturity of the
Notes shall not constitute Redeemable Stock if (x) the "asset sale" or "change
of control" provisions applicable to such Capital Stock are not more favorable
to the holders of such Capital Stock than the terms applicable to the Notes and
described under "-- Certain Covenants -- Limitation on Asset Sales" and "--
Repurchase of Notes upon a Change of Control" and (y) any such requirement only
becomes operative after compliance with such terms applicable to the Notes
including the purchase of any Notes tendered pursuant thereto.
"Replacement Assets" is defined to mean any property, plant or equipment of
a nature or type that are used or usable in Permitted Businesses.
"Restricted Subsidiary" is defined to mean, at any time, any direct or
indirect Subsidiary of the Company that is then not an Unrestricted Subsidiary.
"Share Capital" is defined to mean, at any time of determination, the
stated capital of the Equity Interests (other than Redeemable Stock) and
additional paid-in capital of the Company as set forth on the Most Recent
Balance Sheet of the Company at such time.
"Stated Maturity" is defined to mean, (i) with respect to any debt
security, the date specified in such debt security as the fixed date on which
the final installment of principal of such debt security is due and payable and
(ii) with respect to any scheduled installment of principal of or interest on
any debt security, the date specified in such debt security as the fixed date on
which such installment is due and payable.
"Strategic Minority Capital Stock Issues" is defined to mean issuances or
sales of common stock of a Restricted Subsidiary, principally engaged in
business outside The Netherlands, to a Person which is principally engaged in
the Permitted Business and which has an equity market capitalization, a net
asset value or annual revenues of at least $500 million, which issuances or
sales do not represent more than 49% of the outstanding common stock of such
Restricted Subsidiary; provided that any such Strategic Minority Capital Stock
Issue is made to only one such Person with respect to any Restricted Subsidiary.
"Subsidiary" is defined to mean, with respect to any Person (i) any
corporation, association or other business entity of which more than 50% of the
outstanding Voting Stock is at the time of determination owned, directly or
indirectly, by such Person or one or more other Subsidiaries of such Person and
(ii) any partnership, joint venture, limited liability company or similar entity
of which (A) more than 50% of the capital accounts, distribution rights, total
equity and voting interests or general or limited partnership interests, as
applicable, are owned or controlled, directly or indirectly, by such Person or
one or more of the other
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Subsidiaries of that Person or a combination thereof whether in the form of
membership, general, special or limited partnership or otherwise and (B) such
Person or any Restricted Subsidiary of such Person is a controlling general
partner, co-venturer, manager or similar position or otherwise controls such
entity.
"Telecommunications Assets" is defined to mean, with respect to any Person,
assets used in the Permitted Business (or Equity Interests of a Person that
becomes a Restricted Subsidiary, the assets of which consist principally of such
Telecommunications Assets) that are purchased or acquired by the Company or a
Restricted Subsidiary after the Issue Date.
"Trade Payables" is defined to mean any accounts payable or any other
indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by the Company or any of its Restricted Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods and
services.
"Transaction Date" is defined to mean, with respect to the Incurrence of
any Indebtedness by the Company or any of its Restricted Subsidiaries, the date
such Indebtedness is to be Incurred and, with respect to any Restricted Payment,
the date such Restricted Payment is to be made.
"Unrestricted Subsidiary" is defined to mean (i) any Subsidiary of the
Company which at the time of determination is an Unrestricted Subsidiary (as
designated by the Board of Directors in the manner provided below) and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary, or any of its Subsidiaries, owns any Equity Interests or
Indebtedness of, or owns or holds any Lien on any property of, the Company or
any Restricted Subsidiary; provided that (a) the Company certifies in an
Officers' Certificate that such designation complies with the covenants
described under "Limitation on Restricted Payments", (b) such Subsidiary is not
party to any agreement, contract, arrangement or understanding with the Company
or any Restricted Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Company or such Restricted Subsidiary than those that might reasonably be
obtained in a comparable arm's-length transaction at the time from Persons who
are not Affiliates of the Company, (c) neither the Company nor any of its
Restricted Subsidiaries has any direct or indirect obligation (1) to subscribe
for additional Equity Interests in such Subsidiary or any Subsidiary of such
Subsidiary or (2) to maintain or preserve such Subsidiary's financial condition
or to cause such Subsidiary to achieve any specified levels of operating results
and (d) such Subsidiary and its Subsidiaries has not at the time of designation,
and does not thereafter, Incur any Indebtedness other than Unrestricted
Subsidiary Indebtedness. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary of the Company; provided that
immediately after giving effect to such designation (x) the Company could Incur
$1.00 of additional Indebtedness under the first paragraph of the "Limitation on
Indebtedness" covenant described above on a pro forma basis taking into account
such designation and (y) no Default or Event of Default shall have occurred and
be continuing. Any such designation by the Board of Directors shall be evidenced
to the Trustee by promptly filing with the Trustee a copy of the resolution of
the Board of Directors giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"Unrestricted Subsidiary Indebtedness" is defined to mean Indebtedness of
any Unrestricted Subsidiary (i) as to which neither the Company nor any
Restricted Subsidiary is directly or indirectly liable (by virtue of the Company
or any such Restricted Subsidiary being the primary obligor on, guarantor of, or
otherwise liable in any respect to, such Indebtedness), and (ii) which, upon the
occurrence of a default with respect thereto, does not result in, or permit any
holder of any Indebtedness of the Company or any Restricted Subsidiary to
declare, a default on such Indebtedness of the Company or any Restricted
Subsidiary or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity.
"U.S. GAAP" is defined to mean, at any date of determination, generally
accepted accounting principles as in effect in the United States of America
which are applicable at the date of determination and which are consistently
applied for all applicable periods.
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"U.S. Government Securities" is defined to mean direct obligations of, or
obligations guaranteed by, the United States of America for the payment of which
obligations or guarantee the full faith and credit of the United States is
pledged and are not callable or redeemable at the option of the issuer thereof.
"Voting Stock" is defined to mean with respect to any Person, Capital Stock
of any class or kind ordinarily entitled to vote for the election of directors
thereof at a meeting of Stockholders called for such purpose, without the
occurrence of any additional event or contingency.
"Weighted Average Life to Maturity" is defined to mean, at any date of
determination with respect to any Indebtedness, the quotient obtained by
dividing (i) (a) the sum of the products of the number of years from such date
of determination to the dates of each successive scheduled principal payment of,
or redemption or similar payment with respect to, such Indebtedness multiplied
by (b) the amount of such principal payment, by (ii) the sum of all such
principal payments.
"Wholly Owned Restricted Subsidiary" is defined to mean 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.
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CERTAIN TAX CONSIDERATIONS
NETHERLANDS TAX CONSIDERATIONS
The following is a summary of the principal Netherlands tax consequences
relevant to the exchange, ownership and disposition of Notes to U.S. Holders (as
defined below for the purposes of this section "Netherlands Tax
Considerations"). This summary is not exhaustive of all the possible tax
consequences that may be relevant to Holders in light of their particular
circumstances and potential investors are advised to consult their own tax
advisors in order to determine the final tax consequences of the exchange,
ownership and disposition of Notes in their own particular circumstances. In
particular, this summary does not cover all tax consequences applicable to joint
venture vehicles, such as LLC's and partnership structures.
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 as of July 10, 1998. Changes made to these laws or
Treaty after that date may have retroactive effect, and may effect the tax
consequences described herein.
The outline is based on the assumption that the U.S. Holder:
(i) is not and has not been for at least five years, a resident or deemed
resident of The Netherlands for purposes of Netherlands tax
legislation; and
(ii) does not have or will not obtain an enterprise or an interest in an
enterprise which, in whole or in part, is carried on through a
permanent establishment or a permanent representative in The
Netherlands and to which enterprise or part of an enterprise the
Notes are attributable; and
(iii) is not directly entitled (the term directly means, in this context,
not through the beneficial ownership of shares or similar
securities) to all or a share of the profits of an enterprise that
is managed and controlled in The Netherlands while the Notes form
part of the assets of, or are otherwise attributable to, such
enterprise; and
(iv) does not have or will not obtain a substantial interest (as defined
below) or deemed substantial interest in VersaTel according to the
criteria under Netherlands tax law currently in force or in the event
such Holder does have such an interest, this substantial interest
qualifies as asset of, or is otherwise attributable to an enterprise;
and
(v) does not carry out and has not carried out employment activities on
the territory of The Netherlands, or as director or board member of
an entity resident in The Netherlands or as a civil servant of a
Netherlands public body with which the holding of the Notes is
connected; and
(vi) can obtain full benefit under the Treaty.
(hereinafter "U.S. Holder").
With respect to point (iv) for Netherlands income and/or corporate income
tax purposes, a person (individual or corporate body as defined under
Netherlands tax law) holds among others directly or indirectly a substantial
interest, if such person owns or is deemed to own (e.g. directly and/or
indirectly via call options or Warrants) an interest of at least 5.0% in the
issued capital of a company residing in The Netherlands ("a Substantial
Interest").
NETHERLANDS INCOME TAX
A U.S. Holder of Notes is not subject to Netherlands Corporate Income Tax
("NCIT") or Netherlands Individual Income Tax ("NIIT") under the above
assumptions.
INTEREST, WITHHOLDING TAX AND TAX TREATY LIMITATIONS
Interest paid to a U.S. Holder that does not have a Substantial Interest is
not subject to NCIT or NIIT. Furthermore, according to article 12 of the Treaty,
interest paid to a U.S. Holder entitled to the benefits of the
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<PAGE> 100
Treaty can only be subject to NCIT or NIIT in the country of residence of the
recipient of the interest. As a result, no NCIT or NIIT will be due on interest
paid to a U.S. Holder that has a Substantial Interest, provided they can obtain
full benefit of the Treaty.
The Netherlands will not levy withholding taxes on the payment of interest
under the Notes, provided that the interest payment is not dependent on the
profits of the Company. If such link can be established there is a risk that the
interest would be subject to Netherlands withholding tax as described under
"Dividend withholding tax". For this discussion it is assumed that such link
cannot be established.
CAPITAL GAINS
Under Netherlands laws, capital gains realized upon disposition of any or
all of the Notes by a U.S. Holder are only taxable if the U.S. Holder has a
Substantial Interest or if the U.S. Holder has an enterprise or an interest in
an enterprise that is, in whole or in part, carried on through a permanent
establishment or a permanent representative in The Netherlands and to which
Netherlands enterprise, the Notes are attributable. Moreover, as a result of
article 14 of the Treaty, the right to tax capital gains realized upon
disposition of any or all of the Notes by a U.S. Holder entitled to the benefits
of the Treaty, is allocated to the United States, unless allocable to a
Netherlands enterprise referred to above.
NET WEALTH TAX
A U.S. Holder of the Notes will not be subject to Netherlands net wealth
tax in respect thereof provided that:
(i) such U.S. Holder is not an individual or, if he or she is an
individual, provided that the Holder is neither a resident of The
Netherlands nor deemed to be a resident of The Netherlands; and
(ii) the U.S. Holder does not have an enterprise or an interest in an
enterprise that is, in whole or in part, carried on through a permanent
establishment or a permanent representative in The Netherlands and to which
enterprise or part of an enterprise, as the case may be, to which
enterprise the Notes are attributable; and
(iii) such U.S. Holder is not directly entitled (the term directly
means, in this context, not through the beneficial ownership of shares or
similar securities) to all or a share of the profits of an enterprise that
is managed and controlled in The Netherlands while the Notes form part of
the assets of, or are otherwise attributable to, such enterprise.
GIFT, ESTATE OR INHERITANCE TAXES
No gift, estate or inheritance taxes will arise in The Netherlands in
respect of the transfer of a Note by way of gift by a person who is neither a
resident nor a deemed resident of The Netherlands, or on the death of such
person, provided that:
(i) the transfer is not construed as a gift made by or on behalf of a
person who is a resident or a deemed resident of The Netherlands; and
(ii) the Notes do not form part of the assets of, and are not
otherwise attributable to, an enterprise owned by the donor or the deceased
or in which the donor or the deceased owned an interest and which in whole
or in part is carried on through a permanent establishment or a permanent
representative in The Netherlands; and
(iii) such Notes form part of the assets of, and are not otherwise
attributable to an enterprise that is managed and controlled in The
Netherlands and to which all or a share of the profits thereof the holder
of a Note is directly entitled (the term directly means, in this context,
not as the beneficial owner of shares or similar securities).
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<PAGE> 101
U.S. TAX CONSIDERATIONS
The following is a summary of the principal U.S. federal income tax
considerations relevant to the acquisition, ownership and disposition of
Exchange Notes in general and in the context of the Exchange Offer. This summary
is based on the Internal Revenue Code of 1986, as amended (the "Code"), existing
and proposed Treasury regulations, revenue rulings, administrative
interpretations and judicial decisions (all as currently in effect and all of
which are subject to change, possibly with retroactive effect). Except as
specifically set forth herein, this summary deals only with Exchange Notes held
as capital assets by a U.S. Holder (as defined below) 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 or to holders subject to special tax rules, such as insurance
companies, financial institutions, dealers in securities or foreign currencies,
tax-exempt investors, persons holding the Exchange Notes as part of a
short-sale, hedging transaction, "straddle," conversion transaction or other
integrated transaction, U.S. Holders owning 10% or more of the stock of the
Company, or U.S. Holders whose functional currency (as defined in Section 985 of
the Code) is not the U.S. dollar. Persons considering the acquisition of the
Exchange Notes should consult with their own tax advisors with regard to the
application of the U.S. federal income tax laws to their particular situations
as well as any tax consequences of purchasing, holding and disposing of the
Exchange Notes, including the applicability and effect of the laws of any state,
local or foreign jurisdiction.
As used in this section "U.S. Tax Considerations," the term "U.S. Holder"
means a beneficial owner of a Exchange Note who or that is for U.S. federal
income tax purposes (i) a citizen or resident of the United States, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or of 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.
GENERAL
EXCHANGE OFFER
An exchange of Notes for Exchange Notes pursuant to the Exchange Offer 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
Notes.
THE NOTES
Under applicable authorities, the Exchange Notes should be treated as
indebtedness for U.S. federal income tax purposes. In the unlikely event the
Exchange Notes are treated as equity, the amount of any actual or constructive
Company distributions on any such Exchange Note would first be taxable to the
holder as dividend income to the extent of the issuer's current and accumulated
earnings and profits, and next would be treated as a return of capital to the
extent of the holder's tax basis in the Exchange Note, with any remaining amount
treated as gain from the sale of an Exchange Note. Moreover, in such event a
U.S. Holder would be subject to special U.S. federal income tax rules if the
Company were classified as a "passive foreign investment company" for U.S.
federal income tax purposes. This discussion assumes that the Exchange Notes
will constitute indebtedness of the Company for U.S. federal income tax
purposes.
PAYMENT OF INTEREST
Interest on the Exchange Notes will generally be taxable to a United States
Holder as ordinary income at the time it is paid or accrued in accordance with
the U.S. Holder's method of accounting for tax purposes. In addition to interest
on the Exchange Notes, a U.S. Holder will be required to include in income
Additional Amounts, if any, and withholding tax withheld by The Netherlands or
any other Relevant Taxing Jurisdiction from interest payments, if any,
notwithstanding that such withheld tax would not in fact be received by such
U.S. Holder. Thus, a U.S. Holder may be required to report income in an amount
greater than the cash received with respect of payments made on the Exchange
Notes. A U.S. Holder may be entitled to deduct or
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<PAGE> 102
credit the amount of any applicable withholding tax, subject to applicable
limitations in the Code. The rules governing the foreign tax credit are complex.
Interest income on the Exchange Notes generally 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 foreign tax credit purposes.
Prospective investors should consult their own tax advisors concerning the
application of the foreign tax credit rules to their particular circumstances.
DISPOSITIONS
Upon the sale, exchange or retirement of an Exchange Note, a U.S. Holder
will recognize taxable gain or loss in an amount equal to the difference, if
any, between such holder's adjusted tax basis in such Exchange Note and the
amount realized on such sale, exchange or retirement. Gain or loss recognized by
a U.S. Holder on the sale, exchange or retirement of an Exchange Note generally
will be capital gain or loss (except with respect to amounts received upon a
disposition attributable to accrued but unpaid interest, which will be taxable
as ordinary income). Gain realized by a U.S. Holder on the sale, exchange or any
other disposition of an Exchange Note will generally be treated as United States
source income. Under current law it is unclear whether a loss would be treated
as United States source or foreign source.
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, repurchase by the Company or other disposition of Exchange
Notes. Prospective investors should consult their own tax advisors concerning
the application of the U.S. foreign tax credit rules to their particular
situations.
For certain noncorporate taxpayers (including individuals), such gain will
be eligible to be taxed at a preferential rate if the U.S. Holder's holding
period for the Exchange Notes exceeds one year. Prospective investors should
consult their own tax advisors with respect to the effect of the capital gains
provisions of the Code. The deductibility of capital losses is subject to
limitations.
BACKUP WITHHOLDING
"Backup" withholding and information reporting requirements may apply to
certain payments of principal and interest on an Exchange Note and to certain
payments of proceeds of the sale or retirement of an Exchange Note. The Company,
its agent, a broker, the Trustee or any paying agent, as the case may be, will
be required to withhold tax from any payment that is subject to backup
withholding at a rate of 31.0% of such payment if the U.S. Holder fails to
furnish his taxpayer identification number (social security number or employer
identification number), to certify that such U.S. Holder is not subject to
backup withholding, or to otherwise comply with the applicable requirements of
the backup withholding rules. Certain U.S. Holders (including, among others, all
corporations) are not subject to the backup withholding and reporting
requirements. Any amounts withheld under the backup withholding rules from a
payment to a U.S. Holder generally may be claimed as a credit against such
holder's U.S. federal income tax liability provided that the required
information is furnished to the Internal Revenue Service.
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<PAGE> 103
PLAN OF DISTRIBUTION
Based on positions taken by the staff of the Commission set forth in
no-action letters issued to Exxon Capital Holdings Corp. and Morgan Stanley &
Co. Inc., among others, the Company believes that Exchange Notes issued pursuant
to the Exchange Offer in exchange for Outstanding Notes may be offered for
resale, resold and otherwise transferred by holders thereof (other than any
holder which is (i) an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act, (ii) a broker-dealer who acquired Notes directly from
the Company, or (iii) broker-dealers who acquired Notes as a result of
market-making or other trading activities) without compliance with the
registration and prospectus delivery provisions for the Securities Act provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business, and such holders are not engaged in, and do not intend to engage in,
and have no arrangement or understanding with any person to participate in, a
distribution of such Exchange Notes, provided that broker-dealers
("Participating Broker-Dealers") receiving Exchange Notes in the Exchange Offer
will be subject to a prospectus delivery requirement with respect to resales of
such Exchange Notes. To date, the staff of the Commission has taken the position
that Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to transactions involving an exchange of securities
such as the exchange pursuant to the Exchange Offer (other than a resale of an
unsold allotment from the sale of the Outstanding Notes to the Initial Purchaser
thereof) with the Prospectus contained in the Registration Statement. Pursuant
to the Registration Rights Agreement, the Company has agreed to permit
Participating Broker-Dealers and other persons, if any, subject to similar
prospectus delivery requirements to use this Prospectus in connection with the
resale of such Exchange Notes. The Company has agreed that, for a period of 180
days after the Exchange Offer has been consummated, it will make this
Prospectus, and any amendment or supplement to this Prospectus, available to any
broker-dealer that requests such documents in the Letter of Transmittal.
Each holder of Outstanding Notes who wishes to exchange its Outstanding
Notes for Exchange Notes in the Exchange Offer will be required to make certain
representations to the Company as set forth in "The Exchange Offer". In
addition, each holder who is a broker-dealer and who receives Exchange Notes for
its own account in exchange for Outstanding Notes that were acquired by it as a
result of market-making activities or other trading activities, will be required
to acknowledge that it will deliver a prospectus in connection with any resale
by it of such Exchange Notes.
Holders who tender Outstanding Notes in the Exchange Offer with the
intention to participate in a distribution of the Exchange Notes may not rely
upon the Exxon Capital Holdings Corp., the Morgan Stanley & Co. Inc. or similar
no-action letters.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer and/or the purchasers of any such Exchange Notes. The Letter
of Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incidental to the Exchange Offer
other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Outstanding Notes (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act, as
set forth in the Registration Rights Agreement.
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<PAGE> 104
LEGAL MATTERS
Certain legal matters regarding the validity of the Exchange Notes offered
hereby and the United States federal income tax consequences of the Exchange
Offer will be passed upon for the Company by Shearman & Sterling. Certain
matters of Netherlands corporate law will be passed upon for the Company by
Stibbe Simont Monahan Duhot, Amsterdam, The Netherlands.
INDEPENDENT AUDITORS
The financial statements of VersaTel as of December 31, 1997 and 1996, and
for each of the two years in the period ended December 31, 1997 included in this
Prospectus, have been audited by Arthur Andersen, independent auditors, as set
forth in their report appearing elsewhere herein.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
F-4 under the Securities Act with respect to the Exchange Notes offered hereby.
This Prospectus, which forms a part of the Registration Statement, does not
contain all the information set forth in the Registration Statement, certain
parts of which have been omitted in accordance with the rules and regulations of
the Commission. For further information with respect to the Company and the
Exchange Notes, reference is made to the Registration Statement. Statements
contained in this Prospectus as to the contents of certain documents are not
necessarily complete, and, in each instance, reference is made to the copy of
the document filed as an exhibit to the Registration Statement, and each such
statement is qualified in its entirety by such reference.
As a result of the Exchange Offer, the Company will become subject to the
periodic reporting and other informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith will be required to file reports and other information with the
Commission. Such financial information shall include annual reports containing
consolidated financial statements and notes thereto, together with an opinion
thereon expressed by an independent public accounting firm, as well as quarterly
reports containing unaudited consolidated financial statements for the first
three quarters of each fiscal year. The Registration Statement, as well as such
other information, when so filed, can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549; and at the Commission's regional offices
at Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois
60661-2511, and Seven World Trade Center, 13th Floor, New York, New York 10048.
Copies of such material can also be obtained from the Commission at prescribed
rates through its Public Reference Section at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549. The Commission also maintains a web site
(http://www.sec.gov) that contains the Registration Statement. The Company will
also make such reports available to prospective purchasers of the Exchange
Notes, securities analysts and broker-dealers upon their request. As a foreign
private issuer, the Company is exempt from certain provisions of the Exchange
Act prescribing the furnishing and content of proxy statements to shareholders
and relating to short-swing profits reporting and liability.
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<PAGE> 105
GENERAL LISTING INFORMATION
LISTING
The Company expects to make an application to list the Notes on the
Luxembourg Stock Exchange after the Separation Date. The Articles of Association
of the Company and the legal notice relating to the issue of the Notes will be
deposited prior to the listing with the Registrar of the District Court in
Luxembourg (Greffier en Chef du Tribunal d'Arrondissement a Luxembourg), where
such documents are available for inspection and where copies thereof can be
obtained upon request. As long as the Notes are listed on the Luxembourg Stock
Exchange, an Agent for making payments on, and transfers of, the Notes will be
maintained in Luxembourg.
COMMENTS
The Company has obtained all necessary consents, approvals and
authorizations in connection with the issue of the Notes. The issue of the Notes
was authorized by resolutions of the Supervisory Board on the Company passed on
May 20, 1998.
NO MATERIAL CHANGE
Except as disclosed in this Prospectus, there has been no material change
in the financial position of the Company since March 31, 1998 and no material
adverse change in the financial position or prospects of the Company since March
31, 1998.
LITIGATION
The Company is not involved in any litigation or arbitration proceedings
which relate to claims or amounts which are material in the context of the issue
of the Notes or that may have, or have had during the 12 months preceding the
date of this Prospectus, a material adverse effect on the financial position of
the Company, nor, so far as any of them is aware, is any such proceeding pending
or threatened.
AUDITORS
The consolidated accounts of the Company for the two years ended December
31, 1997 have been prepared in accordance with United States generally accepted
accounting principles ("U.S. GAAP") and have been audited by Arthur Andersen in
accordance with U.S. GAAP. The unaudited consolidated interim accounts for the
three months ended March 31, 1997 and 1998 were prepared in accordance with U.S.
GAAP. Arthur Andersen has given and not withdrawn its 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 FOR INSPECTION
Copies of the following documents may be inspected at the specified office
of the Paying and Transfer Agent in Luxembourg.
- Articles of Association of the Company;
- the Registration Rights Agreement relating to the Outstanding Notes;
- the Indenture relating to the Notes (which includes the form of the Note
certificates); and
- the Escrow Agreement.
In addition, copies of the most recent consolidated financial statements of
the Company for the preceding financial year, and any interim quarterly
financial statements published by the Company, will be available at the
specified office of the Paying and Transfer Agent in Luxembourg for as long as
the Notes are listed on the Luxembourg Stock Exchange.
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CLEARING SYSTEMS
The Notes distributed pursuant to Regulation S and represented by the
Regulation S Global Certificate have been accepted for clearance through the
facilities of Euroclear and Cedel. Relevant trading information is set forth
below. The ISIN number for the Notes is USN93195 AA8 9.
The CUSIP number for the Notes distributed pursuant to Rule 144A
represented by the 144A Global Note is 925301 AA 1 and for the Notes distributed
pursuant to Regulation S and represented by the Regulation S Global Note is
925301 AB 9.
NOTICES
All notices shall be deemed to have been given upon (i) the mailing by
first class mail, postage prepaid, of such notices to Holders of the Notes at
their registered addresses as recorded in the Register; and (ii) so long as the
Notes are listed on the Luxembourg Stock Exchange and it is required by the
rules of the Luxembourg Stock Exchange, publication of such notice to the
Holders of the Notes in English in a leading newspaper having general
circulation in Luxembourg (which is expected to be the Luxembourg 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 is shall be published in
Saturday, Sunday or holiday editions.
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<PAGE> 108
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Balance Sheets as of December 31, 1996 and 1997............. F-3
Statements of Operations for the years ended December 31,
1996 and 1997............................................. F-4
Statements of Shareholders' Equity for the years ended
December 31, 1996 and 1997................................ F-5
Statements of Cash Flows for the years ended December 31,
1996 and 1997............................................. F-6
Notes to Financial Statements............................... F-7
Balance Sheets as of March 31, 1997 and 1998................ F-12
Statements of Operations for the three month periods ended
March 31, 1997 and 1998................................... F-13
Statements of Cash Flows for the three month periods ended
March 31, 1997 and 1998................................... F-14
Notes to Interim Financial Statements....................... F-15
</TABLE>
F-1
<PAGE> 109
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To VersaTel Telecom B.V.,
We have audited the balance sheets as of December 31, 1996 and 1997 of
VERSATEL TELECOM B.V. and the statements of operations, shareholders' equity and
cash flows for the years then ended. 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 Netherlands which do not differ in any significant respect from
United States generally accepted auditing standards. 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 presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of VersaTel Telecom B.V. as of
December 31, 1996 and 1997 and the result of its operations and its cash flows
for the years then ended, in conformity with United States generally accepted
accounting principles.
ARTHUR ANDERSEN
Amsterdam, The Netherlands
April 24, 1998.
F-2
<PAGE> 110
VERSATEL TELECOM B.V.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
---------- -----------
NLG NLG
<S> <C> <C>
ASSETS
Current Assets:
Cash...................................................... 4,290,119 1,345,981
Current portion of restricted cash........................ 100,000 75,980
Accounts receivable, net of allowance for doubtful
accounts of NLG 30,000 and NLG 65,000, respectively.... 1,209,224 1,804,373
Inventory................................................. 135,411 417,572
Prepaid expenses and other................................ 32,472 1,995,251
---------- -----------
Total current assets................................... 5,767,226 5,639,157
---------- -----------
Restricted Cash, net of current portion..................... 53,157 72,932
---------- -----------
Property and Equipment, net................................. 2,339,550 13,619,207
---------- -----------
Total assets...................................... 8,159,933 19,331,296
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... 1,957,993 20,674,434
Due to related parties.................................... 217,987 248,525
Accrued liabilities....................................... 1,652,704 7,690,886
Current portion of deferred income........................ -- 98,434
Current portion of capital lease obligations.............. 252,895 278,661
---------- -----------
Total current liabilities.............................. 4,081,579 28,990,940
---------- -----------
Deferred Income, net of current portion..................... -- 341,648
---------- -----------
Capital Lease Obligations, net of current portion........... 327,013 107,813
---------- -----------
Subordinated Convertible Shareholder Loans.................. 3,605,000 8,105,000
---------- -----------
Shareholders' Equity:
Ordinary Shares, NLG 0.10 par value, 44,550,000 shares
authorized, 8,910,000 issued and outstanding at
December 31, 1996 and 9,579,643 issued and outstanding
at December 31, 1997................................... 891,000 957,964
Additional paid-in capital................................ 4,603,975 6,037,011
Accumulated deficit....................................... (5,348,634) (25,209,080)
---------- -----------
Total shareholders' equity............................. 146,341 (18,214,105)
---------- -----------
Total liabilities and shareholders' equity........ 8,159,933 19,331,296
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 111
VERSATEL TELECOM B.V.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
---------- -----------
NLG NLG
<S> <C> <C>
OPERATING REVENUES.......................................... 6,428,178 18,895,766
COST OF REVENUES............................................ 4,953,829 17,405,302
---------- -----------
Gross margin...................................... 1,474,349 1,490,464
---------- -----------
OPERATING EXPENSES:
Selling, general and administrative....................... 5,485,159 17,526,930
Depreciation.............................................. 453,165 3,236,784
---------- -----------
Total operating expenses............................... 5,938,324 20,763,714
---------- -----------
Operating loss.................................... (4,463,975) (19,273,250)
---------- -----------
OTHER INCOME (EXPENSES):
Foreign currency exchange losses, net..................... -- (52,618)
Interest income........................................... 3,980 20,686
Interest expense -- third parties......................... (24,584) (41,283)
Interest expense -- related parties....................... (248,882) (513,981)
---------- -----------
(269,486) (587,196)
---------- -----------
Net loss.......................................... (4,733,461) (19,860,446)
========== ===========
NET LOSS PER SHARE (Basic and Diluted)...................... (0.95) (2.20)
Weighted average number of shares outstanding............. 5,004,247 9,042,094
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 112
VERSATEL TELECOM B.V.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
NUMBER OF ADDITIONAL
SHARES ORDINARY PAID-IN ACCUMULATED
OUTSTANDING SHARES CAPITAL DEFICIT TOTAL
----------- -------- ---------- ----------- -----------
NLG NLG NLG NLG
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995.................... 4,950,000 495,000 -- (615,173) (120,173)
Shareholder contributions..................... 3,960,000 396,000 4,603,975 -- 4,999,975
Net loss...................................... -- -- (4,733,461) (4,733,461)
--------- ------- --------- ----------- -----------
Balance, December 31, 1996...................... 8,910,000 891,000 4,603,975 (5,348,634) 146,341
Shareholder contributions..................... 669,643 66,964 1,433,036 -- 1,500,000
Net loss...................................... -- -- (19,860,446) (19,860,446)
--------- ------- --------- ----------- -----------
Balance, December 31, 1997...................... 9,579,643 957,964 6,037,011 (25,209,080) (18,214,105)
========= ======= ========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 113
VERSATEL TELECOM B.V.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
---------- -----------
NLG NLG
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss.................................................. (4,733,461) (19,860,446)
Adjustments to reconcile net loss to net cash used in
operating activities --
Depreciation........................................... 453,165 3,236,784
Restricted cash........................................ -- 4,245
Deferred income........................................ -- 440,082
Changes in other operating assets and liabilities
Accounts receivable.................................... (1,157,287) (595,149)
Inventory.............................................. (113,595) (282,161)
Prepaid expenses and other............................. 329,947 (1,962,779)
Accounts payable....................................... 1,753,825 18,716,441
Due to related parties................................. 217,987 30,538
Accrued liabilities.................................... 1,530,958 6,038,182
---------- -----------
Net cash provided by (used in) operating
activities...................................... (1,718,461) 5,765,737
---------- -----------
Cash Flows from Investing Activities:
Capital expenditures...................................... (2,569,171) (14,516,441)
---------- -----------
Cash Flows from Financing Activities:
Proceeds (redemptions) from capital lease obligations..... 421,284 (193,434)
Proceeds from subordinated convertible shareholder
loans.................................................. 3,150,000 4,500,000
Shareholder contributions................................. 4,999,975 1,500,000
---------- -----------
Net cash provided by financing activities......... 8,571,259 5,806,566
---------- -----------
Net Increase (Decrease) in Cash............................. 4,283,627 (2,944,138)
Cash, beginning of the year................................. 6,492 4,290,119
---------- -----------
Cash, end of the year....................................... 4,290,119 1,345,981
========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash paid for --
Interest (net of amounts capitalized).................. 96,189 510,208
Income taxes........................................... -- --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 114
VERSATEL TELECOM B.V.
NOTES TO FINANCIAL STATEMENTS
1. GENERAL
Versatel Telecom B.V. ("VersaTel" or the "Company"), incorporated in
Amsterdam on October 10, 1995, provides international and national
telecommunication services in The Netherlands.
2. FINANCIAL CONDITION AND OPERATIONS
For the year ended December 31, 1997, the Company had a loss from operating
activities of NLG 19,273,250 and negative working capital of NLG 23,351,783 at
December 31, 1997. In addition, the Company had an accumulated deficit of NLG
25,209,080 as of December 31, 1997. The Company expects to incur operating
losses and net losses for the foreseeable future as it incurs additional costs
associated with the development and expansion of the Company's network, the
expansion of its marketing and sales organization and the introduction of new
telecommunications services. In addition, prices in the telecommunications
industry in Europe have declined in recent years and, as competition continues
to increase, the Company expects that prices will continue to decline.
Management of the Company believes that the Company will be able to borrow
additional financing in order to develop its network, thereby increasing its
traffic volume. Also, management believes that it is able to reduce the cost of
providing telecommunication services, commensurate with the decline of the
prices. To sustain its current level of operations and fund its negative working
capital requirements as of December 31, 1997, management has obtained necessary
financial support commitments from certain of its existing shareholders to
enable it to continue its operations through December 31, 1998. See also Note
15. Subsequent events.
3. SIGNIFICANT ACCOUNTING PRINCIPLES
(a) Basis of Financial Statements
The Company maintains its accounts under Dutch tax and corporate
regulations and has made certain out-of-book memorandum adjustments to these
records presenting the accompanying financial statements in accordance with
generally accepted accounting principles in the United States ("U.S. GAAP").
(b) Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
(c) Foreign Currency Transactions
The Company's functional currency is the Dutch guilder. Transactions
involving other currencies are converted into Dutch guilders using the exchange
rates which are in effect at the time of the transactions.
At the balance sheet date, monetary assets and liabilities which are
denominated in other currencies are adjusted to reflect the current exchange
rates. Gains or losses resulting from foreign currency remeasurements are
reflected in the accompanying statements of operations. In 1996, these gains or
losses were not material.
(d) Inventory
Inventory, consisting primarily of dialers to be installed at customer
locations, is stated at the lower of cost (first-in, first-out) or market value.
(e) Advertising expenses
Advertising costs are expensed as incurred.
F-7
<PAGE> 115
VERSATEL TELECOM B.V.
NOTES TO FINANCIAL STATEMENTS
(f) Recognition of Operating Revenues and Cost of Revenues
Operating revenues are recognized when the service is rendered. Cost of
revenues is recorded in the same period as the revenues are recorded.
The cost of telecommunication usage charged by the third party carriers to
the Company in connection with the telecommunication services rendered by the
Company to its customers, as well as other telecommunication costs, including
leased lines, are included in cost of revenues.
4. RESTRICTED CASH
Restricted cash balances of NLG 153,157 and NLG 148,912 at December 31,
1996 and 1997, respectively, include mainly amounts restricted in connection
with bank guarantees given to lessors of the Company's buildings.
The restriction on cash terminates upon cancellation of the lease
agreements for the respective buildings. One of the leases will be terminated in
1998, and the restricted balance related to this lease of NLG 75,980 has been
classified under current assets. The remaining leases, which have restricted
balances of NLG 72,932, will terminate in 2001.
5. PREPAID EXPENSES AND OTHER
Included in this caption as of December 31, 1997 is an amount of
NLG 1,563,644 related to Tax on Value Added.
6. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed on a straight-line basis over the estimated useful life
of the related asset. Property and equipment operated by the Company under a
capital lease agreement are capitalized.
Listed below are the major classes of property and equipment and their
estimated useful lives in years as of December 31, 1996 and 1997:
<TABLE>
<CAPTION>
USEFUL LIFE 1996 1997
----------- --------- ----------
NLG NLG
<S> <C> <C> <C>
Leasehold improvements................................. 5 40,050 911,092
Telecommunications equipment........................... 2-10 2,375,755 14,749,839
Other.................................................. 3-5 388,173 1,546,392
--------- ----------
Property and equipment............................... 2,803,978 17,207,323
Less: Accumulated depreciation....................... 464,428 3,588,116
--------- ----------
Property and equipment, net.......................... 2,339,550 13,619,207
========= ==========
</TABLE>
Presented under deferred income is cash received in connection with the
sublease by the company of part of its building. The received amount is released
to the income statement over the period of the sublease.
The short-term portion of the deferred income is presented under short-term
liabilities.
7. CAPITAL LEASE OBLIGATIONS
The Company entered into a master lease agreement with a finance company to
lease certain telecommunications and EDP equipment. The Company has secured
arrangements to lease equipment under this master agreement for a gross amount
of NLG 770,000 at December 31, 1996 and NLG 847,700 at
F-8
<PAGE> 116
VERSATEL TELECOM B.V.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997. Accumulated depreciation on the related assets amount to NLG
190,092 at December 31, 1996 and NLG 461,226 at December 31, 1997.
Future minimum lease commitments required under capital leases that have an
initial or remaining noncancelable lease term in excess of one year at December
31, 1997 are as follows:
<TABLE>
<S> <C>
1998........................................................ NLG 298,167
1999........................................................ 80,433
2000........................................................ 20,315
2001........................................................ 23,761
2002........................................................ 3,997
</TABLE>
8. SUBORDINATED CONVERTIBLE SHAREHOLDER LOANS
The Company had subordinated convertible shareholder loans with outstanding
balances of NLG 3,605,000 at December 31, 1996 and NLG 8,105,000 at December 31,
1997. The loans bear interest at a rate of 10.0% per annum. The loans will be
repaid in quarterly installments, commencing September 30, 1998 to June 30,
2001. The Company's creditors are entitled to convert NLG 3,605,000 of the
subordinated convertible shareholder loans to Ordinary Shares at a rate of NLG
7.69 per share of the outstanding principal amount in the following situations:
- Default on interest payments or repayments;
- Sale by the Company of (all or a portion of) the operating activities,
without the consent of the creditor;
- Bankruptcy or voluntary termination of the Company.
The subordinated convertible shareholder loan obtained during 1997 of which
NLG 4,500,000 was outstanding as at December 31, 1997, can be converted by the
creditor at a rate of NLG 3.36, of the outstanding principal amount at any time
during the period between December 1, 1997 and June 20, 1998. Any unpaid amounts
as at June 20, 1998 will be automatically converted into Ordinary Shares at the
rate of NLG 3.36 per share.
The subordinated convertible shareholder loans have been converted into
Ordinary Shares subsequent to December 31, 1997. See Note 15.
9. NET LOSS PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 128, "Earnings per Share" ("SFAS 128"). The Company adopted SFAS
128 for the year ended December 31, 1997. SFAS 128 replaced the primary earnings
per share calculation with a basic earnings per share calculation and modified
the calculation of diluted earnings per share. Adoption of SFAS 128 did not
affect the calculation of net loss per share for the Company.
10. EMPLOYEE BENEFIT PLANS
(a) 1997 Stock Option Plan
In December 1996, the shareholders approved the 1997 Stock Option Plan (the
"1997 Plan"). The 1997 Plan provides for the grant of options to certain key
employees of the Company to purchase depositary receipts issued for Ordinary
Shares of the Company. Under the 1997 Plan, no options may be granted with an
expiration date of more than five years after the granting of the option. The
options will be granted for free with an exercise price to be determined in the
particular grant of the option.
F-9
<PAGE> 117
VERSATEL TELECOM B.V.
NOTES TO FINANCIAL STATEMENTS
The option holder is not entitled to retain any depositary receipts
received by the option holder as a result of the exercise of its option. Upon
exercise of its option by the option holder, the option holder is required to
offer the depositary receipts received by it to the Company or to another party
designated by the Company, at the Purchase Price (as defined in the 1997 Plan).
Unless otherwise specified in the particular grant of the option, the Purchase
Price will be the fair market value of the Ordinary Shares minus a penalty
discount. The 1997 Plan contains provisions in the event of a dispute regarding
the fair market value of the Ordinary Shares. The penalty discount, if any, is
determined by the length of employment of the particular option holder.
Pursuant to the Shareholders' Agreement, Telecom Founders, Cromwilld and
NeSBIC must make available the shares underlying the depositary receipts to be
issued under the 1997 Plan.
As of April 24, 1998, 199,000 options to purchase 199,000 depositary
receipts had been granted under the 1997 Plan and the Company does not intend to
grant any more options under the 1997 Plan.
The Company accounts for the 1997 Plan under APB Opinion No. 25, under
which no compensation cost has been recognized. Had compensation cost for stock
options awarded under these plans been determined consistent with FASB Statement
No. 123, the Company's net income and earnings per share would have been reduced
to the following pro forma amounts:
<TABLE>
<CAPTION>
1997
-----------
NLG
<S> <C> <C>
Net Loss: .................................................. As reported (19,860,446)
Pro forma (19,886,957)
Net loss per share (basic and diluted):..................... As reported (2.20)
Pro forma (2.20)
</TABLE>
Of the 199,000 options outstanding at December 31, 1997, 149,500 have
exercise and weighted average exercise prices of NLG 1.26 and a weighted average
remaining contract life of 4.5 years. All of these options are exercisable. Of
the remaining 49,500 options outstanding at December 31, 1997, 49,500 have
exercise and weighted average exercise prices of NLG 0.59 and a weighted average
remaining contract life of 4.0 years. All of these options are exercisable.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for fiscal 1997: risk free rate of 5.75%; expected dividend
yield of 0.00%; expected life of 5 years; and expected volatility of 0.00%.
(b) 1998 Stock Option Plan
In March 1998, the shareholders approved the 1998 Stock Option Plan (the
"1998 Plan"). The 1998 Plan provides for the grant of options to employees to
purchase depositary receipts issued for Ordinary Shares of the Company. The
option period will commence at the date of the grant and will last five years.
The option exercise price shall be the economic value of the depositary receipt
at the date of the grant of the option. The 1998 Plan contains specific
provisions for the determination of the economic value of the depositary
receipts.
The option holder is not entitled to retain any depositary receipts
received by the option holder as a result of the exercise of its option. Upon
exercise of its option by the option holder, the option holder is required to
offer the depositary receipts received by it, within one year after the end of
the option period, to the Company or to another party designated by the Company,
at a purchase price equal to the economic value of the depositary receipts.
As of April 24, 1998, 2,130,000 options to purchase 2,130,000 depositary
receipts have been granted under the 1998 Plan and the company estimates to
grant a total of 2,500,000 options to purchase 2,500,000 depositary receipts
under the 1998 Plan.
F-10
<PAGE> 118
VERSATEL TELECOM B.V.
NOTES TO FINANCIAL STATEMENTS
The depositary receipts issued under both the 1997 Plan and the 1998 Plan
will be administered by the Stichting Administratiekantoor Versatel.
11. TAXES
The Company had income tax carry-forwards of NLG 1,872,022 at December 31,
1996 and NLG 8,193,178 at December 31, 1997, which may be utilized to reduce
future income taxes payable.
The income tax carry-forwards do not expire and can be utilized
indefinitely under Netherlands tax legislation. A valuation allowance has been
established for the entire amount of the Net Operating Loss carry-forwards due
to the uncertainty of its recoverability.
There were no significant temporary differences which gave rise to deferred
tax assets and liabilities at December 31, 1996 or 1997.
12. RELATED PARTY TRANSACTIONS
At December 31, 1996 and 1997, the Company had various accounts payable to
and accruals outstanding relating to related parties. These relate mainly to
interest payable on the subordinated convertible shareholder loans of
approximately NLG 174,000 and NLG 199,000 at December 31, 1996 and 1997.
13. CREDIT FACILITIES
The Company maintains a credit facility under which it can borrow up to
NLG 100,000. As of December 31, 1996 and 1997, no amounts were outstanding under
this credit facility.
14. RENT AND OPERATING LEASE COMMITMENTS
Future minimum commitments in connection with rent and other operating
lease agreements are as follows at December 31, 1997:
<TABLE>
<S> <C>
1998........................................................ NLG 1,828,000
1999........................................................ 1,461,000
2000........................................................ 1,331,000
2001........................................................ 371,000
2002........................................................ 4,000
</TABLE>
Rent and operating lease expenses amounted to approximately NLG 271,000 in
1996 and NLG 585,000 in 1997.
15. SUBSEQUENT EVENTS
Subsequent to December 31, 1997 the Company received additional shareholder
contributions of NLG 20,000,000. Furthermore, subordinated convertible
shareholder loans were converted into common stock for a total amount of
NLG 8,105,000. All loans were converted at a rate of NLG 3.36 in April 1998.
Guarantees were issued for the benefit of third parties in an amount of
NLG 1,000,000.
F-11
<PAGE> 119
VERSATEL TELECOM B.V.
BALANCE SHEETS
MARCH 31, 1997 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1998
---------- -----------
NLG NLG
<S> <C> <C>
ASSETS
Current Assets:
Cash...................................................... 3,105,768 5,148,632
Current portion of restricted cash........................ -- 75,980
Accounts receivable, net of allowance for doubtful
accounts............................................... 1,555,661 3,320,804
Inventory................................................. 377,920 776,949
Prepaid expenses and other................................ 138,420 1,837,796
---------- -----------
Total current assets................................... 5,177,769 11,160,161
---------- -----------
Restricted Cash, net of current portion..................... -- 72,932
---------- -----------
Property and Equipment, net................................. 3,204,480 14,956,272
---------- -----------
Total assets........................................... 8,382,249 26,189,365
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... 3,457,359 24,344,702
Due to related parties.................................... 276,663 530,476
Accrued liabilities....................................... 1,947,517 9,484,963
Current portion of deferred income........................ -- 98,434
Current portion of capital lease obligations.............. 268,812 268,661
---------- -----------
Total current liabilities.............................. 5,950,351 34,727,236
---------- -----------
Deferred Income, net of current portion..................... -- 325,243
---------- -----------
Capital Lease Obligations, net of current portion........... 295,761 49,656
---------- -----------
Subordinated Convertible Shareholder Loans.................. 3,605,000 8,105,000
---------- -----------
Prepaid Shareholder Contributions........................... -- 7,200,000
---------- -----------
Shareholders' Equity:
Ordinary Shares, NLG 0.10 par value, 44,550,000 shares
authorized, 8,910,000 issued and outstanding at March
31, 1997 and 9,579,643 issued and outstanding at March
31, 1998............................................... 891,000 957,964
Additional paid-in capital................................ 4,603,975 6,037,011
Accumulated deficit....................................... (6,963,838) (31,212,745)
---------- -----------
Total shareholders' equity............................. (1,468,863) (24,217,770)
---------- -----------
Total liabilities and shareholders' equity............. 8,382,249 26,189,365
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-12
<PAGE> 120
VERSATEL TELECOM B.V.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1997 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1998
---------- ----------
NLG NLG
<S> <C> <C>
OPERATING REVENUES.......................................... 3,917,031 6,401,589
COST OF REVENUES............................................ 3,092,678 5,459,653
---------- ----------
Gross margin...................................... 824,353 941,936
---------- ----------
OPERATING EXPENSES:
Selling, general and administrative....................... 2,053,663 5,543,778
Depreciation.............................................. 292,305 1,086,922
---------- ----------
Total operating expenses............................... 2,345,968 6,630,700
---------- ----------
Operating loss......................................... (1,521,615) (5,688,764)
---------- ----------
OTHER INCOME (EXPENSES):
Currency exchange loss.................................... -- (114,512)
Interest income........................................... 1,360 13,646
Interest expense -- third parties......................... (11,875) (27,117)
Interest expense -- related parties....................... (83,074) (186,918)
---------- ----------
(93,589) (314,901)
---------- ----------
Net loss............................................... (1,615,204) (6,003,665)
========== ==========
NET LOSS PER SHARE (Basic and Diluted)...................... (0.73) (2.51)
Weighted average number of shares outstanding............... 8,910,000 9,579,643
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-13
<PAGE> 121
VERSATEL TELECOM B.V.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1997 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1998
---------- ----------
NLG NLG
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. (1,615,204) (6,003,665)
Adjustments to reconcile net loss to net cash used in
operating activities --
Depreciation........................................... 292,305 1,086,922
Restricted cash........................................ 153,157 --
Deferred income........................................ -- (16,405)
Changes in other operating assets and liabilities
Accounts receivable.................................... (346,437) (1,516,431)
Inventory.............................................. (242,509) (359,377)
Prepaid expenses and other............................. (105,948) 157,455
Accounts payable....................................... 1,465,534 3,670,268
Due to related parties................................. 166,964 281,951
Accrued liabilities.................................... 220,357 1,794,077
---------- ----------
Net cash used in operating activities............. (11,781) (905,205)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (1,157,235) (2,423,987)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemptions from capital lease obligations................ (15,335) (68,157)
Prepaid shareholder contributions......................... -- 7,200,000
---------- ----------
Net cash provided by (used in) financing
activities...................................... (15,335) 7,131,843
---------- ----------
NET INCREASE (DECREASE) IN CASH............................. (1,184,351) 3,802,651
CASH, beginning of the period............................... 4,290,119 1,345,981
---------- ----------
CASH, end of the period..................................... 3,105,768 5,148,632
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-14
<PAGE> 122
VERSATEL TELECOM B.V.
NOTES TO INTERIM FINANCIAL STATEMENTS
AS OF MARCH 31, 1997 AND 1998
(UNAUDITED)
1. FINANCIAL PRESENTATION AND DISCLOSURES
In the opinion of management, the accompanying unaudited condensed interim
financial statements of Versatel Telecom B.V. (the "Company") have been prepared
in comformity with US GAAP except as noted below and contain all adjustments
(consisting only of normal recurring accruals) necessary to present fairly the
Company's financial position as of March 31, 1997 and March 31, 1998 and pro
forma at March 31, 1998, and the results of operations and cash flows for the
periods indicated.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. Material adjustments may have been required had
an audit been performed. It is suggested that these financial statements be read
in conjunction with the Company's 1997 audited financial statements and the
notes related thereto. The results of operations for the three months period
ended March 31, 1998 may not be indicative of the operating results for the full
year.
As of March 31, 1998, the Company was owned by three shareholders, Telecom
Founders, NeSBIC and Cromwilld. In an effort to increase the equity of the
Company, Versatel has undertaken a recapitalization programme (the
"Recapitalization") during the first four months of 1998, which is expected to
be completed by the end of May 1998 (see Note 3 -- Subsequent Events and Pro
Forma Adjustments to Balance Sheet).
2. FINANCIAL CONDITION AND OPERATIONS
For the year ended December 31, 1997, the Company had a loss from operating
activities of NLG 19,273,250 and negative working capital of NLG 23,351,783 at
December 31, 1997. For the three-month period ended March 31, 1998, the loss
from operating activities amounted to NLG 5,668,764 and the negative working
capital at March 31, 1998 amounted to NLG 23,567,075. In addition, the Company
had an accumulated deficit of NLG 25,209,080 as of December 31, 1997 and of NLG
31,212,745 as of March 31, 1998. The Company expects to incur operating losses
and net losses for the foreseeable future as it incurs additional costs
associated with the development and expansion of the Company's network, the
expansion of its marketing and sales organization and the introduction of new
telecommunications services. In addition, prices in the telecommunications
industry in Europe have declined in recent years and, as competition continues
to increase, the Company expects that prices will continue to decline.
Management of the Company believes that the Company will be able to borrow
additional financing in order to develop its network and by that increasing
traffic volume. Also, management believes that it is able to reduce the cost of
providing telecommunication services, commensurate with the decline of the
prices. To sustain its current level of operations and fund its negative working
capital requirements as of December 31, 1997, management has obtained necessary
financial support commitments from certain of its existing shareholders to
enable it to continue its operations through December 31, 1998. See also Note
3 -- Subsequent Events and Pro Forma Adjustments to Balance Sheet.
3. SUBSEQUENT EVENTS AND PRO FORMA ADJUSTMENTS TO BALANCE SHEET
Financing Transaction
Subsequent to March 31, 1998, the Company initiated an Offering of Units
consisting of 13 1/4% Senior Notes due 2008 and Warrants to purchase 1,500,000
Ordinary Shares that is expected to raise $225 million gross proceeds. The Notes
will be general unsecured obligations of the Company.
F-15
<PAGE> 123
VERSATEL TELECOM B.V.
NOTES TO INTERIM FINANCIAL STATEMENTS
Recapitalization
To increase the equity of the Company by means of the conversion of
subordinated debt and cash contribution by its shareholders, the Company expects
to complete the recapitalization by the end of May 1998.
VersaTel has undertaken a four part Recapitalization. In February 1998,
NeSBIC converted its NLG 4.5 million bridge loan into Ordinary Shares of the
Company. In addition, Telecom Founders and NeSBIC invested an additional NLG 7.2
million in equity capital in the Company which was formally contributed on April
17, 1998. In addition, NeSBIC and Cromwilld converted their subordinated
convertible notes totaling NLG 3.6 million into Ordinary Shares of the Company
in April 1998. The third component included a new equity investment by Paribas
of NLG 12.8 million. The Company has received written commitments from Telecom
Founders, NeSBIC, Paribas and NPM to invest an additional NLG 15.0 million in
equity capital immediately prior to the closing of the Offering. The closing of
the Offering will be conditioned upon funding of those commitments. As a result
of the Recapitalization, the invested equity in the Company will have increased
from NLG 7.0 million to NLG 50.1 million.
F-16
<PAGE> 124
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<PAGE> 125
ANNEX A
GLOSSARY
Access costs -- The costs paid by long distance carriers to the local
telephone companies for accessing the local networks of the local telephone
companies to originate and terminate long distance calls.
ADM (Add-drop multiplexer) -- A multiplexer which controls cross connect
between individual circuits by software, permitting dynamic cross connect of
individual 64 kbps circuits within an El line.
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).
Bps -- Bits per second; the basic measuring unit of speed in a digital
transmission system; the number of bits that a transmission facility can convey
between a sending location and a receiving location in one second.
Carrier pre-selection -- The ability of end users to select the long
distance or international operator of their choice prior to the time their calls
are made.
Carrier selection -- The ability of end users to select on a call-by-call
basis the long distance or international operator of their choice.
Closed user group -- A group of customers with some affiliation with one
another and which are treated for regulatory purposes as not being the public.
Dark fiber -- Fiber that lacks the requisite electronic and optronic
equipment necessary to use the fiber for transmission.
Facilities-based carrier -- A company that owns or leases its international
network facilities including undersea fiber optic cables and switching
facilities rather than reselling time provided by another facilities-based
carrier.
Fiber-optic cable -- The medium of choice for the telecommunications
industry. Fiber is immune to electrical interferences and environmental factors
that affect copper wiring and satellite transmission. Fiber-optic technology
involves sending laser light pulses across glass strands in order to transmit
digital information. A strand of fiber-optic cable is as thick as a human hair
yet has more bandwidth capacity than a copper wire the width of a telephone
pole.
Interconnect -- Connection of a telecommunications device or service to the
PSTN.
Local loop -- That portion of the local telephone network that connects the
customer's premises to the local exchange provider's central office or switching
center. This includes all the facilities starting from the customer premise
interface which connects to the inside wiring and equipment at the customer
premise to a terminating point within the switching wire center.
Mbps -- Megabits per second, a measurement of speed for digital signal
transmission expressed in millions of bits per second.
NOC -- Network operations center.
Nodes -- Locations within the network housing electronic equipment and/or
switches which serve as intermediate connection points to send and receive
transmission signals.
Number Portability -- The ability of end users to keep their number when
changing operators.
POP (Points of Presence) -- Switches owned or leased by an interexchange
carrier that is located near a local exchange carrier's switch and that enables
the interexchange carrier to access the local exchange carrier's customers
and/or services.
A-1
<PAGE> 126
PBX (Private Branch Exchange) -- A switching system within an office
building that allows calls from outside to be routed directly to the individual
instead of through a central number. A PBX also allows for calling within an
office by way of four-digit extensions.
PSTN (Public Switched Telephone Network) -- A telephone network which is
accessible by the public through private lines, wireless systems and pay phones.
PTT (Postal, Telephone and Telegraph Company) -- The dominant carrier or
carriers in each Member State of the EU, until recently, often, but not always,
government-owned or protected.
Reseller -- A carrier that does not operate its own transmission facilities
(although it may own its own switches or other equipment), but obtains
communications services from another carrier for resale to the public for
profit.
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 interconnecting circuits to form a transmission path
between users. Switches allow telecommunications service providers to connect
calls directly to their destination, while providing advanced features and
recording connection information for future billing.
SDH (Synchronous Digital Hierarchy) -- 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.
Traffic -- A generic term that includes any and all calls, messages and
data sent and received by means of telecommunications.
WDM (Wavelength Division Multiplexing) -- A multiplexing technique allowing
multiple different signals to be carried simultaneously on a fiber by allocating
resources according to frequency on non-overlapping frequency bands.
A-2
<PAGE> 127
PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY
VERSATEL TELECOM B.V.
Paalbergweg 36
1105 BV Amsterdam-Zuidoost
The Netherlands
INDEPENDENT AUDITORS
ARTHUR ANDERSEN
Prof. W.H. Keesomlaan 8
1183 DJ Amstelveen
The Netherlands
LEGAL ADVISERS
<TABLE>
<S> <C>
As to U.S. Law As to Dutch Law
SHEARMAN & STERLING STIBBE SIMONT MONAHAN DUHOT
599 Lexington Avenue Strawinskylaan 2001
New York, New York 10022-6069 1077 ZZ Amsterdam
The Netherlands
</TABLE>
TRUSTEE, REGISTRAR, PRINCIPAL PAYING AND TRANSFER AGENT
UNITED STATES TRUST COMPANY OF NEW YORK
114 West 47th Street
New York, New York 10036-1532
LISTING AGENT, PAYING AND TRANSFER AGENT
KREDIETBANK, S.A. LUXEMBOURGEOISE
43, Boulevard Royal
L-2955 Luxembourg
<PAGE> 128
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<PAGE> 129
- ---------------------------------------------------------
- ---------------------------------------------------------
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 OR THE INITIAL PURCHASER. 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.
---------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Service of Process and Enforceability of
Civil Liabilities...................... 1
Disclosure Regarding Forward-Looking
Statements............................. 1
Presentation of Information.............. 2
Summary.................................. 3
Risk Factors............................. 17
Use of Proceeds.......................... 27
The Exchange Offer....................... 27
Exchange Rate Information................ 34
Capitalization........................... 35
Selected Financial and Other Data........ 36
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 37
Business................................. 43
Management............................... 57
Security Ownership of Principal
Shareholders and Management............ 62
Certain Relationships and Related
Transactions........................... 63
Description of the Exchange Notes........ 64
Certain Tax Considerations............... 94
Plan of Distribution..................... 98
Legal Matters............................ 99
Independent Auditors..................... 99
Available Information.................... 99
General Listing Information.............. 100
Index to Financial Statements............ F-1
Glossary................................. A-1
</TABLE>
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
[VERSATEL TELECOM LOGO]
VERSATEL
TELECOM B.V.
OFFER TO EXCHANGE
13 1/4% SENIOR NOTES DUE 2008
FOR ALL OUTSTANDING
13 1/4% SENIOR NOTES DUE 2008
---------------------------
PROSPECTUS
---------------------------
, 1998
- ---------------------------------------------------------
- ---------------------------------------------------------
<PAGE> 130
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20 INDEMNIFICATION OF DIRECTORS AND OFFICERS
Netherlands law permits indemnification of directors, employees and agents
of corporations under certain conditions and subject to certain limitations.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<S> <C> <C>
3.1* -- Deed of Incorporation and Articles of Association of the
Company
4.1 -- Form of Outstanding Note for the Registrant's 13.25% Senior
Notes (contained in Indenture filed as Exhibit 4.3)
4.2 -- Form of Exchange Note for the Registrant's 13.25% Senior
Notes (contained in Indenture filed as Exhibit 4.3)
4.3 -- Indenture, dated May 27, 1998, between the Company and
United States Trust Company of New York, as Trustee
4.4 -- The Registration Rights Agreement, dated May 27, 1998,
between the Company and Initial Purchaser
4.5 -- Escrow Agreement, dated May 27, 1998, between the Company
and United States Trust Company of New York as Trustee and
Escrow Agent
5.1* -- Opinion of Shearman & Sterling regarding the legality of the
securities being registered
5.2* -- Opinion of Shearman & Sterling regarding tax matters
5.3* -- Opinion of Stibbe Simont Monahan Duhot regarding the
legality of the securities being registered
12.1* -- Statements re computation 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 Arthur Andersen
23.3 -- Consent of Stibbe Simont Monahan Duhot
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
</TABLE>
- ---------------
* To be filed by Amendment
(b) Financial Statement Schedules
(1) Financial Statements
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.
II-1
<PAGE> 131
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 form the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this section
do not apply if the registration statement is on Form S-3, Form S-8 or Form
F-3, and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with
or furnished to the Commission by the registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) If the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any
financial statement required by Section 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 Section 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.
II-2
<PAGE> 132
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-3
<PAGE> 133
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 F-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, State of The Netherlands, on the 27th day
of July, 1998.
VersaTel Telecom B.V.
By: /s/ R. GARY MESCH
------------------------------------
R. Gary Mesch
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 27th day of July, 1998. Each person whose signature
appears below hereby authorizes R. Gary Mesch and Raj Raithatha 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 R. Gary Mesch and Raj
Raithatha 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/ R. GARY MESCH Managing Director (principal executive officer)
- ------------------------------------------------
R. Gary Mesch
/s/ RAJ RAITHATHA Chief Financial Officer (principal financial and
- ------------------------------------------------ accounting officer)
Raj Raithatha
Supervisory Director
- ------------------------------------------------
Leopold W.A.M. van Doorne
Supervisory Director
- ------------------------------------------------
Denis O'Brien
/s/ W. GREG MESCH Supervisory Director
- ------------------------------------------------
W. Greg Mesch
</TABLE>
II-4
<PAGE> 134
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ---------- -----------
<S> <C> <C>
3.1* -- Deed of Incorporation and Articles of Association of the
Company
4.1 -- Form of Outstanding Note for the Registrant's 13.25% Senior
Notes (contained in Indenture filed as Exhibit 4.3)
4.2 -- Form of Exchange Note for the Registrant's 13.25% Senior
Notes (contained in Indenture filed as Exhibit 4.3)
4.3 -- Indenture, dated May 27, 1998, between the Company and
United States Trust Company of New York, as Trustee
4.4 -- The Registration Rights Agreement, dated May 27, 1998,
between the Company and Initial Purchaser
4.5 -- Escrow Agreement, dated May 27, 1998, between the Company
and United States Trust Company of New York as Trustee and
Escrow Agent
5.1* -- Opinion of Shearman & Sterling regarding the legality of the
securities being registered
5.2* -- Opinion of Shearman & Sterling regarding tax matters
5.3* -- Opinion of Stibbe Simont Monahan Duhot regarding the
legality of the securities being registered
12.1* -- Statements re computation 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 Arthur Andersen
23.3 -- Consent of Stibbe Simont Monahan Duhot
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
</TABLE>
- ---------------
* To be filed by Amendment
<PAGE> 1
EXHIBIT 4.3
VERSATEL TELECOM B.V.
as Issuer,
AND
UNITED STATES TRUST COMPANY OF NEW YORK
as Trustee, Registrar and
Paying Agent
INDENTURE
Dated as of May 27, 1998
$225,000,000 13 1/4% Senior Notes due 2008
<PAGE> 2
1
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ARTICLE I
<S> <C>
DEFINITIONS AND INCORPORATION BY REFERENCE.......................................... 1
SECTION 1.1 Definitions..................................................................... 1
SECTION 1.2 Incorporation by Reference of TIA............................................... 21
SECTION 1.3 Rules of Construction........................................................... 22
ARTICLE II
THE NOTES.................................................. 22
SECTION 2.1 Form and Dating................................................................. 22
SECTION 2.2 Execution and Authentication.................................................... 23
SECTION 2.3 Registrar and Paying Agent...................................................... 24
SECTION 2.4 Paying Agent To Hold Assets in Trust............................................ 25
SECTION 2.5 List of Holders................................................................. 26
SECTION 2.6 Book-Entry Provisions for Global Notes.......................................... 26
SECTION 2.7 Registration of Transfer and Exchange........................................... 27
SECTION 2.8 Replacement Notes............................................................... 33
SECTION 2.9 Outstanding Notes............................................................... 33
SECTION 2.10 Treasury Notes.................................................................. 34
SECTION 2.11 Temporary Notes................................................................. 34
SECTION 2.12 Cancellation.................................................................... 34
SECTION 2.13 Defaulted Interest.............................................................. 35
SECTION 2.14 CUSIP, ISIN and Common Code Numbers............................................. 35
SECTION 2.15 Deposit of Moneys............................................................... 35
SECTION 2.16 Certain Matters Relating to Global Notes........................................ 36
ARTICLE III
REDEMPTION.................................................. 36
SECTION 3.1 Optional Redemption............................................................. 36
SECTION 3.2 Notices to Trustee.............................................................. 36
SECTION 3.3 Selection of Notes To Be Redeemed............................................... 36
SECTION 3.4 Notice of Redemption............................................................ 37
SECTION 3.5 Effect of Notice of Redemption.................................................. 38
SECTION 3.6 Deposit of Redemption Price..................................................... 38
SECTION 3.7 Notes Redeemed in Part.......................................................... 39
</TABLE>
<PAGE> 3
2
<TABLE>
ARTICLE IV
<S> <C>
COVENANTS.................................................. 39
SECTION 4.1 Payment of Notes................................................................ 39
SECTION 4.2 Maintenance of Office or Agency................................................. 40
SECTION 4.3 Limitation on Restricted Payments............................................... 40
SECTION 4.4 Limitation on Indebtedness...................................................... 42
SECTION 4.5 Corporate Existence............................................................. 46
SECTION 4.6 Payment of Taxes and Other Claims............................................... 46
SECTION 4.7 Maintenance of Properties and Insurance......................................... 47
SECTION 4.8 Compliance Certificate; Notice of Default....................................... 47
SECTION 4.9 Compliance with Laws............................................................ 48
SECTION 4.10 Reports......................................................................... 48
SECTION 4.11 Waiver of Stay, Extension or Usury Laws......................................... 49
SECTION 4.12 Limitation on Transactions with Shareholders and Affiliates..................... 50
SECTION 4.13 Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries.......................................... 50
SECTION 4.14 Limitation on Liens............................................................. 52
SECTION 4.15 Change of Control............................................................... 52
SECTION 4.16 Limitation on Asset Sales....................................................... 54
SECTION 4.17 Limitation on Issuance of Guarantees of Indebtedness by
Restricted Subsidiaries.................................................... 58
SECTION 4.18 Business of the Company; Restriction on Transfers of Existing
Business................................................................... 58
SECTION 4.19 Limitation on the Issuance and Sale of Capital Stock of
Restricted Subsidiaries.................................................... 59
SECTION 4.20 Additional Amounts.............................................................. 59
SECTION 4.21 Payment of Non-Income Taxes and Similar Charges................................. 60
ARTICLE V
SUCCESSOR CORPORATION............................................ 60
SECTION 5.1 Consolidation, Merger, and Sale of Assets....................................... 60
SECTION 5.2 Successor Corporation Substituted............................................... 61
ARTICLE VI
DEFAULT AND REMEDIES............................................. 61
SECTION 6.1 Events of Default............................................................... 61
SECTION 6.2 Acceleration.................................................................... 63
SECTION 6.3 Other Remedies.................................................................. 63
SECTION 6.4 The Trustee May Enforce Claims Without Possession of
Securities................................................................. 64
SECTION 6.5 Rights and Remedies Cumulative.................................................. 64
SECTION 6.6 Delay or Omission Not Waiver.................................................... 64
</TABLE>
<PAGE> 4
3
<TABLE>
<S> <C>
SECTION 6.7 Waiver of Past Defaults......................................................... 64
SECTION 6.8 Control by Majority............................................................. 65
SECTION 6.9 Limitation on Suits............................................................. 65
SECTION 6.10 Rights of Holders To Receive Payment............................................ 66
SECTION 6.11 Collection Suit by Trustee...................................................... 66
SECTION 6.12 Trustee May File Proofs of Claim................................................ 66
SECTION 6.13 Priorities...................................................................... 67
SECTION 6.14 Restoration of Rights and Remedies. ............................................ 67
SECTION 6.15 Undertaking for Costs........................................................... 67
SECTION 6.16 Compliance Certificate; Notices of Default...................................... 68
ARTICLE VII
TRUSTEE................................................... 68
SECTION 7.1 Duties of Trustee............................................................... 68
SECTION 7.2 Rights of Trustee............................................................... 69
SECTION 7.3 Individual Rights of Trustee.................................................... 71
SECTION 7.4 Trustee's Disclaimer............................................................ 71
SECTION 7.5 Notice of Default............................................................... 71
SECTION 7.6 Report by Trustee to Holders.................................................... 71
SECTION 7.7 Compensation and Indemnity...................................................... 72
SECTION 7.8 Replacement of Trustee.......................................................... 73
SECTION 7.9 Successor Trustee by Merger, Etc................................................ 74
SECTION 7.10 Corporate Trustee Required; Eligibility......................................... 74
SECTION 7.11 Disqualification; Conflicting Interests......................................... 75
SECTION 7.12 Preferential Collection of Claims Against Company............................... 75
ARTICLE VIII
SATISFACTION AND DISCHARGE OF INDENTURE................................... 75
SECTION 8.1 Option To Effect Legal Defeasance or Covenant Defeasance........................ 75
SECTION 8.2 Legal Defeasance and Discharge.................................................. 75
SECTION 8.3 Covenant Defeasance............................................................. 76
SECTION 8.4 Conditions to Legal or Covenant Defeasance...................................... 76
SECTION 8.5 Satisfaction and Discharge of Indenture......................................... 78
SECTION 8.6 Survival of Certain Obligations................................................. 79
SECTION 8.7 Acknowledgement of Discharge by Trustee......................................... 79
SECTION 8.8 Application of Trust Moneys..................................................... 79
SECTION 8.9 Repayment to the Company; Unclaimed Money....................................... 79
SECTION 8.10 Reinstatement................................................................... 80
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS..................................... 80
SECTION 9.1 Without Consent of Holders of Notes............................................. 80
</TABLE>
<PAGE> 5
4
<TABLE>
<S> <C>
SECTION 9.2 With Consent of Holders of Notes................................................ 81
SECTION 9.3 Compliance with TIA............................................................. 83
SECTION 9.4 Revocation and Effect of Consents............................................... 83
SECTION 9.5 Notation on or Exchange of Notes................................................ 83
SECTION 9.6 Trustee To Sign Amendments, Etc................................................. 83
ARTICLE X
COLLATERAL AND SECURITY........................................... 84
SECTION 10.1 Escrow Agreement................................................................ 84
SECTION 10.2 Recording and Opinions.......................................................... 84
SECTION 10.3 Release of Collateral........................................................... 85
SECTION 10.4. Certificates of the Company..................................................... 86
SECTION 10.5. Authorization of Actions to be Taken by the Trustee Under
the Escrow Agreement....................................................... 86
SECTION 10.6. Authorization of Receipt of Funds by the Trustee Under the
Escrow Agreement........................................................... 86
SECTION 10.7. Termination of Security Interest................................................ 87
ARTICLE XI
MISCELLANEOUS................................................ 87
SECTION 11.1 TIA Controls.................................................................... 87
SECTION 11.2 Notices......................................................................... 87
SECTION 11.3 Communications by Holders with Other Holders.................................... 88
SECTION 11.4 Certificate and Opinion as to Conditions Precedent.............................. 89
SECTION 11.5 Statements Required in Certificate or Opinion................................... 89
SECTION 11.6 Rules by Trustee, Paying Agent, Registrar....................................... 90
SECTION 11.7 Legal Holidays.................................................................. 90
SECTION 11.8 Governing Law................................................................... 90
SECTION 11.9 Submission to Jurisdiction; Appointment of Agent for
Service; Waiver............................................................ 90
SECTION 11.10 No Adverse Interpretation of Other Agreements................................... 91
SECTION 11.11 No Personal Liability of Directors, Officers, Employees,
Stockholders or Incorporators.............................................. 91
SECTION 11.12 Currency Indemnity. ............................................................ 91
SECTION 11.13 Successors. ................................................................... 92
SECTION 11.14 Counterpart Originals........................................................... 92
SECTION 11.15 Severability.................................................................... 92
SECTION 11.16 Table of Contents, Headings, etc................................................ 92
</TABLE>
<PAGE> 6
5
EXHIBITS
<TABLE>
<S> <C>
Exhibit A - Form of Initial Global Note
Exhibit B - Form of Initial Definitive Note
Exhibit C - Form of Exchange Global Note
Exhibit D - Form of Exchange Definitive Note
Exhibit E - Form of Transfer Certificate for Transfer from U.S. Global Note to
Regulation S Global Note
Exhibit F - Form of Transfer Certificate for Transfer from Regulation S Global
Note to U.S. Global Note
</TABLE>
NOTE: This Table of Contents shall not, for any purpose, be deemed to be part
of this Indenture.
<PAGE> 7
1
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
<S> <C>
310(a)(1).......................................................................... 7.10
(a)(2)....................................................................... 7.10
(a)(3)....................................................................... NA
(a)(4)....................................................................... NA
(a)(5)....................................................................... 7.8; 7.11
(b).......................................................................... 7.8; 7.11
(c).......................................................................... NA
311(a)............................................................................. 7.12
(b).......................................................................... 7.12
(c).......................................................................... NA
312(a)............................................................................. 2.5
(b).......................................................................... 11.3
(c).......................................................................... 11.3
313(a)............................................................................. 7.6
(b)(1)....................................................................... 11.3
(b)(2)....................................................................... 7.6
(c).......................................................................... 7.6; 11.2
(d).......................................................................... 7.6
314(a)............................................................................. 4.8; 4.10; 11.2;
11.4
(b).......................................................................... 11.2
(c)(1)....................................................................... 7.2; 11.4
(c)(2)....................................................................... 7.2; 11.4
(c)(3)....................................................................... NA
(d).......................................................................... 11.3;11.4; 11.5
(e).......................................................................... 11.5
(f).......................................................................... NA
315(a)............................................................................. 7.1(c)
(b).......................................................................... 7.5; 11.2
(c).......................................................................... 7.1(a)
(d).......................................................................... 6.8; 7.1(c)
(e).......................................................................... 6.15
316(a)(last sentence).............................................................. 2.9
(a)(1)(A).................................................................... 6.8
(a)(1)(B).................................................................... 6.7
(a)(2)....................................................................... NA
(b).......................................................................... 6.10
317(a)(1).......................................................................... 6.11
(a)(2)....................................................................... 6.12
</TABLE>
<PAGE> 8
2
<TABLE>
<S> <C>
(b).......................................................................... 2.4
318(a)............................................................................. 11.1
(c).......................................................................... 11.1
</TABLE>
- ----------------------
NA means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be
a part of this Indenture.
<PAGE> 9
1
INDENTURE, dated as of May 27, 1998, between
VERSATEL TELECOM B.V., a company organized under the
laws of The Netherlands, and having its corporate
seat in Amsterdam, The Netherlands (the "Company"),
and United States Trust Company of New York, a New
York banking corporation, as Trustee, Registrar and
Paying Agent.
The Company has duly authorized the creation and issuance of
its 13.1/4% Senior Notes due 2008 (the "Initial Notes") and 13.1/4% Senior Notes
due 2008 to be issued in exchange for the Initial Notes pursuant to the
Registration Rights Agreement (the "Exchange Notes" and, together with the
Initial Notes, the "Notes"); and, to provide therefor, the Company has duly
authorized the execution and delivery of this Indenture.
The Company and the Trustee agree as follows for the benefit
of each other and for the equal and ratable benefit of the Holders of the Notes:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions. For purposes of this Indenture,
unless otherwise specifically indicated herein, the term "consolidated" with
respect to any Person refers to such Person consolidated with its Restricted
Subsidiaries, and excludes from such consolidation any Unrestricted Subsidiary
as if such Unrestricted Subsidiary were not an Affiliate of such Person. In
addition, for purposes of the following definitions and this Indenture
generally, all calculations and determinations shall be made in accordance with
U.S. GAAP and shall be based upon the consolidated financial statements of the
Company and its subsidiaries prepared in accordance with U.S. GAAP. As used in
this Indenture, the following terms shall have the following meanings:
"Acquired Indebtedness" means, 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 or assumed in
connection with an Asset Acquisition by the Company or a Restricted Subsidiary
and not incurred in connection with, or in anticipation of, such Person becoming
a Restricted Subsidiary, such merger or consolidation or such Asset Acquisition;
provided that Indebtedness of such Person which is redeemed, defeased, retired
or otherwise repaid at the time of or immediately upon the consummation of the
transactions by which such Person becomes a Restricted Subsidiary or is merged
or consolidated with or into the Company or any Restricted Subsidiary or such
Asset Acquisition shall not be Indebtedness.
"Additional Amounts" shall have the meaning set forth in
Section 4.20.
<PAGE> 10
2
"Affiliate" as applied to any Person means any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, is defined to mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent" means any Registrar, Paying Agent, Authenticating
Agent or co- Registrar.
"Agent Members" shall have the meaning set forth in Section
2.16.
"Asset 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) an acquisition by the Company or any of its
Restricted Subsidiaries of the property and assets of any Person (other than the
Company or any of its Restricted Subsidiaries) that constitute substantially all
of an operating unit or line of business of such Person or which is otherwise
outside the ordinary course of business.
"Asset Disposition" means the sale or other disposition by the
Company or any of its Restricted Subsidiaries (other than to the Company or
another Restricted Subsidiary of the Company) of (i) all or substantially all of
the Equity Interests in any Restricted Subsidiary of the Company or (ii) all or
substantially all of the assets that constitute an operating unit or line of
business of the Company or any of its Restricted Subsidiaries or which is
otherwise outside the ordinary course of business.
"Asset Sale" means any sale, transfer or other disposition
(including by way of merger, consolidation or sale-leaseback transactions) in
one transaction or a series of related transactions by the Company or any of its
Restricted Subsidiaries to any Person (other than the Company or any of its
Restricted Subsidiaries) of (i) all or any of the Equity Interests in any
Subsidiary, (ii) all or substantially all of the property and assets of an
operating unit or line of business of the Company or any of its Restricted
Subsidiaries or (iii) any other property and assets of the Company or any of its
Restricted Subsidiaries outside 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
<PAGE> 11
3
consummated in compliance with Section 5.1 and the creation of any Lien not
prohibited by Section 4.14; provided, however, that any transaction consummated
in compliance with such Section 5.1, involving a sale, conveyance, assignment,
transfer, lease or other disposal of less than all of the properties or assets
of the Company and the Restricted Subsidiaries shall be deemed to be an Asset
Sale with respect to the properties or assets of the Company and Restricted
Subsidiaries that are not so sold, conveyed, assigned, transferred, leased or
otherwise disposed of in such transaction; (b) sales of property or equipment
that has become worn out, obsolete or damaged or otherwise unsuitable for use in
connection with the business of the Company or any Restricted Subsidiary, as the
case may be; and (c) any transaction consummated in compliance with Section 4.3.
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."
"Asset Sale Offer" shall have the meaning set forth in Section
4.16.
"Authenticating Agent" shall have the meaning set forth in
Section 2.2.
"Bankruptcy Law" means (i) for purposes of the Company, the
Faillissementswet and any similar statute, regulation or provision of any other
jurisdiction in which the Company is organized or conducting business and and
(ii) for purposes of the Trustee, Title 11, U.S. Code or any similar United
States Federal, state or foreign law for the relief of creditors.
"Board of Directors" means the Supervisory Board of the
Company.
"Board Resolution" means a duly authorized resolution of the
Board of Directors certified by Secretary or Assistant Secretary and delivered
to the Trustee.
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banking institutions are authorized or required by
law to close in New York City or Amsterdam.
"Capital Stock" means with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) in equity of such Person, including, without
limitation, if such Person is a partnership, partnership interests (whether
general or limited) and any other interest or participation that confers on a
Person the right to receive a share of the profits and losses of, or
distributions of assets of, such partnership.
"Capitalized Lease" means, as applied to any Person, any lease
of any property (whether real, personal or mixed) of which the discounted
present value of the
<PAGE> 12
4
rental obligations of such Person as lessee, in conformity with U.S. GAAP, is
required to be capitalized and reflected as a liability on the balance sheet of
such Person; and "Capitalized Lease Obligation" is defined to mean, at the time
any determination thereof is to be made, the discounted present value of the
rental obligations under such lease.
"Cash Equivalents" means (a) securities issued or directly and
fully guaranteed or insured by the U.S. government or any agency or
instrumentality thereof having maturities of not more than 360 days from the
date of acquisition; (b) certificates of deposit and eurodollar time deposits
with maturities of 360 days or less from the date of acquisition, bankers'
acceptances with maturities not exceeding 360 days and overnight bank deposits,
in each case with any commercial bank having capital and surplus in excess of
$500 million; provided, however, that securities deposited in the Escrow Account
may have a Stated Maturity as late as May 15, 2001; (c) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clauses (a) and (b) entered into with any financial institution
meeting the qualifications specified in clause (b) above; (d) commercial paper
rated P-1, A-1 or the equivalent thereof by Moody's Investors Service, Inc. or
Standard & Poor's Ratings Group, respectively, and in each case maturing within
six months after the date of acquisition; (e) marketable direct obligations of
the United Kingdom, The Netherlands, Belgium, Germany or France or obligations
fully and unconditionally guaranteed by such sovereign nation (or any agency
thereof), of the type and maturity described in clauses (a) through (d) above of
foreign obligors, which have ratings described in such clauses or equivalent
ratings from comparable foreign rating agencies; and (f) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (a) through (e) above.
"Cedel" means Cedel Bank, societe anonyme.
"Change of Control" means such time as (i) a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
(other than a Permitted Holder) becomes the ultimate "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of more than 50% of the total
voting power of the then outstanding Voting Stock of the Company on a fully
diluted basis; (ii) individuals who at the beginning of any period of two
consecutive calendar years constituted the Board of Directors (together with any
directors who are members of the Board of Directors on the date hereof and any
new directors whose election by the Board of Directors or whose nomination for
election by the Company's stockholders was approved by a vote of at least two
thirds of the members of the Board of Directors then still in office who either
were members of the Board of 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 members of such Board of Directors then
in office; (iii) the sale, lease, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of
<PAGE> 13
5
the assets of the Company to any such "person" or "group" (other than to a
Restricted Subsidiary); or (iv) the merger or consolidation of the Company with
or into another corporation or the merger of another corporation with or into
the Company with the effect that immediately after such transaction any such
"person" or "group" of persons or entities shall have become the beneficial
owner of securities of the surviving corporation of such merger or consolidation
representing a majority of the total voting power of the then outstanding Voting
Stock of the surviving corporation.
"Change of Control Offer" shall have the meaning set forth in
Section 4.15.
"Change of Control Payment" shall have the meaning set forth
in Section 4.15.
"Change of Control Payment Date" shall have the meaning set
forth in Section 4.15.
"Company" means the party named as such in this Indenture
until a successor replaces it pursuant to this Indenture and thereafter means
such successor.
"Company Order" means a written order or request signed in the
name of the Company by two officers of the Company, one of whom must be the
principal executive officer, the principal financial officer, the treasurer or
the principal accounting officer of the Company or any other officer so
authorized and delivered to the Trustee.
"Consolidated Cash Flow" means, with respect to any Person for
any period, the (i) Consolidated Net Income of such Person for such period plus,
to the extent deducted in computing such Consolidated Net Income (and without
duplication) Consolidated Fixed Charges, (ii) any provision for taxes (other
than taxes (either positive or negative) attributable to extraordinary and non
recurring gains or losses or sales of assets), (iii) any amount attributable to
depreciation and amortization expense and (iv) all other non-cash items reducing
Consolidated Net Income (excluding any non-cash charge to the extent that it
requires or represents an accrual of, or reserve for, cash charges in any future
period), less all non-cash items increasing Consolidated Net Income (excluding
any items which represent the reversal of an accrual of, or reserve for,
anticipated cash charges at any prior period), all as determined on a
consolidated basis for such Person and its Restricted Subsidiaries in accordance
with U.S. GAAP; provided, however, that there shall be excluded therefrom the
Consolidated Cash Flow of (if positive) of any Restricted Subsidiary (calculated
separately for such Restricted Subsidiary in the same manner as provided above)
that is subject to a restriction which prevents the payment of dividends or the
making of distributions to the Company or another Restricted Subsidiary to the
extent of such restriction.
<PAGE> 14
6
"Consolidated Fixed Charges" means, with respect to any Person
for any period, Consolidated Interest Expense plus dividends declared and
payable on Preferred Stock.
"Consolidated Interest Expense" means, with respect to any
Person for any period, the aggregate amount of interest in respect of
Indebtedness (including capitalized interest, amortization of original issue
discount on any Indebtedness and the interest portion of any deferred payment
obligation) calculated in accordance with U.S. GAAP; all commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financing; the net costs associated with Interest Rate Agreements;
and interest on Indebtedness that is Guaranteed or secured by such Person or any
of its Restricted Subsidiaries), less the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid
or to be accrued by such Person and its Restricted Subsidiaries during such
period; excluding, however, any amount of such interest of any Restricted
Subsidiary to the extent the net income of such Restricted Subsidiary is
excluded in the calculation of Consolidated Net Income pursuant to the last
proviso of such definition.
"Consolidated Net Income" means, with respect to any Person
for any period, the aggregate net income (or loss) of such Person and its
Restricted Subsidiaries for such period determined on a consolidated basis and
in conformity with U.S. GAAP; provided that the following items shall be
excluded in computing Consolidated Net Income (without duplication): (i) the net
income (or loss) of any Restricted Subsidiary accrued prior to the date it
becomes a Restricted Subsidiary or is merged into or consolidated with such
Person or any of its Restricted Subsidiaries or all or substantially all of the
property and assets of such Restricted Subsidiary are acquired by such Person or
any of its Restricted Subsidiaries; (ii) any gains or losses (on an after-tax
basis) but not losses attributable to Asset Sales; (iii) all extraordinary gains
and gains from Currency Agreements or Interest Rate Agreements and gains from
the extinguishment of debt; (iv) the net income (or loss) of any other Person
(other than net income (or loss) attributable to a Restricted Subsidiary) in
which such other Person (other than such Person or any of its Restricted
Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to such Person or any of its
Restricted Subsidiaries by such other Person during such period; (v) net gains
attributable to write-ups of assets or write-downs of liabilities (determined
after taking into account losses attributable to write-downs of assets or
write-ups of liabilities up to but not in excess of such gains); and (vi) the
cumulative effect of a change in accounting principles after the Issue Date; and
provided, further, that there shall be further excluded therefrom the net income
(but not the net loss) of any Restricted Subsidiary (calculated separately for
such Restricted Subsidiary in the same manner as provided above) that is subject
to a restriction which prevents the payment of dividends or the making of
distributions to the Company or another Restricted Subsidiary to the extent of
such restriction.
<PAGE> 15
7
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly or
annual consolidated balance sheet of such Person and its Restricted Subsidiaries
(which shall be as of a date not more than 90 days prior to the date of
determination), less any amounts attributable to Redeemable Stock or any equity
security convertible into or exchangeable for Indebtedness, the cost of treasury
stock and the principal amount of any promissory notes receivable from the sale
of Equity Interests in the Company or any of its Restricted Subsidiaries, each
item to be determined in conformity with U.S. GAAP (excluding the effects of
foreign currency exchange adjustments under Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 52).
"Continuing Director" means, as of any date of determination,
any member of the Board of Directors who (i) was a member of such Board of
Directors on the Issue Date or (ii) was nominated for election or elected to
such Board of Directors with, or whose election to such Board of Directors was
approved by, the affirmative vote of a majority of the Continuing Directors who
were members of such Board of Directors at the time of such nomination or
election or (iii) is any designee of any Permitted Holder or was nominated by
any Permitted Holder.
"Corporate Trust Office" means the address of the Trustee
specified in Section 11.2.
"Covenant Defeasance" shall have the meaning set forth in
Section 8.3.
"Credit Facilities" means one or more senior credit
agreements, senior loan agreements or similar senior facilities with banks or
other institutional lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.
"Cumulative Consolidated Cash Flow" means, for the period
beginning on the Issue Date through and including the end of the last fiscal
quarter (taken as one accounting period) preceding the date of any proposed
Restricted Payment, Consolidated Cash Flow of the Company and its Restricted
Subsidiaries for such period determined on a consolidated basis in accordance
with U.S. GAAP.
<PAGE> 16
8
"Cumulative Consolidated Fixed Charges" means, for the period
beginning on the Issue Date through and including the end of the last fiscal
quarter (taken as one accounting period) preceding the date of any proposed
Restricted Payment, Consolidated Fixed Charges of the Company and its Restricted
Subsidiaries for such period determined on a consolidated basis in accordance
with U.S. GAAP.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement and any other arrangement or agreement designed to
provide protection against fluctuations in currency values.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Default Interest Payment Date" shall have the meaning set
forth in Section 2.13.
"Definitive Notes" means Notes in definitive registered form
substantially in the form of Exhibits B and D.
"DTC" means The Depository Trust Company or its successors.
"DWAC" means the Depositary/Deposit Withdraw at Custodian
system.
"Eligible Accounts Receivable" means the accounts receivables
(net of any reserves and allowances for doubtful accounts in accordance with
U.S. GAAP) of any Person that are not more than 60 days past their due date and
that were entered into in the ordinary course of business on normal payment
terms as shown on the most recent consolidated balance sheet of such Person
filed with the Commission, all in accordance with U.S. GAAP.
"Equity Interests" means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"Escrow Account" means the account established by the Escrow
Agent pursuant to the terms of the Escrow Agreement for the deposit of the U.S.
Government Securities purchased by, or purchased at the direction of, the
Company with a portion of the net proceeds from the Offering.
"Escrow Agent" means United States Trust Company of New York,
as escrow agent under the Escrow Agreement.
"Escrow Agreement" means the Escrow Agreement, dated as of the
date of the Indenture, among the Escrow Agent, the Trustee and the Company,
governing the disbursement of funds from the Escrow Account.
<PAGE> 17
9
"Escrow Collateral" means all funds and securities in the
Escrow Account and the proceeds thereof.
"Euroclear Operator" means Morgan Guaranty Trust Company of
New York (Brussels office), as operator of the Euroclear System.
"Event of Default" shall have the meaning set forth in Section
6.1.
"Excess Proceeds" shall have the meaning set forth in Section
4.16.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"Exchange Notes" have the meaning provided in the preamble to
this Indenture.
"Exchange Offer" shall have the meaning set forth in the
Registration Rights Agreement.
"Fair Market Value" means, with respect to any asset or
property, 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 acting in good faith, which determination
shall be evidenced by a resolution of such Board delivered to the Trustee.
"Global Note" shall have the meaning set forth in Section 2.1.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America for the payment of which
obligations or guarantee the full faith and credit of the United States is
pledged and are not callable or redeemable at the option of the issuer thereof.
"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness or other
obligation in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof) of any other Person; provided that
the term "Guarantee" shall not include endorsements for collection or deposit in
the ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Holder" means a Person in whose name a Note is registered on
the Registrar's books.
<PAGE> 18
10
"Incur" means, with respect to any Indebtedness, to incur,
create, issue, assume, Guarantee or otherwise become liable for or with respect
to, or become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including an Incurrence of Indebtedness by reason of the
acquisition of more than 50% of the Equity Interests in any Person; provided
that the accrual of interest shall not be considered an Incurrence of
Indebtedness.
"Indebtedness" means, with respect to any Person at any date
of determination (without duplication), (i) all indebtedness of such Person,
whether or not contingent (A) in respect of borrowed money, (B) evidenced by
bonds, debentures, notes or other similar instruments or letters of credit or
other similar instruments (including reimbursement obligations with respect
thereto), (C) representing the balance deferred and unpaid of the purchase price
of property or services, which purchase price is due more than six months after
the date of placing such property in service or taking delivery and title
thereto or the completion of such services, except Trade Payables, (D)
representing Capitalized Lease Obligations, (ii) all Indebtedness of other
Persons secured by a Lien on any asset of such Person, whether or not such
Indebtedness is assumed by such Person; provided that the amount of such
Indebtedness shall be the lesser of (A) the fair market value of such asset at
such date of determination and (B) the amount of such Indebtedness, (iii) all
Indebtedness of other Persons Guaranteed by such Person to the extent such
Indebtedness is Guaranteed by such Person, (iv) the maximum fixed redemption or
repurchase price of Redeemable Stock of such Person at the time of determination
and (v) to the extent not otherwise included in this definition, obligations
under Currency Agreements and Interest Rate Agreements. The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and, with respect to
contingent obligations, the maximum liability upon the occurrence of the
contingency giving rise to the obligation; provided (x) that the amount
outstanding at any time of any Indebtedness issued with original issue discount
is the face amount of such Indebtedness less the remaining unamortized portion
of the original issue discount of such Indebtedness at such time as determined
in conformity with U.S. GAAP and (y) that Indebtedness shall not include any
liability for federal, state, local or other taxes.
"Indebtedness to Consolidated Cash Flow Ratio" shall have the
meaning set forth in Section 4.4.
"Indenture" means this Indenture, as amended, modified or
supplemented from time to time in accordance with the terms hereof.
"Initial Global Notes" means the Regulation S Global Note and
the U.S. Global Note.
<PAGE> 19
11
"Initial Notes" shall have the meaning set forth in the
preamble to this Indenture.
"Initial Purchaser" means Lehman Brothers Inc.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Notes.
"Interest Rate Agreement" means any interest rate swap
agreement, interest rate cap agreement, interest rate insurance, and any other
arrangement or agreement designed to provide protection against fluctuations in
interest rates.
"Investment" in any Person means, any direct or indirect
advance, loan or other extension of credit (including, without limitation, by
way of Guarantee or similar arrangement; but excluding advances to customers in
the ordinary course of business that are, in conformity with U.S. GAAP, recorded
as accounts receivable on the balance sheet of such Person or its Restricted
Subsidiaries) or capital contribution to (by means of any transfer of cash or
other tangible or intangible property to others or any payment for any property
or services for the account or use of others), or any purchase or acquisition of
Equity Interests, bonds, notes, debentures, or other similar instruments issued
by, any other Person. For purposes of the definition of "Unrestricted
Subsidiary" and Sections 4.3 and 4.19, (i) "Investment" shall include (a) the
Fair Market Value of the assets (net of liabilities) of any Restricted
Subsidiary of the Company at the time that such Restricted Subsidiary of the
Company is designated an Unrestricted Subsidiary and shall exclude the Fair
Market Value of the assets (net of liabilities) of any Unrestricted Subsidiary
at the time that such Unrestricted Subsidiary is designated a Restricted
Subsidiary of the Company and (b) the Fair Market Value, in the case of a sale
of Equity Interests in accordance with Section 4.19 such that a Person no longer
constitutes a Restricted Subsidiary, of the remaining assets (net of
liabilities) of such Person after such sale, and shall exclude the fair market
value of the assets (net of liabilities) of any Unrestricted Subsidiary at the
time that such Unrestricted Subsidiary is designated a Restricted Subsidiary of
the Company and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its Fair Market Value at the time of such
transfer.
"Issue Date" means the date on which the Notes are originally
issued under this Indenture.
"Legal Defeasance" shall have the meaning set forth in Section
8.2.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the City of Amsterdam, The Netherlands or The City of
New York or a place of payment are authorized or required by law, regulation or
executive order to
<PAGE> 20
12
remain closed. If a payment date is a Legal Holiday at a place of payment,
payment may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
"Lien" means, any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind in respect of an asset, whether or not
filed, recorded or otherwise perfected under applicable law (including, without
limitation, any conditional sale or other title retention agreement or lease in
the nature thereof, any sale with recourse against the seller or any Affiliate
of the seller, or any option or other agreement to sell or give any security
interest).
"Liquidated Damages" shall have the meaning set forth in the
Registration Rights Agreement.
"Maturity Date" means May 15, 2008.
"Most Recent Balance Sheet" means, with respect to any Person,
the most recent consolidated balance sheet of such Person reported on by an
internationally recognized firm of independent accountants without qualification
as to scope.
"Moody's" means Moody's Investors Service, Inc.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale,
the proceeds of such Asset Sale in the form of cash or Cash Equivalents,
including payments in respect of deferred payment obligations (to the extend
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or Cash Equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary of the Company) and proceeds from the conversion of other property
received when converted to cash or Cash Equivalents, net of (i) brokerage
commissions and other fees and expenses (including fees and expenses of counsel
and investment bankers) related to such Asset Sale, (ii) taxes paid or payable
as a result thereof (after taking into account any available tax credits or
deductions and any tax sharing agreements), (iii) payments made to repay
Indebtedness or any other obligation outstanding at the time of such Asset Sale
that either (A) is secured by a Lien on the property or assets sold or (B) is
required to be paid as a result of such sale and (iv) appropriate amounts to be
provided by the Company or any Restricted Subsidiary of the Company as a reserve
against any liabilities associated with such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as determined in conformity
with U.S. GAAP; provided that such amounts which cease to be held as reserves
shall be deemed Net Cash Proceeds; and (b) with respect to any capital
contribution or any issuance or sale of Equity Interests (other than Redeemable
Stock), the proceeds of such
<PAGE> 21
13
capital contribution, issuance or sale in the form of cash or Cash Equivalents,
including payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or Cash Equivalents (except to the extent (1) such
obligations are financed, directly or indirectly, with money borrowed from the
Company or any Restricted Subsidiary or otherwise financed or sold with recourse
to the Company or any Restricted Subsidiary or (2) the capital contribution or
purchase of the Equity Interests is otherwise financed, directly or indirectly,
by the Company or any Restricted Subsidiary, including through funds
contributed, extended, guaranteed or otherwise advanced by the Company or any
Affiliate) and proceeds from the conversion of other property received when
converted to cash or Cash Equivalents, net of attorney's fees, accountants'
fees, underwriters' or placement agents' fees, discounts or commissions and
brokerage, consultant and other fees incurred in connection with such issuance
or sale and net of taxes paid or payable as a result thereof.
"Non-U.S. Person" means a person who is not a U.S. Person, as
defined in Regulation S.
"Notes" shall have the meaning set forth in the preamble of
this Indenture.
"Offer Amount" shall have the meaning set forth in Section
4.16.
"Offering" means the offering of the Notes described in the
Offering Memorandum.
"Offer Period" shall have the meaning set forth in Section
4.16.
"Officer" means, with respect to any Person (other than any
Agent), the Chairman of the Board, any Director, the Chief Executive Officer,
the President, any Vice President, the Chief Financial Officer, the Treasurer,
the Assistant Treasurer, the Controller or the Secretary of such Person.
"Officers' Certificate" means a certificate signed on behalf
of the Company by two officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company that meets the requirements set
forth in Sections 11.4 and 11.5.
"Opinion of Counsel" means a written opinion from legal
counsel which and who are reasonably acceptable to, and addressed to, the
Trustee complying with the requirements of Sections 11.4 and 11.5. Unless
otherwise required by the TIA, the legal counsel may be an employee of or
counsel to the Company or the Trustee.
<PAGE> 22
14
"Ordinary Shares" means the ordinary shares, par value NLG
0.10 per share, of the Company.
"Paying Agent" shall have the meaning set forth in Section
2.3.
"Permitted Business" means the business of (i) transmitting,
or providing services relating to the transmission of, voice, video or data
through owned or leased transmission facilities, (ii) constructing, creating,
developing or marketing communications related network equipment, software and
other devices for use in a telecommunications business or (iii) evaluating,
participating or pursuing any other activity or opportunity that is primarily
related to those identified in clause (i) or (ii) above.
"Permitted Holder" means, collectively, Telecom Founders B.V.,
NeSBIC Venture Fund C.V., Cromwilld Limited, Paribas Deelnemingen N.V.,
Nederlandse Participatie Maatschappij N.V. and any Affiliate of the foregoing
Persons.
"Permitted Investment" means (i) an Investment in a Restricted
Subsidiary or a Person which will, upon the making of such Investment, become a
Restricted Subsidiary or be merged or consolidated with or into or transfer or
convey all or substantially all its assets to, the Company or a Restricted
Subsidiary; (ii) payroll, travel and similar advances to cover matters that are
expected at the time of such advance ultimately to be treated as expenses in
accordance with U.S. GAAP; (iii) stock, obligations or securities received in
satisfaction of judgments; (iv) Investments in any Person (the primary business
of which is related, ancillary or complementary to the business of the Company
on the date of such Investment) at any one time outstanding (measured on the
date each such Investment was made without giving effect to subsequent changes
in value) in an aggregate amount not to exceed the greater of (x) $10.0 million
and (y) 5.0% of the Company's total consolidated assets as of the end of the
most recently completed fiscal quarter; (v) Investments in Cash Equivalents;
(vi) Investments made as a result of the receipt of noncash consideration from
any Asset Sale made in compliance with Section 4.16; (vii) Investments made in
the ordinary course of the telecommunications business in the Permitted Business
and on ordinary business terms in the Permitted Business in consortia formed to
construct transmission infrastructure; (viii) Investments made in the ordinary
course of the telecommunications business and on ordinary business terms as
partial payment for constructing a network relating principally to the Permitted
Business; and (ix) any Investment in Pledged Securities.
"Permitted Liens" means (i) Liens for taxes, assessments,
governmental charges or claims that are being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
for which a reserve or other appropriate provision, if any, as shall be required
in conformity with U.S. GAAP shall have been
<PAGE> 23
15
made; (ii) statutory Liens of landlords and carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen or other similar Liens arising in the ordinary
course of business and with respect to amounts not yet delinquent or being
contested in good faith by appropriate legal proceedings promptly instituted and
diligently conducted and for which a reserve or other appropriate provision, if
any, as shall be required in conformity with U.S. GAAP shall have been made;
(iii) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security; (iv) easements, rights-of-way, municipal and zoning ordinances
and similar charges, encumbrances, title defects or other irregularities that do
not materially interfere with the ordinary course of business of the Company or
any of its Restricted Subsidiaries; (v) Liens (including extensions and renewals
thereof) upon real or personal property of a Restricted Subsidiary purchased or
leased after the Issue Date; provided that (a) such Lien is created solely for
the purpose of securing Indebtedness Incurred by such Restricted Subsidiary in
compliance with Section 4.4 (1) to finance the cost of the item of property or
assets subject thereto and such Lien is created prior to, at the time of or
within six months after the later of the acquisition and the Incurrence of such
Indebtedness or (2) to refinance any Indebtedness of a Restricted Subsidiary
previously so secured, (b) the principal amount of the Indebtedness secured by
such Lien does not exceed 100% of such cost and (c) any such Lien shall not
extend to or cover any property or assets other than such item of property or
assets; (vi) any interest or title of a lessor in the property subject to any
Capitalized Lease or operating lease of a Restricted Subsidiary which, in each
case, is permitted under the Indenture; (vii) Liens on property of, or on Equity
Interests in or Indebtedness of, any Person existing at the time such Person
becomes, or becomes a part of, any Restricted Subsidiary; provided that such
Liens were not created, incurred or assumed in contemplation of such transaction
and do not extend to or cover any property or assets of the Company or any
Restricted Subsidiary other than the property or assets so acquired; (viii)
Liens arising from the rendering of a final judgment or order against the
Company or any Restricted Subsidiary of the Company that does not give rise to
an Event of Default; (ix) Liens encumbering customary initial deposits and
margin deposits and other Liens that are either within the general parameters
customary in the industry or incurred in the ordinary course of business, in
each case, securing Indebtedness under Interest Rate Agreements and Currency
Agreements; (x) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of business
in accordance with the past practices of the Company and its Restricted
Subsidiaries prior to the Issue Date; (xi) Liens existing on the Issue Date or
securing the Notes or any Guarantee of the Notes; (xii) Liens granted after the
Issue Date on any assets or Equity Interests in the Company or its Restricted
Subsidiaries created in favor of the Holders; (xiii) Liens created in connection
with the incurrence of any Indebtedness permitted to be Incurred under clause
(iii) of paragraph (b) of Section 4.4; provided that the Indebtedness which it
refinances is secured by similar Liens; (xiv) Liens securing Indebtedness under
Credit
<PAGE> 24
16
Facilities incurred in compliance with clause (viii) of paragraph (b) of
Section 4.4; and (xv) Liens with respect to the Escrow Account arising under the
Escrow Agreement.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Pledged Securities" means the U.S. Government Securities
purchased by the Company with a portion of the net proceeds from the Offering
and deposited in the Escrow Account.
"Preferred Stock" means, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) 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.
"Private Placement Legend" means the legend set forth in
Section 2.7(g).
"Pro Forma Consolidated Cash Flow" means, with respect to any
Person for any period, the Consolidated Cash Flow of such Person for such period
calculated on a pro forma basis to give effect to any Asset Disposition or Asset
Acquisition (including acquisitions of other Persons by merger, consolidation or
purchase of Equity Interests) during such period as if such Asset Disposition or
Asset Acquisition had taken place on the first day of such period and income (or
losses) ceased to accrue or accrued, as the case may be, therefrom from such
date.
"Public Equity Offering" means an underwritten primary public
offering of Ordinary Shares of the Company pursuant to an effective registration
statement under the Securities Act.
"Purchase Date" shall have the meaning set forth in Section
4.16.
"Qualified Institutional Buyer" or "QIB" shall have the
meaning specified in Rule 144A under the Securities Act.
"Record Date" means the Record Dates specified in the Notes.
"Redeemable Stock" means , with respect to any Person, any
Capital Stock which by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable) or upon the happening of any
event (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Redeemable Stock or (iii) is redeemable
<PAGE> 25
17
or must be purchased, upon the occurrence of certain events or otherwise, by
such Person at the option of the holder thereof, in whole or in part, in each
case on or prior to the first anniversary of the Stated Maturity of the Notes;
provided, however, that any Capital Stock that would not constitute Redeemable
Stock but for provisions thereof giving holders thereof the right to require
such Person to purchase or redeem such Capital Stock upon the occurrence of an
"asset sale" or "change of control" occurring prior to the first anniversary of
the Stated Maturity of the Notes shall not constitute Redeemable Stock if (x)
the "asset sale" or "change of control" provisions applicable to such Capital
Stock are not more favorable to the holders of such Capital Stock than the terms
applicable to the Notes and described under Section 4.15 and Section 4.16 and
(y) any such requirement only becomes operative after compliance with such terms
applicable to the Notes including the purchase of any Notes tendered pursuant
thereto.
"Redemption Date" when used with respect to any Note to be
redeemed, means the date fixed for such redemption pursuant to this Indenture
and Paragraphs 8 and 9 of the Initial Notes and Paragraphs 7 and 8 of the
Exchange Notes.
"Redemption Price" when used with respect to any Note to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
and Paragraphs 8 and 9 of the Initial Notes and Paragraphs 7 and 8 of the
Exchange Notes.
"Registrar" shall have the meaning set forth in Section 2.3.
"Registration Rights Agreement" means the Registration Rights
Agreement between the Company and the Initial Purchaser, relating to the Notes
and dated as of May 27, 1998, as the same may be amended, supplemented or
modified from time to time in accordance with the terms thereof.
"Regulation S" means Regulation S (including any successor
regulation thereto) under the Securities Act, as it may be amended from time to
time.
"Regulation S Global Note" shall have the meaning set forth in
Section 2.1.
"Regulation S Note" shall have the meaning set forth in
Section 2.1.
"Relevant Taxing Jurisdiction" shall have the meaning set
forth in Section 4.20.
"Replacement Assets" means any property, plant or equipment of
a nature or type that are used or usable in Permitted Businesses.
"Restricted Period" shall have the meaning set forth in
Section 2.7(c).
<PAGE> 26
18
"Restricted Subsidiary" means, at any time, any direct or
indirect Subsidiary of the Company that is then not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 (including any successor regulation
thereto) under the Securities Act, as it may be amended from time to
time.
"Rule 144A" means Rule 144A (including any successor
regulation thereto) under the Securities Act, as it may be amended from time to
time.
"S&P" means Standard and Poor's Ratings Group.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Share Capital" means, at any time of determination, the
stated capital of the Equity Interests (other than Redeemable Stock) and
additional paid-in capital of the company asset forth on the most recent balance
sheet of the company at such time.
"Significant Subsidiary" shall have the meaning set forth in
Rule 405 (including any successor regulation thereto) of the rules and
regulations (the "Rules and Regulations") of the Commission, as they
may be amended from time to time.
"Stated Maturity" means, (i) with respect to any debt
security, the date specified in such debt security as the fixed date on which
the final installment of principal of such debt security is due and payable and
(ii) with respect to any scheduled installment of principal of or interest on
any debt security, the date specified in such debt security as the fixed date on
which such installment is due and payable.
"Strategic Minority Capital Stock Issues" means issuances or
sales of common stock of a Restricted Subsidiary, principally engaged in
business outside The Netherlands, to a Person which is principally engaged in
the Permitted Business and which has an equity market capitalization, a net
asset value or annual revenues of at least $500 million, which issuances or
sales do not represent more than 49% of the outstanding common stock of such
Restricted Subsidiary; provided that any such Strategic Minority Capital Stock
Issue is made to only one such Person with respect to any Restricted Subsidiary.
"Subsidiary" means, with respect to any Person (i) any
corporation, association or other business entity of which more than 50% of the
outstanding Voting Stock is at the time of determination owned, directly or
indirectly, by such Person or one
<PAGE> 27
19
or more other Subsidiaries of such Person and (ii) any partnership, joint
venture, limited liability company or similar entity of which (A) more than 50%
of the capital accounts, distribution rights, total equity and voting interests
or general or limited partnership interests, as applicable, are owned or
controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person or a combination thereof whether in the form of
membership, general, special or limited partnership or otherwise and (B) such
Person or any Restricted Subsidiary of such Person is a controlling general
partner, co-venturer, manager or similar position or otherwise controls such
entity.
"Successor Company" shall have the meaning set forth in
Section 5.1.
"Taxes" shall have the meaning set forth in Section 4.20.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb), as it may be amended from time to time.
"Telecommunications Assets" means, with respect to any Person,
assets used in the Permitted Business (or Equity Interests of a Person that
becomes a Restricted Subsidiary, the assets of which consist principally of such
Telecommunications Assets) that are purchased or acquired by the Company or a
Restricted Subsidiary after the Issue Date.
"Trade Payables" means any accounts payable or any other
indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by the Company or any of its Restricted Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods and
services.
"Transaction Date" means, with respect to the Incurrence of
any Indebtedness by the Company or any of its Restricted Subsidiaries, the date
such Indebtedness is to be Incurred and, with respect to any Restricted Payment,
the date such Restricted Payment is to be made.
"Trust Officer" means any officer within the corporate trust
department (or any successor group of the Trustee), including any vice
president, assistant vice president, corporate trust officer, assistant
corporate trust officer, 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 or her knowledge of and
familiarity with the particular subject.
<PAGE> 28
20
"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.
"Units" means units consisting of $1,000 aggregate principal
amount of Notes and one Warrant to purchase 6.667 Ordinary Shares of the
Company, issued by the Company on the Issue Date.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company which at the time of determination is an Unrestricted Subsidiary (as
designated by the Board of Directors in the manner provided below) and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary, or any of its Subsidiaries, owns any Equity Interests or
Indebtedness of, or owns or holds any Lien on any property of, the Company or
any Restricted Subsidiary; provided that (a) the Company certifies in an
Officers' Certificate that such designation complies with the covenants
described under Section 4.3, (b) such Subsidiary is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might reasonably be obtained in a
comparable arm's-length transaction at the time from Persons who are not
Affiliates of the Company, (c) neither the Company nor any of its Restricted
Subsidiaries has any direct or indirect obligation (1) to subscribe for
additional Equity Interests in such Subsidiary or any Subsidiary of such
Subsidiary or (2) to maintain or preserve such Subsidiary's financial condition
or to cause such Subsidiary to achieve any specified levels of operating results
and (d) such Subsidiary and its Subsidiaries has not at the time of designation,
and does not thereafter, Incur any Indebtedness other than Unrestricted
Subsidiary Indebtedness. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary of the Company; provided that
immediately after giving effect to such designation (x) the Company could Incur
$1.00 of additional Indebtedness under Section 4.4(a) on a pro forma basis
taking into account such designation and (y) no Default or Event of Default
shall have occurred and be continuing. Any such designation by the Board of
Directors shall be evidenced to the Trustee by promptly filing with the Trustee
a copy of the resolution of the Board of Directors giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"Unrestricted Subsidiary Indebtedness" means Indebtedness of
any Unrestricted Subsidiary (i) as to which neither the Company nor any
Restricted Subsidiary is directly or indirectly liable (by virtue of the Company
or any such Restricted Subsidiary being the primary obligor on, guarantor of, or
otherwise liable in any respect to, such Indebtedness), and (ii) which, upon the
occurrence of a default with
<PAGE> 29
21
respect thereto, does not result in, or permit any holder of any Indebtedness of
the Company or any Restricted Subsidiary to declare, a default on such
Indebtedness of the Company or any Restricted Subsidiary or cause the payment
thereof to be accelerated or payable prior to its Stated Maturity.
"U.S. GAAP" means, at any date of determination, generally
accepted accounting principles as in effect in the United States of America
which are applicable at the date of determination and which are consistently
applied for all applicable periods.
"U.S. Global Note" shall have the meaning set forth in Section
2.1.
"U.S. Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America for the payment of which
obligations or guarantee the full faith and credit of the United States is
pledged and are not callable or redeemable at the option of the issuer thereof.
"U.S. Notes" shall have the meaning set forth in Section 2.1.
"U.S. Person" means a "U.S. person" as defined in Rule 902
under the Securities Act or any successor to such Rule.
"Voting Stock" means, with respect to any Person, Capital
Stock of any class or kind ordinarily entitled to vote for the election of
directors thereof at a meeting of Stockholders called for such purpose, without
the occurrence of any additional event or contingency.
"Weighted Average Life to Maturity" means, at any date of
determination with respect to any Indebtedness, the quotient obtained by
dividing (i) (a) the sum of the products of the number of years from such date
of determination to the dates of each successive scheduled principal payment of,
or redemption or similar payment with respect to, such Indebtedness multiplied
by (b) the amount of such principal payment, by (ii) the sum of all such
principal payments.
"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 1.2 Incorporation by Reference of TIA. This Indenture
is subject to the mandatory provisions of the TIA which as of the date hereof
and
<PAGE> 30
22
thereafter as in effect are 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 Notes;
"indenture security holder" means a Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the indenture securities means the Company or any
other obligor on the Notes.
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 1.3 Rules of Construction. Unless the context
otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning
assigned to it in accordance with U.S. GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and words in the
plural include the singular;
(e) provisions apply to successive events and transactions;
and
(f) "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.
<PAGE> 31
23
ARTICLE II
THE NOTES
SECTION 2.1 Form and Dating. The Initial Notes and the
notation relating to the Trustee's certificate of authentication shall be
substantially in the form of Exhibits A or B, as applicable. The Exchange Notes
and the notation relating to the Trustee's certificate of authentication shall
be substantially in the form of Exhibits C or D, as applicable. The Notes 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 Notes and any
notation, legend or endorsement on them. Each Note shall be dated the date of
its issuance and shall show the date of its authentication.
The terms and provisions contained in the Notes, annexed
hereto as Exhibits A, B, C or D shall constitute, and are hereby expressly made,
a part of this Indenture and, to the extent applicable, the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby. The Notes will initially be
represented by the Initial Global Notes.
Notes offered and sold in their initial distribution in
reliance on Regulation S shall be initially issued as one or more global notes,
in registered global form without interest coupons, substantially in the form of
Exhibit A hereto, with such applicable legends as are provided in Exhibit A
hereto, except as otherwise permitted herein. Such Initial Global Notes shall be
referred to collectively herein as the "Regulation S Global Note." Such
Regulation S Global Note shall be deposited on behalf of the holders of the
Notes represented thereby with the Trustee, at its New York office, as custodian
for DTC, and registered in the name of DTC or its a nominee, duly executed by
the Company and authenticated by the Trustee or an Authenticating Agent as
provided herein, for credit to the accounts of the respective depositaries for
Euroclear and Cedel (or such other accounts as they may direct). The aggregate
principal amount of the Regulation S Global Note may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
custodian for DTC, or the records of DTC or its nominee, as the case may be, as
hereinafter provided (or by the issue of a further Regulation S Global Note), in
connection with a corresponding decrease or increase in the aggregate principal
amount of the U.S. Global Note or in consequence of the issue of Definitive
Notes or additional Regulation S Notes, as hereinafter provided. The Regulation
S Global Note and all other Initial Notes that are not U.S. Global Notes shall
collectively be referred to herein as the "Regulation S Notes".
Notes offered and sold in their initial distribution in
reliance on Rule 144A shall be initially issued as one or more global notes in
registered, global form without interest coupons, substantially in the form of
Exhibit A hereto, with such applicable legends as are provided in Exhibit A
hereto, except as otherwise permitted herein. Such
<PAGE> 32
24
Initial Global Note shall be referred to collectively herein as the "U.S. Global
Note." Such U.S. Global Notes shall be deposited on behalf of the holders of the
Notes represented thereby by the Trustee, at its New York office, as custodian
for DTC, duly executed by the Company and authenticated by the Trustee or
Authenticating Agent as provided herein. The aggregate principal amount of the
U.S. Global Note may from time to time be increased or decreased by adjustments
made on the records of the Trustee, as custodian for DTC, or the records of DTC
or its nominee, as the case may be, as hereinafter provided (or by the issue of
a further U.S. Global Note), in connection with a corresponding decrease or
increase in the aggregate principal amount of the Regulation S Global Note or in
consequence of the issue of Definitive Notes or additional U.S. Notes, as
hereinafter provided. The U.S. Global Note and all other Initial Notes
evidencing the debt, or any portion of the debt, initially evidenced by such
U.S. Global Note, shall collectively be referred to herein as the "U.S. Notes."
SECTION 2.2 Execution and Authentication. Two Officers, or an
Officer and a Secretary, shall sign, or one Officer shall sign and one Officer
or an Assistant Secretary (each of whom shall, in each case, have been duly
authorized by all requisite corporate actions) shall attest to, the Notes for
the Company by manual or facsimile signature.
If an Officer or Secretary whose signature is on a Note was an
Officer or Secretary at the time of such execution but no longer holds that
office or position at the time the Trustee authenticates the Note, the Note
shall be valid nevertheless.
A Note shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Note. The
signature shall be conclusive evidence that the Note has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Initial Notes for original
issue in the aggregate principal amount not to exceed $225,000,000, and (ii)
Exchange Notes from time to time for issue in the aggregate principal amount not
to exceed $225,000,000 for issuance in exchange for a like principal amount of
Initial Notes pursuant to an exchange offer registration statement under the
Securities Act or pursuant to a Private Exchange (as defined in the Registration
Rights Agreement), in each case upon receipt of a Company Order in the form of
an Officers' Certificate. Exchange Notes may have such distinctive series
designation, and such changes in the form thereof, as are specified in the
written order referred to in the preceding sentence. The Officers' Certificate
shall specify the amount of Notes to be authenticated, the series and type of
Notes and the date on which the Notes are to be authenticated, whether the Notes
are to be Initial Notes or Exchange Notes, whether the Notes are to be issued as
Definitive Notes or Global Notes and whether or not the Notes shall bear the
Private Placement Legend, or such other information as the Trustee may
reasonably request. In authenticating the Notes and accepting the
responsibilities under this Indenture in relation to the Notes the Trustee
<PAGE> 33
25
shall be entitled to receive, and shall be fully protected in relying upon, an
Opinion of Counsel stating that the form and terms thereof have been established
in conformity with the provisions of this Indenture. The aggregate principal
amount of Notes outstanding at any time may not exceed $225,000,000, except as
provided in Section 2.8. Upon receipt of a Company Order, the Trustee shall
authenticate Notes in substitution of Notes originally issued to reflect any
name change of the Company.
The Trustee may appoint an authenticating agent
("Authenticating Agent") reasonably acceptable to the Company to authenticate
Notes. Unless otherwise provided in the appointment, an Authenticating Agent may
authenticate Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
Authenticating Agent. An Authenticating Agent has the same rights as an Agent to
deal with the Company and Affiliates of the Company. The Trustee hereby appoints
United States Trust Company of New York to be the Authenticating Agent on the
Issue Date.
The Notes shall be issuable only in denominations of $1,000
and any integral multiple thereof.
SECTION 2.3 Registrar and Paying Agent. The Company shall
maintain an office or agency in the Borough of Manhattan, The City of New York
and, if and so long as the Notes are listed on the Luxembourg Stock Exchange and
the rules of such stock exchange so require, in Luxembourg, where (i) Global
Notes may be presented or surrendered for registration of transfer or for
exchange ("Registrar"), (ii) Global Notes may be presented or surrendered for
payment ("Paying Agent") and (iii) notices and demands in respect of such Global
Notes and this Indenture may be served. In the event that Definitive Notes are
issued, (x) Definitive Notes may be presented or surrendered for registration of
transfer or for exchange, (y) Definitive Notes may be presented or surrendered
for payment and (z) notices and demands in respect of the Definitive Notes and
this Indenture may be served at an office of the Registrar or the Paying Agent,
as applicable, in the Borough of Manhattan, The City of New York. The Registrar
shall keep a register of the Notes and of their transfer and exchange. The
Company, upon notice to the Trustee, may have one or more co-Registrars and one
or more additional Paying Agents reasonably acceptable to the Trustee. The term
"Registrar" includes any co-Registrar and the term "Paying Agent" includes any
additional Paying Agent. The Company initially appoints United States Trust
Company of New York as Registrar and Paying Agent until such time as United
States Trust Company of New York has resigned or a successor has been appointed.
The Company may change any Registrar or Paying Agent without notice to any
Holder. Payment of principal will be made upon the surrender of Definitive Notes
at the office of the Paying Agent, including, if any, the Paying Agent in
Luxembourg. In the case of a transfer of a Definitive Note in part, upon
surrender of the Definitive Note to be transferred, a Definitive Note shall be
issued to the transferee in respect of the principal amount
<PAGE> 34
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transferred and a Definitive Note shall be issued to the transferor in respect
of the balance of the principal amount of the transferred Definitive Note at the
office of any transfer agent, including, if any, the transfer agent in
Luxembourg.
If Definitive Notes are issued, the Company will appoint
Kredietbank S.A. Luxembourgeoise, or such other Person located in Luxembourg and
reasonably acceptable to the Trustee, as an additional paying and transfer
agent. Upon the issuance of Definitive Notes, Holders will be able to receive
principal and interest on the Notes and will be able to transfer Definitive
Notes at the Luxembourg office of such paying and transfer agent, subject to the
right of the Company to mail payments in accordance with the terms of this
Indenture.
SECTION 2.4 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, Additional
Amounts, if any, Liquidated Damages, if any, premium, if any, or interest on,
the Notes, and shall 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, the Paying Agent shall have no
further liability for such assets.
SECTION 2.5 List of Holders. 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 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 2.6 Book-Entry Provisions for Global Notes. (a) The
Global Notes initially shall (i) be registered in the name of DTC or the nominee
of such depositary, (ii) be delivered to the Trustee as custodian for such
depositary and (iii) bear legends as set forth in Section 2.7(g) hereto.
(b) Restrictions on Transfer and Exchange of Global Notes.
Notwithstanding any other provisions of this Indenture, a Global Note may not be
transferred as a whole except by DTC to a nominee of DTC or by a nominee of DTC
to DTC or another successor of DTC or a nominee of such successor depositary.
Interests
<PAGE> 35
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of beneficial owners in the Global Notes may be transferred or exchanged for
Definitive Notes in accordance with the rules and procedures of DTC and the
provisions of Section 2.7. All Global Notes shall be exchanged by the Company
(with authentication by the Trustee) for one or more Definitive Notes, if (a)
DTC (i) has notified the Company that it is unwilling or unable to continue as,
or ceases to be, a clearing agency registered under the Exchange Act and (ii) a
successor to DTC registered as a clearing agency under the Exchange Act is not
able to be appointed by the Company within 90 days of such notification or (b)
at any time at the option of the Company. If an Event of Default occurs and is
continuing, the Company shall, at the request of the Holder thereof, exchange
all or part of a Global Note for one or more Definitive Notes (with
authentication by the Trustee); provided, however, that the principal amount at
maturity of such Definitive Notes and such Global Note after such exchange shall
be $1,000 or integral multiples thereof. Whenever all of a Global Note is
exchanged for one or more Definitive Notes, it shall be surrendered by the
Holder thereof to the Trustee for cancellation. Whenever a part of a Global Note
is exchanged for one or more Definitive Notes the Global Note shall be
surrendered by the Holder thereof to the Trustee who shall cause an adjustment
to be made to Schedule A of such Global Note such that the principal amount of
such Global Note will be equal to the portion of such Global Note not exchanged
and shall thereafter return such Global Note to such Holder. A Global Note may
not be exchanged for a Definitive Note other than as provided in this Section
2.6(b).
(c) In connection with the transfer of Global Notes as an
entirety to beneficial owners pursuant to paragraph (b) of this Section 2.6, the
Global Notes 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 DTC in exchange for its beneficial interest in
the Global Notes, an equal aggregate principal amount of Definitive Notes of
authorized denominations.
(d) Any Definitive Note constituting a U.S. Note delivered in
exchange for an interest in a Global Note pursuant to paragraph (b) of this
Section 2.6 shall, except as otherwise provided by Section 2.8, bear the Private
Placement Legend.
SECTION 2.7 Registration of Transfer and Exchange. (a)
Notwithstanding any provision to the contrary herein, so long as a Note remains
outstanding, transfers of beneficial interests in Global Notes or transfers of
Definitive Notes, in whole or in part, shall be made only in accordance with
this Section 2.7.
(b) U.S. Global Note to Regulation S Global Note. If a holder
of a beneficial interest in the U.S. Global Note deposited with DTC wishes at
any time to exchange its interest in such U.S. Global Note for an interest in
the Regulation S Global Note, or to transfer its interest in such U.S. Global
Note to a Person who wishes to take
<PAGE> 36
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delivery thereof in the form of an interest in such Regulation S Global Note,
such holder may, subject to the rules and procedures of DTC and to the
requirements set forth in the following sentence, exchange or cause the exchange
or transfer or cause the transfer of such interest for an equivalent beneficial
interest in such Regulation S Global Note. Upon receipt by the Trustee, as
Transfer Agent, at its office in The City of New York of (1) instructions given
in accordance with DTC's procedures from or on behalf of a holder of a
beneficial interest in the U.S. Global Note, directing the Trustee (via DWAC),
as Transfer Agent, to credit or cause to be credited a beneficial interest in
the Regulation S Global Note in an amount equal to the beneficial interest in
the U.S. Global Note to be exchanged or transferred, (2) a written order given
in accordance with DTC's procedures containing information regarding the
Euroclear or Cedel account to be credited with such increase and the name of
such account, and (3) a certificate in the form of Exhibit E given by the holder
of such beneficial interest stating that the exchange or transfer of such
interest has been made pursuant to and in accordance with Rule 904 of Regulation
S or Rule 144 under the Securities Act, the Trustee, as Transfer Agent, shall
promptly deliver appropriate instructions to DTC (via DWAC), its nominee, or the
custodian for DTC, as the case may be, to reduce or reflect on its records a
reduction of the U.S. Global Note by the aggregate principal amount of the
beneficial interest in such U.S. Global Note to be so exchanged or transferred
from the relevant participant, and the Trustee, as Transfer Agent, shall
promptly deliver appropriate instructions (via DWAC) to DTC, its nominee, or
the custodian for DTC, as the case may be, concurrently with such reduction, to
increase or reflect on its records an increase of the principal amount of such
Regulation S Global Note by the aggregate principal amount of the beneficial
interest in such U.S. Global Note to be so exchanged or transferred, and to
credit or cause to be credited to the account of the Person specified in such
instructions (who shall be the agent member of Euroclear or Cedel, or both, as
the case may be) a beneficial interest in such Regulation S Global Note equal to
the reduction in the principal amount of such Restricted Global Note.
(c) Regulation S Global Note to U.S. Global Note. If a holder
of a beneficial interest in the Regulation S Global Note wishes at any time to
exchange its interest in such Regulation S Global Note for an interest in the
U.S. Global Note, or to transfer its interest in such Regulation S Global Note
to a Person who wishes to take delivery thereof in the form of an interest in
such U.S. Global Note, such holder may, subject to the rules and procedures of
Euroclear or Cedel and DTC, as the case may be, and to the requirements set
forth in the following sentence, exchange or cause the exchange or transfer or
cause the transfer of such interest for an equivalent beneficial interest in
such U.S. Global Note. Upon receipt by the Trustee, as Transfer Agent, at its
office in The City of New York of (l) instructions given in accordance with the
procedures of Euroclear or Cedel and DTC, as the case may be, from or on behalf
of a beneficial owner of an interest in the Regulation S Global Note directing
the Trustee, as Transfer Agent, to credit or cause to be credited a beneficial
interest in the U.S. Global Note in an amount equal to the beneficial interest
in the Regulation S Global Note to be
<PAGE> 37
29
exchanged or transferred, (2) a written order given in accordance with the
procedures of Euroclear or Cedel and DTC, as the case may be, containing
information regarding the account with DTC to be credited with such increase and
the name of such account, and (3) prior to or on the 40th day after the later of
the commencement of the offering of the Notes and the Closing Date (the
"Restricted Period"), a certificate in the form of Exhibit F given by the
holder of such beneficial interest and stating that the Person transferring such
interest in such Regulation S Global Note reasonably believes that the person
acquiring such interest in such U.S. Global Note is a Qualified Institutional
Buyer (as defined in Rule 144A) and is obtaining such beneficial interest in a
trans action meeting the requirements of Rule 144A and any applicable securities
laws of any state of the United States or any other jurisdiction, the Trustee,
as Transfer Agent, shall promptly deliver (via DWAC) appropriate instructions to
DTC, its nominee, or the custodian for DTC, as the case may be, to reduce or
reflect on its records a reduction of the Regulation S Global Note by the
aggregate principal amount of the beneficial interest in such Regulation S
Global Note to be exchanged or transferred, and the Trustee, as Transfer Agent,
shall promptly deliver (via DWAC) appropriate instructions to DTC, its nominee,
or the custodian for DTC, as the case may be, concurrently with such reduction,
to increase or reflect on its records an increase of the principal amount of
such U. S. Global Note by the aggregate principal amount of the beneficial
interest in such Regulation S Global Note to be so exchanged or transferred, and
to credit or cause to be credited to the account of the Person specified in such
instructions a beneficial interest in such U.S. Global Note equal to the
reduction in the principal amount of such Regulation S Global Note. After the
expiration of the Restricted Period, the certification requirement set forth in
clause (3) of the second sentence of this Section 2.7(c)(iii) will no longer
apply to such transfers.
(d) Any beneficial interest in one of the Global Notes that is
transferred to a Person who takes delivery in the form of an interest in the
other Global Note will, upon transfer, cease to be an interest in such Global
Note and become an interest in the other Global Note and, accordingly, will
thereafter be subject to all transfer restrictions and other procedures
applicable to beneficial interests in such other Global Note for as long as it
remains such an interest.
(e) Other Exchanges. In the event that a Global Note is
exchanged for Definitive Notes in registered form without interest coupons,
pursuant to Section 2.6(b), or a Definitive Note in registered form without
interest coupons is exchanged for another such Definitive Note in registered
form without interest coupons, or a Definitive Note is exchanged for a
beneficial interest in a Global Note, such Notes may be exchanged or
transferred for one another only in accordance with such procedures as are
substantially consistent with the provisions of Sections 2.7(b) and (c) above
(including the certification requirements intended to ensure that such exchanges
or transfers comply with Rule 144, Rule 144A or Regulation S, as the case may
be) and as may be from time to time adopted by the Company and the Trustee.
<PAGE> 38
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(f) Interests in Regulation S Global Note to be Held Through
Euroclear or Cedel. Prior to the expiration of the Restricted Period, beneficial
interests in the Regulation S Global Note may only be held by DTC through its
member participants who are agent members of Euroclear and Cedel, unless
delivery is made through the U.S. Global Note in accordance with the
certification requirements hereof.
(g) Private Placement Legend. Each Note issued hereunder
shall, upon issuance, bear the legend set forth herein and such legend shall not
be removed from such Note except as provided in the next sentence. The legend
required for a U.S. Note may be removed from a U.S. Note if there is delivered
to the Company and the Trustee such satisfactory evidence, which may include an
opinion of independent counsel licensed to practice law in the State of New
York, as may be reasonably required by the Company and the Trustee, that neither
such legend nor the restrictions on transfer set forth therein are required to
ensure that transfers of such Note will not violate the registration
requirements of the Securities Act. Upon provision of such satisfactory
evidence, the Trustee, at the direction of the Company, shall authenticate and
deliver in exchange for such Note another Note or Notes having an equal
aggregate principal amount that does not bear such legend. If such a legend
required for a U.S. Note has been removed from a U.S. Note as provided above, no
other Note issued in exchange for all or any part of such Note shall bear such
legend, unless the Company has reasonable cause to believe that such other Note
is a "restricted security" within the meaning of Rule 144 and instructs the
Trustee to cause a legend to appear thereon.
The Initial Notes shall bear the following legend (the
"Private Placement Legend") on the face thereof:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST
OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF
THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF
REGULATION S, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH
IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE
144(k) UNDER THE SECURITIES ACT OR ANY
<PAGE> 39
31
SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE
DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON
WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE,
IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION
TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY
EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A,
TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES
THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE
COMPANY AND THE TRUSTEE SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE
FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OR TRANSFER IN THE
FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE TRUSTEE, THIS LEGEND WILL BE REMOVED
UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES"
AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER
THE SECURITIES ACT.
The Global Notes shall also bear the following legend on the
face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS AGENT FOR
REGISTRATION
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OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER REPRESENTATIVE OF
DTC AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
THE RESTRICTIONS SET FORTH IN SECTION 2.6 OF THE INDENTURE PURSUANT TO
WHICH THEY WERE ISSUED.
(h) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the
restrictions on transfer of such Note set forth in this Indenture and
in the Private Placement Legend and agrees that it will transfer such
Note 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 Note (including any transfers between or among Agent Members or
beneficial owners of interest in any Global Note) other than to require delivery
of such certificates and other documentation or evidence as are expressly
required by, and to do so if and when expressly required by the terms of, this
Indenture, 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 2.6 or this Section
2.7. 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.
(i) Any Initial Notes which are presented to the Registrar for
exchange pursuant to the Exchange Offer shall be exchanged for Exchange Notes of
equal principal
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33
amount upon surrender to the Registrar of the Initial Notes to be exchanged;
provided, however, that the Initial Notes so surrendered for exchange shall be
duly endorsed and accompanied by a letter of transmittal or written instrument
of transfer in form satisfactory to the Company, the Trustee and the Registrar
duly executed by the Holder thereof or his attorney who shall be duly authorized
in writing to execute such document. Whenever any Initial Notes are so
surrendered for exchange, the Company shall execute, and upon receipt of the
Company Order provided for in Section 2.2, the Trustee shall authenticate and
deliver to the Holder the same aggregate principal amount of Exchange Notes as
those Initial Notes that have been surrendered.
(j) Definitive Notes shall be transferable only upon the
surrender of a Definitive Note for registration of transfer. When a Definitive
Note is presented to the Registrar or a co-registrar with a request to register
a transfer, the Registrar shall register the transfer as requested if its
requirements for such transfers are met. When Definitive Notes are presented to
the Registrar or a co-registrar with a request to exchange them for an equal
principal amount of Definitive Notes of other denominations, the Registrar shall
make the exchange as requested if the same requirements are met. To permit
registration of transfers and exchanges, the Company shall execute and the
Trustee shall authenticate Definitive Notes at the Registrar's or co-registrar's
request.
(k) The Company shall not be required to make, and the
Registrar need not register transfers or exchanges of, Definitive Notes selected
for redemption (except, in the case of Definitive Notes to be redeemed in part,
the portion thereof not to be redeemed) or any Definitive Notes for a period of
15 days before a selection of Definitive Notes to be redeemed.
(l) Prior to the due presentation for registration of transfer
of any Definitive Note, the Company, the Trustee, the Paying Agent, the
Registrar or any co-registrar may deem and treat the Person in whose name a
Definitive Note is registered as the absolute owner of such Definitive Note for
the purpose of receiving payment of principal, interest, Additional Amounts, if
any, or Liquidated Damages, if any, on such Definitive Note and for all other
purposes whatsoever, whether or not such Definitive Note is overdue, and none of
the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar
shall be affected by notice to the contrary.
(m) The Company may require payment of a sum sufficient to pay
all taxes, assessments or other governmental charges in connection with any
transfer or exchange pursuant to this Section 2.7 (other than in respect of the
Exchange Offer, except as otherwise provided in the Registration Rights
Agreement).
(n) All Notes issued upon any transfer or exchange pursuant to
the terms of this Indenture will evidence the same debt and will be entitled to
the same benefits under this Indenture as the Notes surrendered upon such
transfer or exchange.
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(o) Holders of Initial Notes (or holders of interests therein)
and prospective purchasers designated by such Holders (or holders of interests
therein) will have the right to obtain from the Company upon request by such
Holders (or holders of interests therein) or prospective purchasers, during any
period in which the Company is not subject to Section 13 or 15(d) of the
Exchange Act, or is exempt from reporting pursuant to 12g3-2(b) under the
Exchange Act, the information required by paragraph d(4)(i) of Rule 144A in
connection with any transfer or proposed transfer of such Notes.
SECTION 2.8 Replacement Notes. If a mutilated Definitive Note
is surrendered to the Registrar, if a mutilated Global Note is surrendered to
the Company or if the Holder of a Note claims that such Note has been lost,
destroyed or wrongfully taken, the Company shall issue and the Trustee shall
authenticate a replacement Note in such form as the Note being replaced if the
requirements of the Trustee, the Registrar and the Company are met. If required
by the Trustee, the Registrar or the Company, such Holder must provide an
indemnity bond or other indemnity, sufficient in the judgment of the Company,
the Registrar and the Trustee, to protect the Company, the Registrar, the
Trustee and any Agent from any loss which any of them may suffer if a Note is
replaced. The Company may charge such Holder for its reasonable, out-of-pocket
expenses in replacing a Note, including reasonable fees and expenses of counsel.
Every replacement Note is an additional obligation of the Company.
SECTION 2.9 Outstanding Notes. Notes outstanding at any time
are all the Notes that have been authenticated by the Trustee except those
cancelled by it, those delivered to it for cancellation, those reductions in the
Global Note effected in accordance with the provisions hereof and those
described in this Section as not outstanding. Subject to Section 2.10, a Note
does not cease to be outstanding because the Company or any of its Affiliates
holds the Note.
If a Note is replaced pursuant to Section 2.8 (other than a
mutilated Note surrendered for replacement), it ceases to be outstanding unless
the Trustee receives proof satisfactory to it that the replaced Note is held by
a bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender
of such Note and replacement thereof pursuant to Section 2.8.
If the principal amount of any Note is considered paid under
Section 4.1 hereof, it ceases to be outstanding and interest, Additional
Amounts, if any and Liquidated Damages, if any, on it cease to accrue.
If on a Redemption Date or the Maturity Date the Paying Agent
holds cash in U.S. dollars or Government Securities sufficient to pay all of the
principal and interest due on the Notes payable on that date, then on and after
that date such Notes cease to be
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35
outstanding and interest, Additional Amounts, if any, and Liquidated Damages, if
any, on such Notes cease to accrue.
SECTION 2.10 Treasury Notes. In determining whether the
Holders of the required principal amount of Notes have concurred in any
direction, waiver or consent, Notes owned by the Company or 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
Notes that a Trust Officer of the Trustee actually knows are so owned shall be
disregarded.
The Company shall notify the Trustee, in writing, when it or
any of its Affiliates repurchases or otherwise acquires Notes of the aggregate
principal amount of such Notes so repurchased or otherwise acquired. The Trustee
may require an Officers' Certificate listing Notes owned by the Company, a
Subsidiary of the Company or an Affiliate of the Company.
SECTION 2.11 Temporary Notes. Until permanent Definitive Notes
are ready for delivery, the Company may prepare and the Trustee shall
authenticate temporary Definitive Notes upon receipt of a Company Order in the
form of an Officers' Certificate. The Officers' Certificate shall specify the
amount of temporary Definitive Notes to be authenticated and the date on which
the temporary Definitive Notes are to be authenticated. Temporary Definitive
Notes shall be substantially in the form of permanent Definitive Notes but may
have variations that the Company considers appropriate for temporary Definitive
Notes. Without unreasonable delay, the Company shall prepare and the Trustee
shall authenticate upon receipt of a Company Order pursuant to Section 2.2
permanent Definitive Notes in exchange for temporary Definitive Notes.
SECTION 2.12 Cancellation. The Company at any time may deliver
Notes to the Trustee for cancellation. The Registrar and the Paying Agent shall
forward to the Trustee any Notes surrendered to them for 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 and, at the written direction of the
Company, shall dispose of (subject to the record retention requirements of the
Exchange Act) all Notes surrendered for transfer, exchange, payment or
cancellation; provided, however, that the Trustee may, but shall not be required
to, destroy such cancelled Notes. Subject to Section 2.7, the Company may not
issue new Notes to replace Notes that it has paid or delivered to the Trustee
for cancellation. If the Company shall acquire any of the Notes, such
acquisition shall not operate as a redemption or satisfaction of the
Indebtedness represented by such Notes unless and until the same are surrendered
to the Trustee for cancellation pursuant to this Section 2.12.
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SECTION 2.13 Defaulted Interest. If the Company defaults in a
payment of interest on the Notes, it shall pay the defaulted interest, plus (to
the extent lawful) any interest payable on the defaulted interest, to the Holder
thereof on a subsequent special record date, which date shall be the fifteenth
day next preceding the date fixed by the Company for the payment of defaulted
interest. The Company shall notify the Trustee and Paying Agent in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment (a "Default Interest Payment Date"), and at the same
time the Company shall deposit with the Trustee or Paying Agent an amount of
money equal to the aggregate amount proposed to be paid in respect of such
defaulted interest or shall make arrangements satisfactory to the Trustee or
Paying Agent for such deposit prior to the date of the proposed payment, such
money when deposited to be held in trust for the benefit of the Persons entitled
to such defaulted interest as in this Section 2.13; provided, however, that in
no event shall the Company deposit monies proposed to be paid in respect of
defaulted interest later than 11:00 a.m. New York City time on the proposed
Default Interest Payment Date with respect to defaulted interest to be paid on
the Note. At least 15 days before the subsequent special record date, the
Company shall mail to each Holder, with a copy to the Trustee, a notice that
states the subsequent special record date, the payment date and the amount of
defaulted interest, and interest payable on such defaulted interest, if any, to
be paid.
SECTION 2.14 CUSIP, ISIN and Common Code Numbers. The Company
in issuing the Notes may use a "CUSIP", "ISIN" or "Common Code" number, and if
so, the Trustee shall use the CUSIP, ISIN and Common Code number in notices of
redemption or exchange as a convenience to Holders; provided, however, that any
such notice may state that no representation is made as to the correctness or
accuracy of the CUSIP, ISIN and Common Code number printed in the notice or on
the Notes, and that reliance may be placed only on the other identification
numbers printed on the Notes. The Company shall promptly notify the Trustee of
any change in any CUSIP, ISIN or Common Code number.
SECTION 2.15 Deposit of Moneys. Prior to 11:00 a.m. New York
City time on each Interest Payment Date and Maturity Date, the Company shall
have deposited with the Paying Agent in immediately available funds money
sufficient to make cash payments, if any, due on such Interest Payment Date or
Maturity Date, as the case may be, on all Notes then outstanding. Such payments
shall be made by the Company in a timely manner which permits the Paying Agent
to remit payment to the Holders on such Interest Payment Date or Maturity Date,
as the case may be.
SECTION 2.16 Certain Matters Relating to Global Notes. (a)
Members of, or participants in, DTC ("Agent Members") shall have no rights under
this Indenture with respect to any Global Note held on their behalf by DTC or
the Trustee as its custodian, or under the Global Note, and DTC may be treated
by the Company, the
<PAGE> 45
37
Trustee and any agent of the Company or the Trustee as the absolute owner of the
Global Note 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 DTC or impair, as between DTC and its Agent Members,
the operation of customary practices governing the exercise of the rights of a
Holder of any Note.
(b) The Holder of any Global Note may grant proxies and
otherwise authorize any person, including DTC and its Agent Members and persons
that may hold interests through Agent Members, to take any action which a Holder
is entitled to take under this Indenture or the Notes.
ARTICLE III
REDEMPTION
SECTION 3.1 Optional Redemption. The Company may redeem all or
any portion of the Notes, upon the terms and at the redemption prices set forth
in each of the Notes. Any redemption pursuant to this Section 3.1 shall be made
pursuant to the provisions of this Article III.
SECTION 3.2 Notices to Trustee. If the Company elects to
redeem Initial Notes pursuant to Paragraphs 8 or 9 of such Notes or Exchange
Notes pursuant to Paragraphs 7 or 8 thereof, it shall notify the Trustee in
writing of the Redemption Date and the principal amount of Notes to be redeemed
at least 15 days prior to the giving of the notice contemplated by Section 3.4
(or such shorter period as the Trustee in its sole discretion shall determine).
The Company shall give notice of redemption as required under the relevant
paragraph of the Notes pursuant to which such Notes are being redeemed.
SECTION 3.3 Selection of Notes To Be Redeemed. If less than
all of the Notes are to be redeemed at any time, selection of such Notes for
redemption will be made by the Trustee in compliance with the requirements of
the principal securities exchange, if any, on which such Notes are listed, if
such Notes are not so listed or such exchange prescribes no method of selection,
on a pro rata basis, by lot or by such other method as the Trustee in its sole
discretion shall deem fair and appropriate (and in such manner as complies with
applicable legal and exchange requirements); provided, however, that no Note of
$1,000 in aggregate principal amount or less shall be redeemed in part. In the
event of partial redemption by lot, the particular Notes to be redeemed shall be
selected, unless otherwise provided herein, not less than 30 nor more than 60
days prior to the Redemption Date by the Trustee from the outstanding Notes not
previously called for redemption.
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SECTION 3.4 Notice of Redemption. At least 30 days but not
more than 60 days before a Redemption Date, the Company shall publish in a
leading newspaper having a general circulation in New York (which is expected to
be The Wall Street Journal) and in Amsterdam (which is expected to be Het
Financieele Dagblad) (and, if and so long as the Notes are listed on the
Luxembourg Stock Exchange and the rules of such Stock Exchange shall so require,
a newspaper having a general circulation in Luxembourg (which is expected to be
the Luxemburger Wort)) or in the case of Definitive Notes, mail to Holders by
first-class mail, postage prepaid, at their respective addresses as they appear
on the registration books of the Registrar (and, if and so long as the Notes are
listed on the Luxembourg Stock Exchange and the rules of such Stock Exchange
shall so require, publish in a newspaper having a general circulation in
Luxembourg (which is expected to be the Luxemburger Wort)). At the Company's
request made at least 45 days before the Redemption Date (or such shorter period
as the Trustee in its sole discretion shall determine), the Trustee shall give
the notice of redemption in the Company's name and at the Company's expense;
provided, however, that the Company shall deliver to the Trustee, an Officers'
Certificate requesting that the Trustee give such notice and setting forth the
information to be stated in such notice as provided in the following items. Each
notice for redemption shall identify the Notes to be redeemed and shall state:
(a) the Redemption Date;
(b) the Redemption Prices and the amount of interest, if any,
Additional Amounts, if any, and Liquidated Damages, if any, to be paid;
(c) the name and address of the Paying Agent;
(d) that Notes called for redemption must be surrendered to
the Paying Agent to collect the Redemption Price plus accrued and
unpaid interest, if any, Additional Amounts, if any, and Liquidated
Damages, if any;
(e) that, unless the Company defaults in making the redemption
payment, interest, Additional Amounts, if any, and Liquidated Damages,
if any, on Notes called for redemption cease to accrue on and after the
Redemption Date, and the only remaining right of the Holders of such
Notes is to receive payment of the Redemption Price upon surrender to
the Paying Agent of the Notes redeemed;
(f) (i) if any Global Note is being redeemed in part, the
portion of the principal amount of such Note to be redeemed and that,
after the Redemption Date, interest, Additional Amounts, if any, and
Liquidated Damages, if any, shall cease to accrue on the portion called
for redemption, and upon surrender of such Global Note, the Global Note
with a notation on Schedule A thereof adjusting the principal amount
thereof to be equal to the unredeemed portion, will be returned
<PAGE> 47
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and (ii) if any Definitive Note is being redeemed in part, the portion
of the principal amount of such Note to be redeemed, and that, after
the Redemption Date, upon surrender of such Definitive Note, a new
Definitive Note or Notes in aggregate principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder
thereof, upon cancellation of the original Note;
(g) if fewer than all the Notes are to be redeemed, the
identification of the particular Notes (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Notes to be
redeemed and the aggregate principal amount of Notes to be outstanding
after such partial redemption;
(h) the paragraph of the Notes pursuant to which the Notes are
to be redeemed; and
(i) the CUSIP, ISIN or Common Code number, and that no
representation is made as to the correctness or accuracy of the CUSIP,
ISIN or Common Code number, if any, listed in such notice or printed on
the Notes.
SECTION 3.5 Effect of Notice of Redemption. Once notice of
redemption is given in accordance with Section 3.4, Notes called for redemption
become due and payable on the Redemption Date and at the Redemption Price plus
accrued and unpaid interest, if any, Additional Amounts, if any, and Liquidated
Damages, if any. Upon surrender to the Trustee or Paying Agent, such Notes
called for redemption shall be paid at the Redemption Price (which shall include
accrued and unpaid interest thereon, if any, Additional Amounts, if any, and
Liquidated Damages, if any, to the Redemption Date), but installments of
interest, the maturity of which is on or prior to the Redemption Date, shall be
payable to Holders of record at the close of business on the relevant Record
Dates.
SECTION 3.6 Deposit of Redemption Price. Prior to 11:00 a.m.
New York City time on the Redemption Date, the Company shall deposit with the
Paying Agent cash in U.S. dollars sufficient to pay the Redemption Price plus
accrued and unpaid interest, if any, Additional Amounts, if any, and Liquidated
Damages, if any, of all Notes to be redeemed on that date. The Paying Agent
shall promptly return to the Company any cash in U.S. dollars so deposited which
is not required for that purpose upon the written request of the Company.
If the Company complies with the preceding paragraph, then,
unless the Company defaults in the payment of such Redemption Price plus accrued
and unpaid interest, if any, Additional Amounts, if any, and Liquidated Damages,
if any, interest, Additional Amounts and Liquidated Damages on the Notes to be
redeemed will cease to accrue on and after the applicable Redemption Date,
whether or not such Notes are presented for payment. With respect to Definitive
Notes, if a Definitive Note is
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redeemed on or after an interest Record Date but on or prior to the related
Interest Payment Date, then any accrued and unpaid interest, Additional Amounts,
if any, and Liquidated Damages, if any, shall be paid to the Person in whose
name such Note was registered at the close of business on such Record Date. If
any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest, Additional Amounts, if any, and Liquidated Damages, if any,
shall be paid on the unpaid principal, from the redemption date until such
principal is paid, and to the extent lawful on any interest not paid on such
unpaid principal, in each case at the rate provided in the Notes and in Section
4.1.
SECTION 3.7 Notes Redeemed in Part. Upon surrender and
cancellation of a Definitive Note that is redeemed in part, the Company shall
execute and the Trustee shall authenticate for the Holder (at the Company's
expense) a new Definitive Note equal in principal amount to the unredeemed
portion of the Definitive Note surrendered and cancelled; provided, however,
that each such Definitive Note shall be in a principal amount at maturity of
$1,000 or an integral multiple thereof. Upon surrender of a Global Note that is
redeemed in part, the Paying Agent shall forward such Global Note to the Trustee
who shall make a notation on Schedule A thereof to reduce the principal amount
of such Global Note to an amount equal to the unredeemed portion of the Global
Note surrendered; provided, however, that each such Global Note shall be in a
principal amount at maturity of $1,000 or an integral multiple thereof.
ARTICLE IV
COVENANTS
SECTION 4.1 Payment of Notes. (a) The Company shall pay the
principal, premium, if any, interest, Additional Amounts, if any, and Liquidated
Damages, if any, on the Notes in the manner provided in such Notes and this
Indenture. An installment of principal of or interest on the Notes shall be
considered paid on the date it is due if the Trustee or Paying Agent holds at
11:00 a.m. New York City time on that date money deposited by the Company in
immediately available funds and designated for, and sufficient to pay the
installment in full and is not prohibited from paying such money to the Holders
pursuant to the terms of this Indenture.
(b) The Company shall pay, to the extent such payments are
lawful, interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and on overdue installments of interest
(without regard to any applicable grace periods), on any Additional Amounts, and
on any Liquidated Damages, from time to time on demand at the rate borne by the
Notes plus 2% per annum. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months.
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SECTION 4.2 Maintenance of Office or Agency. The Company shall
maintain the office or agency (which office may be an office of the Trustee or
an affiliate of the Trustee, Registrar or co-Registrar) required under Section
2.3 where Notes may be surrendered for registration of transfer or for exchange
and where notices and demands to or upon the Company in respect of the Notes and
this Indenture may be served. 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 11.2. The Company hereby initially
designates the office of CT Corporation System, located at 1633 Broadway, New
York, New York, 10019, as its office or agency outside The Netherlands as
required under Section 2.3 hereof. If Definitive Notes are issued, and if the
Notes are listed on the Luxembourg Stock Exchange, the Company will appoint
Kredietbank S.A. Luxembourgeoise, or such other Person located in Luxembourg and
reasonably acceptable to the Trustee, as an additional paying and transfer
agent.
SECTION 4.3 Limitation on Restricted Payments. (a) The Company
will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, (i) declare or pay any dividend or make any distribution on account
of any Equity Interest in the Company or any Restricted Subsidiary to the
holders thereof, including any dividend or distribution payable in connection
with any merger or consolidation (other than (A) dividends or distributions
payable solely in Equity Interests (other than Redeemable Stock) of the Company,
(B) dividends or distributions made only to the Company or a Restricted
Subsidiary and (C) pro rata dividends or distributions on Capital Stock of a
Restricted Subsidiary held by Persons other than the Company or a Restricted
Subsidiary), (ii) purchase, redeem, retire or otherwise acquire for value any
Equity Interests of the Company or any Equity Interests of any Restricted
Subsidiary (other than any such Equity Interests owned by the Company or any
Restricted Subsidiary), (iii) make any principal payment or redeem, repurchase,
defease, or otherwise acquire or retire for value, in each case, prior to any
scheduled repayment, or maturity, any Indebtedness of the Company that is
subordinated in right of payment to the Notes, or (iv) make any Investment,
other than a Permitted Investment, in any Person (all such payments or any other
actions described in clauses (i) through (iv) above being collectively referred
to as "Restricted Payments") unless, at the time of, and after giving effect to,
the proposed Restricted Payment:
(A) no Default or Event of Default shall have occurred and be
continuing;
(B) the Company could Incur at least $1.00 of additional Indebtedness
under Section 4.4(a); and
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(C) the aggregate amount expended for all Restricted Payments (the
amount so expended, if other than in cash, to be determined in good faith by the
Board of Directors, whose determination shall be conclusive and evidenced by a
Board Resolution) after the Issue Date is less than the sum of (1) Cumulative
Consolidated Cash Flow minus 150% of Cumulative Consolidated Fixed Charges plus
(2) 100% of the aggregate Net Cash Proceeds received by the Company after the
Issue Date as a capital contribution or from the issuance and sale of its Equity
Interests (other than Redeemable Stock, and excluding any Ordinary Shares issued
in connection with the Offering or the Recapitalization, as defined in the
Offering Memorandum) to a Person (other than a Restricted Subsidiary of the
Company), plus (3) the aggregate amount by which Indebtedness (other than any
Indebtedness subordinated in right of payment to the Notes) of the Company or
any Restricted Subsidiary is reduced on the Company's balance sheet upon the
conversion or exchange (other than by a Restricted Subsidiary of the Company)
subsequent to the Issue Date into Equity Interests (other than Redeemable Stock
and 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) and
plus (4) without duplication of any amount included in the calculation of
Consolidated Net Income, in the case of repayment of, or return of capital in
respect of, any Investment constituting a Restricted Payment made after the
Issue Date, an amount equal to the lesser of the repayment of, the return of
capital with respect to, such Investment and the cost of such Investment, in
either case less the cost of the disposition of such Investment and net of
taxes.
(b) The foregoing provisions in Section 4.3(a) shall
not prohibit:
(i) the payment of any dividend within 60 days after the date
of declaration thereof if, at said date of declaration, such payment
would comply with the provisions of the Indenture; (ii) the redemption,
repurchase, defeasance or other acquisition or retirement for value of
Indebtedness that is subordinated in right of payment to the Notes
including premium, if any, and accrued and unpaid interest, with the
proceeds of, or in exchange for, Indebtedness Incurred under clause
(iii) of paragraph Section 4.4(b); (iii) the repurchase, redemption or
other acquisition of Equity Interests in the Company in exchange for,
or out of the Net Cash Proceeds of, a substantially concurrent capital
contribution or offering of Equity Interests (other than Redeemable
Stock) in the Company to any Person (other than a Restricted
Subsidiary); (iv) the repurchase, redemption or other acquisition of
Indebtedness of the Company which is subordinated in right of payment
to the Notes in exchange for, or out of the Net Cash Proceeds
of, a substantially concurrent capital contribution or offering of
Equity Interests (other than Redeemable Stock) in the Company to any
Person (other than a Restricted Subsidiary); (v) the purchase of any
subordinated Indebtedness at a purchase price not greater than 101% of
the principal amount thereof following a Change of Control pursuant to
an obligation in the instruments governing such subordinated
Indebtedness to purchase or redeem such subordinated Indebtedness as a
result of
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such Change of Control; provided, however, that no such purchase or
redemption shall be permitted until the Company has completely
discharged its obligations described under Section 4.15 (including the
purchase of all Notes tendered for purchase by holders) arising as a
result of such Change of Control; (vi) repurchases of Warrants in
accordance with Section 5.3 of the Warrant Agreement; and (vii)
repurchases of Equity Interests of the Company from employees of the
Company or any of its Restricted Subsidiaries deemed to occur upon
exercise of stock options if such Equity Interests represent a portion
of the exercise price of such options; provided that any payments made
pursuant to this clause (vii) may not exceed in aggregate $500,000 in
any fiscal year of the Company;
provided that in the case of clauses (ii) through (vii), no Default or Event of
Default shall have occurred and be continuing or occur as a consequence of the
actions or payments set forth therein.
Each Restricted Payment permitted pursuant to this Section 4.3(b) (other than
the Restricted Payment referred to in clause (ii) hereof) and the Net Cash
Proceeds from any capital contribution or issuance of Equity Interests referred
to in clauses (iii) and (iv), shall be included in calculating whether the
conditions of clause (C) of Section 4.3(a) have been met with respect to any
subsequent Restricted Payments. In the event the proceeds of an issuance of
Equity Interests (other than Redeemable Stock) of the Company are used for the
redemption, repurchase or other acquisition of the Notes, then the Net Cash
Proceeds of such issuance shall be included in clause (C) of the Section 4.3(a)
only to the extent such proceeds are not used for such redemption, repurchase or
other acquisition of the Notes.
(c) Not later than the date of making any Restricted Payment,
the Company shall deliver to the Trustee an Officers' Certificate stating that
such Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.3 were computed, which calculations may
be based upon the Company's latest available financial statements. The Trustee
shall have no duty to recompute or recalculate or verify the accuracy of the
information set forth in such Officers' Certificate.
SECTION 4.4 Limitation on Indebtedness. (a) The Company will
not, and will not permit any of its Restricted Subsidiaries to, Incur any
Indebtedness; provided, however, that if no Default or Event of Default shall
have occurred and be continuing at the time, or would occur as a consequence, of
the Incurrence of any such Indebtedness, the Company may Incur Indebtedness if
immediately thereafter the ratio of (i) the aggregate principal amount of
Indebtedness of the Company and its Restricted Subsidiaries on a consolidated
basis outstanding as of the Transaction Date to (ii) the pro forma Consolidated
Cash Flow (the "Indebtedness to
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44
Consolidated Cash Flow Ratio") for the preceding two full fiscal quarters
multiplied by two, determined on a pro forma basis as if any such Indebtedness
had been Incurred and the proceeds thereof had been applied at the beginning of
such two fiscal quarters, would be greater than zero and less than or equal to
5.0 to 1.
(b) Notwithstanding the foregoing, (except for Indebtedness under
subsection (vii) below) the Company and (except for Indebtedness under
subsections (v), (vi) and (x) (A) below) any Restricted Subsidiary may Incur
each and all of the following:
(i) Indebtedness (other than Acquired Indebtedness) Incurred
to finance the cost (provided that such Indebtedness is Incurred at any time on
or before, or within 90 days following, the incurrence of such cost) (including
the cost of design, development, construction, acquisition, installation or
integration) of assets used in the Permitted Business or Equity Interests of (A)
a Restricted Subsidiary, that owns principally such assets, from a Person other
than the Company or a Restricted Subsidiary of the Company or (B) any Person
that is principally engaged in the Permitted Business, that would become a
Restricted Subsidiary and owns principally such assets; provided that (x) any
such Indebtedness of a Restricted Subsidiary must be Incurred under one or more
Credit Facilities, under one or more Capitalized Leases or from the vendor of
the assets, property or services acquired with the proceeds of such
Indebtedness, (y) the amount of such Indebtedness of a Restricted Subsidiary may
not exceed the Fair Market Value of the assets so acquired and (z) the amount of
such Indebtedness of the Company, Incurred to acquire Equity Interests under
clauses (A) and (B) above, may not exceed the Fair Market Value of such assets
of any Restricted Subsidiary or any such Person so acquired;
(ii) Indebtedness of any Restricted Subsidiary to the Company
or Indebtedness of the Company or any Restricted Subsidiary to any other
Restricted Subsidiary; provided that any subsequent issuance or transfer of any
Capital Stock which results in any such Restricted Subsidiary ceasing to be a
Restricted Subsidiary or any subsequent transfer of such Indebtedness not
permitted by this clause (ii) (other than to the Company or another Restricted
Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such
Indebtedness; and provided, further, that Indebtedness of the Company to a
Restricted Subsidiary must be unsecured and subordinated in right of payment to
the Notes;
(iii) Indebtedness issued in exchange for, or the net proceeds
of which are used to refinance or refund, then outstanding Indebtedness of the
Company or a Restricted Subsidiary, other than Indebtedness Incurred under this
Section 4.4(b) (ii), (iv), (vii), (viii) and (xii), and any refinancings thereof
in an amount not to exceed the amount so refinanced or refunded (plus premiums,
accrued interest, and reasonable fees and expenses); provided that such new
Indebtedness shall only be permitted under this Section 4.4(b) (iii) if (A) in
case the Notes are refinanced in part or the Indebtedness to
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be refinanced or refunded is pari passu with the Notes, such new Indebtedness,
by its terms or by the terms of any agreement or instrument pursuant to which
such new Indebtedness is issued or remains outstanding, is expressly made pari
passu with, or subordinate in right of payment to, the remaining Notes, (B) in
case the Indebtedness to be refinanced is subordinated in right of payment to
the Notes, such new Indebtedness, by its terms or by the terms of any agreement
or instrument pursuant to which such new Indebtedness is issued or remains
outstanding, is expressly made subordinate in right of payment to the Notes at
least to the extent that the Indebtedness to be refinanced or refunded is
subordinated to the Notes, (C) the Stated Maturity of such new Indebtedness,
determined as of the date of Incurrence of such new Indebtedness, is no earlier
than the Stated Maturity of the Indebtedness being refinanced or refunded and
(D) such new Indebtedness, determined as of the date of Incurrence of such new
Indebtedness, has a Weighted Average Life to Maturity which is not less than the
remaining Weighted Average Life to Maturity of the Indebtedness to be refinanced
or refunded; and provided, further, that in no event may Indebtedness of the
Company be refinanced or refunded by means of any Indebtedness of any Restricted
Subsidiary pursuant to this Section 4.4(b) (iii);
(iv) Indebtedness (A) in respect of performance, surety or
appeal bonds or letters of credit supporting Trade Payables, in each case
provided in the ordinary course of business, (B) under Currency Agreements and
Interest Rate Agreements; provided that such agreements do not increase the
Indebtedness of the obligor outstanding at any time other than as a result of
fluctuations in foreign currency exchange rates or interest rates or by reason
of fees, indemnities and compensation payable thereunder, and (C) arising from
agreements providing for indemnification, adjustment of purchase price or
similar obligations, or from Guarantees or letters of credit, surety bonds or
performance bonds securing any obligations of the Company or any of its
Restricted Subsidiaries pursuant to such agreements, in any case Incurred in
connection with the disposition of any business, assets or Restricted Subsidiary
of the Company (other than Guarantees of Indebtedness Incurred for the purpose
of financing such acquisition by the Person acquiring all or any portion of such
business, assets or Restricted Subsidiary), in a principal amount not to exceed
the gross proceeds actually received by the Company or any Restricted Subsidiary
in connection with such disposition;
(v) Indebtedness, to the extent that the net proceeds thereof
are promptly (A) used to repurchase Notes tendered in a Change of Control Offer
or (B) deposited to defease all of the Notes as described in Sections 8.1 and
8.2;
(vi) Indebtedness of the Company represented by the Notes;
(vii) Indebtedness represented by a Guarantee of the Notes and
Guarantees of other Indebtedness of the Company by a Restricted Subsidiary, in
each case permitted by and made in accordance with Section 4.17;
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46
(viii) Indebtedness under one or more Credit Facilities, in an
aggregate principal amount at any one time outstanding not to exceed the greater
of (x) NLG 70.0 million and (y) 80.0% of Eligible Accounts Receivable at any one
time outstanding, subject to any permanent reductions required by any other
terms of the Indenture;
(ix) Acquired Indebtedness; provided that the aggregate amount
of such Acquired Indebtedness (other than the Indebtedness Incurred under one or
more Credit Facilities, under one or more Capitalized Leases or from the vendor
of assets, property or services acquired with the proceeds of such Indebtedness)
of the Person 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 does not
exceed the Fair Market Value of the plant, property and equipment (excluding
property, plant and equipment securing any of the Credit Facilities or vendor
financings or subject to any Capital Leases referred to in this clause (ix)) of
any Restricted Subsidiary so acquired;
(x) Indebtedness of (A) the Company not to exceed, at any one
time outstanding, 2.00 times the Net Cash Proceeds from (1) the issuance and
sale, other than to a Subsidiary, of Equity Interests (other than Redeemable
Stock and excluding any Ordinary Shares issued in connection with the
Recapitalization) of the Company and (2) capital contributions made in the
Company (other than by a Subsidiary) less, in each case, the amount of such
proceeds used to make Restricted Payments as provided in Section 4.3(a) (C)(2)
or Section 4.3(b) (iii) or (iv) and (B) the Company or Acquired Indebtedness of
a Restricted Subsidiary (provided that any such Indebtedness of such Restricted
Subsidiary must be incurred under one or more Credit Facilities, under one or
more Capitalized Leases or from the vendor of the assets, property or services
acquired with the proceeds of such Indebtedness) not to exceed, at any one time
outstanding, the fair market value of any Telecommunications Assets acquired by
the Company or such Restricted Subsidiary in exchange for Equity Interests of
the Company issued after the Issue Date; provided, however, that in determining
the fair market value of any such Telecommunications Assets so acquired, if the
estimated fair market value of such Telecommunications Assets exceeds (x)$2.0
million (as estimated in good faith by the Board of Directors), then the fair
market value of such Telecommunications Assets will be determined by a majority
of the Board of Directors of the Company, which determination will be evidenced
by a resolution thereof, and (y)$10.0 million (as estimated in good faith by the
Board of Directors), then the Company will deliver the Trustee a written
appraisal as to the fair market value of such Telecommunications Assets prepared
by an internationally recognized investment banking or public accounting firm
(or, if no such investment banking or public accounting firm is qualified
to prepare such an appraisal, by an internationally recognized appraisal firm);
and provided further that such Indebtedness (other than the Indebtedness
Incurred under one or more Credit Facilities, under one or more Capitalized
Leases or from the vendor of assets, property or services acquired with the
proceeds of such Indebtedness) does not mature prior to the
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47
Stated Maturity of the Notes and the Weighted Average Life to Maturity of such
Indebtedness is longer than that of the Notes;
(xi) Indebtedness outstanding as of the Issue Date; and
(xii) Indebtedness (in addition to Indebtedness permitted
under clauses (i) through (x) above) in an aggregate principal amount
outstanding at any one time not to exceed the greater of (A) NLG 100 million and
(B) an amount equal to 5% of the Company's consolidated net tangible assets as
of such date.
(c) For purposes of determining any particular amount of Indebtedness
under Section 4.4(b), 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
forgoing shall not in any way be deemed to limit the provisions of Section 4.17.
For purposes of determining compliance with Section 4.4, (A) in the event that
an item of Indebtedness meets the criteria of more than one of the types of
Indebtedness described above, the Company, in its sole discretion, shall
classify (or from time to time reclassify) such item of Indebtedness and only be
required to include the amount and type of such Indebtedness in one of such
clauses and (B) the principal amount of Indebtedness issued at a price that is
less than the principal amount thereof shall be equal to the amount of the
liability in respect thereof determined in conformity with U.S. GAAP.
SECTION 4.5 Corporate Existence. Except as otherwise permitted
by Article V, the Company shall do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence and the
corporate, partnership, limited liability or other existence of each of its
Subsidiaries in accordance with the respective organizational documents (as the
same may be amended from time to time) of each Subsidiary and the rights
(charter and statutory) of the Company and each of its Subsidiaries; provided,
however, that the Company shall not be required to preserve any such right, or
the corporate, partnership, limited liability or other existence of any
Subsidiary, if the Board of Directors of the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and each of its Subsidiaries, taken as a whole, and that the loss
thereof is not, and will not be, adverse in any material respect to the Holders.
SECTION 4.6 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, (i) all material taxes, assessments and governmental charges
levied or imposed upon it or any of its Subsidiaries or upon the income, profits
or property of it or any of its Subsidiaries and (ii) 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 it or any of its
Subsidiaries; provided, however, that the Company shall not
<PAGE> 56
48
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 4.7 Maintenance of Properties and Insurance. (a) The
Company shall cause all material properties owned by or leased by it or any of
its Subsidiaries useful and necessary to the conduct of its business or the
business of any of its Subsidiaries to be improved or maintained and kept in
normal condition, repair and working order and shall cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in its judgment may be necessary, so that the business carried on in
connection therewith may be properly conducted at all times; provided, however,
that nothing in this Section 4.7 shall prevent the Company or any of its
Subsidiaries 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 any
Subsidiary of the Company concerned, or of an officer (or other agent employed
by the Company or of any of its Subsidiaries) of the Company or any of its
Subsidiaries having managerial responsibility for any such property, desirable
in the conduct of the business of the Company or any Subsidiary of the Company,
and if such discontinuance or disposal is not adverse in any material respect to
the Holders.
(b) To the extent available at commercially reasonable rates,
the Company shall maintain, and shall cause its 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.
SECTION 4.8 Compliance Certificate; Notice of Default. (a) The
Company shall deliver to the Trustee, within 90 days after the close of each
fiscal year, an Officers' Certificate stating that a review of the activities of
the Company and its Subsidiaries during the preceding fiscal year has been made
under the supervision of the signing Officers with a view to determining whether
it has kept, observed, performed and fulfilled, and has caused each of its
Subsidiaries to keep, observe, perform and fulfill its obligations under this
Indenture and the Escrow Agreement and further stating, as to each such Officer
signing such certificate, that, to the best of his knowledge, the Company during
such preceding fiscal year has kept, observed, performed and fulfilled, and has
caused each of its Subsidiaries to keep, observe, perform and fulfill each and
every such covenant contained in this Indenture and the Escrow Agreement and no
Default occurred during such year and at the date of such certificate there is
no Default which has occurred and is continuing or, if such signers do know of
such Default, the certificate shall describe its status, with particularity and
that, to the best of his or her knowledge, no event has occurred and remains by
reason of which payments on the account of the
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49
principal of or interest, if any, Additional Amounts, if any, or Liquidated
Damages, if any, on the Notes is prohibited or if such event has occurred, a
description of the event and what action each is taking or proposes to take with
respect thereto. The Officers' Certificate shall also notify the Trustee should
the Company elect to change the manner in which it fixes its fiscal year end.
The Company shall notify the Trustee of any default or defaults in the
performance of any covenants or agreements under this Indenture or the Escrow
Agreement within five Business Days of becoming aware of any such default.
(b) The annual financial statements delivered pursuant to Section 4.10
shall include, so long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, a written report of the
Company's independent accountants (who shall be a firm of established
international reputation) that in conducting their audit of such financial
statements nothing has come to their attention that would lead them to believe
that the Company has violated any provisions of Articles IV, V or VI of this
Indenture or, if any such violation has occurred, specifying the nature and
period of existence thereof, it being understood that such accountants shall not
be liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation.
(b) The Company shall deliver to the Trustee, within 5
Business Days, upon any officer becoming aware of any Default or any default or
event of default under any document, instrument or agreement representing
Indebtedness of the Company, an Officers' Certificate specifying the Default or
such default or event of default and describing its status with particularity.
SECTION 4.9 Compliance with Laws. The Company shall comply,
and shall cause each of its Subsidiaries to comply, with all applicable
statutes, rules, regulations, orders of the relevant jurisdiction in which they
are incorporated and/or in which they carry on business, all political
subdivisions thereof, and of any relevant governmental regulatory authority, in
respect of the conduct of their respective businesses and the ownership of their
respective properties, except for such noncompliances as would not in the
aggregate have a material adverse effect on the financial condition or results
of operations of the Company and its Subsidiaries taken as a whole.
SECTION 4.10 Reports. (a) The Company will file on a timely
basis with the SEC, to the extent such filings are accepted by the SEC and
whether or not the Company has a class of securities registered under the
Exchange Act, (i) all annual and quarterly financial statements and other
financial information that would be required to be contained in a filing with
the Commission on Forms 20-F and 10-Q if the Company were required to file such
Forms (which financial statements shall be prepared in accordance with U.S.
GAAP), including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual financial
<PAGE> 58
50
information, a report thereon by the Company's certified independent accountants
and (ii) all current reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such reports. Such
quarterly financial information shall be filed with the Commission within 45
days following the end of each fiscal quarter of the Company, and such annual
financial information shall be furnished within 90 days following the end of
each fiscal year of the Company. Such annual financial information shall include
the geographic segment financial information required to be disclosed by the
Company under Item 101(d) of Regulation S-K under the Securities Act. The
Company shall also (a) file with the Trustee, and provide to each holder,
without cost to such holder, copies of such reports and documents within 15 days
after the date on which the Company files such reports and documents with the
Commission or the date on which the Company would be required to file such
reports and documents if the Company were so required, and (b) if filing such
reports and documents with the Commission is not accepted by the Commission or
is prohibited under the Exchange Act, to supply at the Company's cost copies of
such reports and documents to any prospective holder promptly upon request. In
addition, for so long as the Notes remain outstanding and the Company is not
subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act
nor exempt from reporting under Rule 12g3-2(b) of the Exchange Act, the Company
shall furnish to the Holders and to securities analysts and prospective
investors, upon their request, any information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act and, to any beneficial holder of
Notes, information of the type that would be filed with the Commission pursuant
to the foregoing provisions, upon the request of any such holder, and if, and so
long as the Notes are listed on the Luxembourg Stock Exchange and the rules of
such exchange shall so require, copies of all such reports and documents
described above will be deposited with the Company's listing agent in
Luxembourg.
(b) Such reports shall be delivered to the Registrar and the
Registrar will mail them at the Company's expense to the Holders at their
addresses appearing in the register of Notes maintained by the Registrar.
(c) Upon qualification of this Indenture with the TIA, the
Company shall also comply with the provisions of TIA Section 314(a).
SECTION 4.11 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
that would prohibit or forgive the Company from paying all or any portion of the
principal of and/or interest on the Notes 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 will not hinder, delay or impede the
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execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
SECTION 4.12 Limitation on Transactions with Shareholders and
Affiliates. (a) The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, enter into, renew or extend any
transaction or series of transactions (including, without limitation, the
purchase, sale, lease or exchange of property or assets, or the rendering of any
service) with any direct or indirect holder (or any Affiliate of such holder) of
5% or more of any class of Capital Stock of the Company or with any Affiliate of
the Company or any Restricted Subsidiary, unless:
(i) such transaction or series of transactions is on terms
that are no less favorable to the Company or such Restricted Subsidiary
than could reasonably be obtained in a comparable arm's-length
transaction with a Person that is not such a holder or Affiliate,
(ii) if such transaction or series of transactions involves
aggregate consideration in excess of $2.0 million, then the Company
shall deliver to the Trustee a resolution set forth in an Officers'
Certificate adopted by a majority of the Board of Directors, including
a majority of the independent, disinterested directors, approving such
transaction or series of transactions and certifying that such
transaction or series of transactions comply with Section 4.12(a)(i);
and
(iii) if such transaction or series of transactions involves
aggregate consideration in excess of $5.0 million, then the Company
will deliver to the Trustee a written opinion as to the fairness to the
Company or such Restricted Subsidiary of such transaction or series of
transactions from a financial point of view from an internationally
recognized investment banking firm (or, if an investment banking firm
is generally not qualified to give such an opinion, by an
internationally recognized appraisal firm or accounting firm).
(b) The foregoing limitation does not limit and will not apply
to (i) any transaction between the Company and any of its Restricted
Subsidiaries or between Restricted Subsidiaries; (ii) the payment of reasonable
and customary regular fees to directors of the Company who are not employees of
the Company; and (iii) payment of dividends or other distributions in respect of
Equity Interests of the Company or any Restricted Subsidiary permitted by
Section 4.3.
SECTION 4.13 Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries. (a) The Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Restricted
Subsidiary to:
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52
(i) pay dividends or make any other distributions permitted
by applicable law on any Equity Interests of such Restricted Subsidiary
owned by the Company or any other Restricted Subsidiary,
(ii) pay any Indebtedness owed to the Company or any other
Restricted Subsidiary,
(iii) make loans or advances to the Company or any other
Restricted Subsidiary, or
(iv) transfer any of its property or assets to the Company or
any other Restricted Subsidiary.
(b) The foregoing provisions shall not prohibit any
encumbrances or restrictions:
(i) existing under or by reason of any agreement in effect on
the Issue Date, and any amendments, supplements, extensions,
refinancings, renewals or replacements of such agreements; provided
that the encumbrances and restrictions in any such amendments,
supplements, extensions, refinancings, renewals or replacements are no
more restrictive than those encumbrances or restrictions that are then
in effect and that are being amended, supplemented, extended,
refinanced, renewed or replaced;
(ii) existing under or by reason of applicable law;
(iii) existing with respect to any Restricted Subsidiary
acquired by the Company or any Restricted Subsidiary after the Issue
Date, or the property or assets of such Restricted Subsidiary, and
existing at the time of such acquisition and not incurred in
contemplation thereof, which encumbrances or restrictions are not
applicable to any Person or the property or assets of any Person other
than such Person or the property or assets of such Person so acquired,
and any amendments, supplements, extensions, refinancings, renewals or
replacements of agreements containing such encumbrances or
restrictions; provided that the encumbrances and restrictions in any
such amendments, supplements, extensions, refinancings, renewals or
replacements are no more restrictive than those encumbrances or
restrictions that are then in effect and that are being amended,
supplemented, extended, refinanced, renewed or replaced;
(iv) in the case of Section 4.13(a)(iv), (A) that restrict in
a customary manner the subletting, assignment or transfer of any
property or asset that is, or is subject to, a lease, purchase mortgage
obligation, license, conveyance or contract or similar property or
asset, (B) existing by virtue of any transfer of, agreement
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53
to transfer, option or right with respect to, or Lien on, any property
or assets of the Company or any Restricted Subsidiary not otherwise
prohibited by this Indenture or (C) arising or agreed to in the
ordinary course of business, not relating to any Indebtedness, and that
do not, individually or in the aggregate, materially detract from the
value of property or assets of the Company or any Restricted Subsidiary
to the Company or any Restricted Subsidiary;
(v) with respect to a Restricted Subsidiary and imposed
pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock in, or
property and assets of, such Restricted Subsidiary; provided that such
restriction shall terminate if such transaction is abandoned or if such
transaction is not consummated within six months of the date such
agreement was entered into; or
(vi) contained in the terms of any Indebtedness or any
agreement pursuant to which such Indebtedness was issued if (A) the
encumbrance or restriction applies only in the event of a payment
default or a default with respect to a financial covenant contained in
such Indebtedness or agreement, (B) the encumbrance or restriction is
not materially more disadvantageous to the holders of the Notes than is
customary in comparable financings (as determined by the Board of
Directors) and (C) the Board of Directors determines that any such
encumbrance or restriction will not materially affect the Company's
ability to make principal or interest payments on the Notes.
Nothing contained in this Section 4.13 shall prevent the Company or any
Restricted Subsidiary from creating, incurring, assuming or suffering to exist
any Liens otherwise permitted in Section 4.14 that limit the right of the debtor
to dispose of the assets securing such Indebtedness.
SECTION 4.14 Limitation on Liens. The Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, create,
incur, assume or suffer to exist any Lien (other than Permitted Liens) on any
asset or property of the Company or any Restricted Subsidiary without making
effective provisions for all of the Notes and all other amounts due under the
Indenture to be directly secured equally and ratably with (or, if the obligation
or liability to be secured by such Lien is subordinated in right of payment to
the Notes, prior to) the obligation or liability secured by such Lien.
SECTION 4.15 Change of Control. (a) Upon the occurrence of a
Change of Control, the Company will make an offer to purchase all or any part
(equal to $1,000 aggregate principal amount and integral multiple thereof) of
the Notes pursuant to the offer described below (the "Change of Control Offer")
at a price in cash (the "Change of Control Payment") equal to 101% of the
aggregate principal amount thereof
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54
plus accrued and unpaid interest, thereon to the date of repurchase, plus
Additional Amounts, if any, and Liquidated Damages, if any, to the date of
repurchase (and in the case of Definitive Notes, subject to the right of Holders
of record on the relevant record date to receive interest and Liquidated
Damages, if any, due on the relevant interest payment date and Additional
Amounts, if any, in respect thereof). Within 30 days following any Change of
Control, the Company will publish notice of such in a leading newspaper having a
general circulation in New York (which is expected to be The Wall Street
Journal) and in Amsterdam (which is expected to be Het Financieele Dagblad)
(and, if and so long as the Notes are listed on the Luxembourg Stock Exchange
and the rules of such Stock Exchange shall so require, a newspaper having a
general circulation in Luxembourg (which is expected to be the Luxemburger
Wort)) or, in the case of Definitive Notes, mail a notice to each Holder postage
prepaid (and if and so long as the Notes are listed on the Luxembourg Stock
Exchange and the rules of such Stock Exchange shall so require, will publish
notice in a newspaper having a general circulation in Luxembourg (which is
expected to be the Luxemburger Wort)), with a copy to the Trustee, with the
following information: (i) a Change of Control Offer is being made pursuant to
this Section 4.15 and all Notes properly tendered pursuant to such Change of
Control Offer will be accepted for payment; (ii) the purchase price and the
purchase date, which will be no earlier than 30 days nor later than 60 days from
the date such notice is published, or where relevant, mailed, except as may be
otherwise required by applicable law (the "Change of Control Payment Date");
(iii) any Note not properly tendered will remain outstanding and continue to
accrue interest and Liquidated Damages, if any; (iv) unless the Company defaults
in the payment of the Change of Control Payment, all Notes accepted for payment
pursuant to the Change of Control Offer will cease to accrue interest, as the
case may be, and to accrue Liquidated Damages, if any, on the Change of Control
Payment Date; (v) Holders electing to have any Notes purchased pursuant to a
Change of Control Offer will be required to surrender the Notes, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Notes
completed, to the Paying Agent and at the address specified in the notice prior
to the close of business on the third Business Day preceding the Change of
Control Payment Date; (vi) Holders will be entitled to withdraw their tendered
Notes and their election to require the Company to purchase such Notes;
provided, however, that the Paying Agent receives, not later than the close of
business on the last day of the offer period, a facsimile transmission or letter
setting forth the name of the Holder, the principal amount of Notes tendered for
purchase, and a statement that such Holder is withdrawing his tendered Notes and
his election to have such Notes purchased; and (vii) that Holders whose Notes
are being purchased only in part will be issued new Notes equal in principal
amount to the unpurchased portion of the principal amount of the Notes
surrendered, which unpurchased portion must be equal to $1,000 in principal
amount or an integral multiple thereof.
The Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
and will comply
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with the applicable laws of any non-U.S. jurisdiction in which a Change of
Control Offer is made, in each case, to the extent such laws or regulations are
applicable in connection with the repurchase of the Notes pursuant to a Change
of Control Offer. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of this Indenture, the Company will
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations contained in this Indenture by virtue
thereof. The provisions relating to the Company's obligation to make an offer to
repurchase the Notes as a result of a Change of Control may be waived or
modified with the written consent of the Holders of a majority in principal
amount of the Notes.
(b) On the Change of Control Payment Date, the Company will,
to the extent permitted by law, (i) accept for payment all Notes or portions
thereof properly tendered pursuant to the Change of Control Offer, (ii) deposit
with the Paying Agent an amount equal to the aggregate Change of Control Payment
in respect of all Notes or portions thereof so tendered and (iii) deliver, or
cause to be delivered, to the Trustee for cancellation the Notes so accepted
together with an Officers' Certificate stating that such Notes or portions
thereof have been tendered to and purchased by the Company. The Paying Agent
will promptly either (x) pay to the Holder against presentation and surrender
(or, in the case of partial payment, endorsement) of the Global Notes or (y) in
the case of Definitive Notes, mail to each Holder of Notes postage prepaid, the
Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and deliver to the Holder of the Global Notes a new Global Note or
Notes or, in the case of Definitive Notes, mail to each Holder a new Definitive
Note, as applicable, equal in principal amount to any unpurchased portion of the
Notes surrendered, if any; provided, however, that each new Definitive Note will
be in a principal amount of $1,000 or an integral multiple thereof. The Company
will publicly announce the results of the Change of Control Offer on or as soon
as practicable after the Change of Control Payment Date.
SECTION 4.16 Limitation on Asset Sales. (a) The Company will
not, and will not permit any Restricted Subsidiary to, make any Asset Sale
unless (i) the Company or the 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 disposed of and (ii) at least 80% of the
consideration received for such Asset Sale consists of cash or Cash Equivalents
or Replacement Assets or the assumption of Indebtedness which ranks pari passu
in right of payment with the Notes.
(b) The Company shall, or shall cause the relevant Restricted
Subsidiary to, apply the Net Cash Proceeds from an Asset Sale within 270 days of
the receipt thereof to (A) permanently repay unsubordinated Indebtedness of the
Company or Indebtedness of any Restricted Subsidiary, in each case owing to a
Person other than the Company or any of its Restricted Subsidiaries, (B) invest
in Replacement Assets, or (C) in any combination of repayment, prepayment, and
reinvestment permitted by the
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foregoing clauses (A) and (B). Any Net Proceeds from the Asset Sale that are not
invested as provided and within the time period set forth in the first sentence
of this Section 4.16(b) will be deemed to constitute "Excess Proceeds."
If at any time the aggregate amount of Excess Proceeds exceeds
$5.0 million, the Company shall, within 30 Business Days thereafter, make an
offer to all Holders of Notes (an "Asset Sale Offer") to purchase on a pro rata
basis the maximum principal amount of Notes, that is an integral multiple of
$1,000 that may be purchased out of the Excess Proceeds at an offer price in
cash in an amount equal to 100% of the outstanding principal amount thereof,
plus accrued and unpaid interest thereon, plus Additional Amounts, if any, and
Liquidated Damages, if any, to the date fixed for the closing of such offer
(and, in the case of Definitive Notes, subject to the right of a Holder of
record on the relevant record date to receive interest and Liquidated Damages,
if any, due on the relevant interest payment date and Additional Amounts, if
any, in respect thereof), in accordance with the procedures set forth in this
Indenture. The Company will commence an Asset Sale Offer with respect to Excess
Proceeds within thirty business days after the date that Excess Proceeds exceeds
$5.0 million by publishing or, where relevant, mailing the notice required
pursuant to the terms of the Indenture, with a copy to the Trustee. To the
extent that the aggregate amount of Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, subject to applicable law, the Company
may use any remaining Excess Proceeds for general corporate purposes. Upon
completion of any such Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero.
The Asset Sale Offer shall remain open for a period of 20
Business Days following its commencement and no longer, except to the extent
that a longer period is required by applicable law (the "Offer Period"). No
later than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Company shall purchase the maximum principal amount of
Notes that may be purchased with such Excess Proceeds (or such pro rata portion)
(which maximum principal amount of Notes shall be the "Offer Amount") or, if
less than the Offer Amount has been tendered, all Notes tendered in response to
the Asset Sale Offer.
If the Purchase Date is on or after an interest Record Date
and on or before the related Interest Payment Date, any accrued and unpaid
interest will be paid in the case of a Global Note, to the Holder thereof or, in
the case of a Definitive Note, to the Person in whose name such Definitive Note
is registered at the close of business on such Record Date, and no additional
interest will be payable to Holders with respect to Notes tendered pursuant to
the Asset Sale Offer.
At least 30 days but not more than 60 days before a Purchase
Date, the Company shall publish in a leading newspaper having a general
circulation in New York (which is expected to be The Wall Street Journal) and in
Amsterdam (which is expected
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to be Het Financieele Dagblad ) (and, if and so long as the Notes are listed on
the Luxembourg Stock Exchange and the rules of such Stock Exchange shall so
require, a newspaper having a general circulation in Luxembourg (which is
expected to be the Luxemburger Wort)) or in the case of Definitive Notes, mail
to Holders by first-class mail, postage prepaid, at their respective addresses
as they appear on the registration books of the Registrar with a copy of such
notice to the Trustee (and, if and so long as the Notes are listed on the
Luxembourg Stock Exchange and the rules of such Stock Exchange shall so require,
publish in a newspaper having a general circulation in Luxembourg (which is
expected to be the Luxemburger Wort)). The notice shall contain all instructions
and materials (or instructions on how to obtain instructions and materials)
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(A) that the Asset Sale Offer is being made pursuant to this
Section 4.16 and the length of time the Asset Sale Offer shall remain
open;
(B) the Offer Amount (including the amount of accrued and
unpaid interest, if any), the purchase price and the Purchase Date;
(C) that any Note or portion thereof not tendered or accepted
for payment shall continue to accrue interest, Additional Amounts, if
any, and Liquidated Damages, if any, in accordance with the terms
thereof;
(D) that, unless the Company defaults in making payment
therefor any Note or portion thereof accepted for payment pursuant to
the Asset Sale Offer shall cease to accrue interest, Additional
Amounts, if any, and Liquidated Damages, if any, after the Purchase
Date;
(E) (1) if any Global Note is being purchased in part, the
portion of the principal amount of such Note to be purchased and that,
after the Purchase Date, interest, Additional Amounts, if any, and
Liquidated Damages, if any, shall cease to accrue on the portion to be
purchased, and upon surrender of such Global Note, the Global Note with
a notation on Schedule A thereof adjusting the principal amount thereof
to be equal to the unpurchased portion, will be returned and (2) if a
Definitive Note may be purchased in part, that, after the Purchase
Date, upon surrender of such Definitive Note, a new Definitive Note or
Notes in aggregate principal amount equal to the unpurchased portion
thereof will be issued in the name of the Holder thereof, upon
cancellation of the original Note;
(F) that Holders electing to have a Note or portion thereof
purchased pursuant to any Asset Sale Offer shall be required to
surrender the Note, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Note
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completed, to the Company, a depositary, if appointed by the Company,
or a Paying Agent at the address specified in the notice at least three
Business Days before the Purchase Date and must complete any form
letter of transmittal proposed by the Company and acceptable to the
Trustee and the Paying Agent;
(G) that, subject to applicable law, Holders shall be entitled
to withdraw their election if the Company, depositary or Paying Agent,
as the case may be, receives, not later than the second Business Day
before the Purchase Date, a facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Note or
portion thereof the Holder delivered for purchase, the Note certificate
number and a statement that such Holder is withdrawing his election to
have the Note or portion thereof purchased;
(H) that, if the aggregate principal amount of Notes tendered
by Holders exceeds the Offer Amount, the selection of such Notes for
purchase will be made by the Trustee in compliance with the
requirements of the principal securities exchange, if any, on which
such Notes are listed, if such Notes are not so listed or such exchange
prescribes no method of selection, subject to applicable law, on a pro
rata basis by lot or by such other method as the Trustee in its sole
discretion shall deem fair and appropriate (and in such manner as
complies with applicable legal and exchange requirements); provided,
however, that no Notes of $1,000 or less shall be purchased in part;
provided further, that, subject to applicable law, in the event of
partial purchase by lot, the particular Notes to be purchased shall be
selected, unless otherwise provided herein, by the Registrar or Trustee
from the outstanding Notes not previously called for purchase; and
(I) the instructions that Holders must follow to tender their
Notes.
On or before the Purchase Date, the Company shall, to the
extent lawful, accept for payment, on a pro rata basis to the extent necessary,
the Offer Amount of Notes or portions thereof tendered pursuant to the Asset
Sale Offer, or if less than the Offer Amount has been tendered, all Notes or
portions thereof tendered, and deliver to the Trustee an Officers' Certificate
stating that such Notes or portions thereof were accepted for payment by the
Company in accordance with the terms of this Section 4.16. On the Purchase Date,
the Paying Agent shall promptly cause the principal amount of any Global Note so
tendered to be adjusted on Schedule A thereof to be equal to any unpurchased
portion of such Global Note which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof, and shall promptly
authenticate and mail or deliver to each tendering Holder of a Definitive Note,
a new Definitive Note or Notes equal in principal amount to any unpurchased
portion of the Definitive Note surrendered which unpurchased portion must be
equal to $1,000 in principal amount or an integral multiple thereof. DTC, the
Paying Agent or the Company, as the case may be, shall promptly (but in any case
not later than five Business
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59
Days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the Offer Amount of the Notes tendered by such Holder and accepted by
the Company for purchase. Any Notes not so accepted shall be promptly mailed or
delivered by or on behalf of the Company to the Holder thereof. The Company
shall publicly announce the results of the Asset Sale Offer not later than the
second Business Day following the Purchase Date.
The Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
and will comply with the applicable laws of any non-U.S. jurisdiction in which
an Asset Sale Offer is made, in each case, to the extent such laws or
regulations are applicable in connection with the repurchase of the Notes
pursuant to an Asset Sale Offer. To the extent that the provisions of any
securities laws or regulations conflict with the provisions hereunder, the
Company will comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations described in this Indenture
by virtue thereof.
SECTION 4.17 Limitation on Issuance of Guarantees of
Indebtedness by Restricted Subsidiaries. (a) The Company shall not permit any
Restricted Subsidiary, directly or indirectly, to guarantee, assume or in any
other manner become liable with respect to any Indebtedness of the Company
unless (i) such Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture to this Indenture providing for a Guarantee of all of the
Company's obligations under the Notes and this Indenture on terms substantially
similar to the guarantee of such Indebtedness, except that if such Indebtedness
is by its express terms subordinated in right of payment to the Notes, any such
assumption, Guarantee or other liability of such Restricted Subsidiary with
respect to such Indebtedness shall be subordinated in right of payment to such
Restricted Subsidiary's assumption, Guarantee or other liability with respect to
the Notes substantially to the same extent as such Indebtedness is subordinated
to the Notes 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 Guarantee; provided any Restricted Subsidiary may guarantee
Indebtedness of the Company under a Credit Facility if such Indebtedness is
Incurred in accordance with Section 4.4.
(b) Notwithstanding the foregoing Section 4.17(a), any
Guarantee of all of the Company's obligations under the Notes and this Indenture
by a Restricted Subsidiary may provide by its terms that it will 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 Company's and each Restricted Subsidiary's Equity Interests in, or all or
substantially all of the assets of, such Restricted Subsidiary (which sale,
exchange or transfer is not prohibited by this Indenture) or (ii) the release or
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discharge of the guarantee which resulted in the creation of such Guarantee,
except a discharge or release by or as a result of payment under such guarantee.
SECTION 4.18 Business of the Company; Restriction on Transfers
of Existing Business. The Company will not, and will not permit any Restricted
Subsidiary to, be principally engaged in any business or activity other than a
Permitted Business. In addition, the Company and any Restricted Subsidiary will
not be permitted to, directly or indirectly, transfer to any Unrestricted
Subsidiary (i) any of the licenses, permits or authorizations used in the
Permitted Business of the Company and any Restricted Subsidiary or (ii) any
material portion of the "property and equipment" (as such term is used in the
Company's consolidated financial statements) of the Company or any Restricted
Subsidiary used in the licensed service areas of the Company and any Restricted
Subsidiary.
SECTION 4.19 Limitation on the Issuance and Sale of Capital
Stock of Restricted Subsidiaries. The Company will not, and will not permit any
Restricted Subsidiary, directly or indirectly, to issue, transfer, convey, sell,
lease or otherwise dispose of any shares of Capital Stock (including options,
warrants or other rights to purchase shares of such Capital Stock) of such
Restricted Subsidiary or any other Restricted Subsidiary to any Person (other
than (i) to the Company or a Wholly Owned Restricted Subsidiary, (ii) issuances
of director's qualifying shares or sales to foreign nationals of shares of
Capital Stock of foreign Restricted Subsidiaries, in each case, to the extent
required by applicable law and (iii) Strategic Minority Capital Stock Issues),
unless (A) immediately after giving effect to such issuance, transfer,
conveyance, sale, lease or other disposition, such Restricted Subsidiary would
no longer constitute a Restricted Subsidiary and (B) any Investment in such
Person remaining after giving effect to such issuance, transfer, conveyance,
sale, lease or other disposition would have been permitted to be made under
Section 4.3 if made on the date of such issuance, transfer, conveyance, sale,
lease or other disposition (valued as provided in the definition of "Investment"
in Section 1.1).
SECTION 4.20 Additional Amounts. At least 10 days prior to the
first date on which payment of principal, premium, if any, or interest on the
Notes is to be made, and at least 10 days prior to any subsequent such date if
there has been any change with respect to the matters set forth in the Officers'
Certificate described in this Section 4.20, the Company will furnish the Trustee
and the Paying Agent, if other than the Trustee, with an Officers' Certificate
instructing the Trustee and the Paying Agent whether such payment of principal,
premium, if any, or interest on the Notes (whether or not in the form of
Definitive Notes) shall be made to the Holders without withholding for or on
account of any present or future tax, duty, assessment or other governmental
charges of whatever nature (collectively "Taxes") imposed or levied by or on
behalf of The Netherlands or any jurisdiction in which the Company or any
Surviving Entity is organized or is otherwise resident for tax purposes or any
political subdivision thereof or
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any authority having power to tax therein or any jurisdiction from or through
which payment is made (each a "Relevant Taxing Jurisdiction"), unless the
withholding or deduction of such Taxes is then required by law. If any deduction
or withholding for, or on account of, any Taxes of any Relevant Taxing
Jurisdiction, shall at any time be required on any payments made by the Company
with respect to the Notes, including payments of principal, redemption price,
interest or premium, then such Officers' Certificate shall specify the amount,
if any, required to be withheld on such payments to such Holders and the Company
will pay to the Trustee or the Paying Agent the additional amounts pursuant to
paragraph 2 of the Notes (the "Additional Amounts") and upon request shall
provide the Trustee with documentation satisfactory to the Trustee evidencing
the payment of such Additional Amounts. Copies of such documentation shall be
made available to the Holders upon request. The Company shall indemnify the
Trustee and the Paying Agent for, and hold them harmless against, any loss,
liability or expense incurred without negligence or bad faith on their part
arising out of or in connection with actions taken or omitted by any of them in
reliance on any Officers' Certificate furnished to them pursuant to this Section
4.20.
SECTION 4.21 Payment of Non-Income Taxes and Similar Charges.
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, the United States of
America, or any jurisdiction in which a Paying Agent is located, other than
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.
ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1 Consolidation, Merger, and Sale of Assets. The
Company will not consolidate with, merge with or into, or sell, convey,
transfer, lease or otherwise dispose of all or substantially all of its property
and assets (as an entirety or substantially an entirety in one transaction or in
a series of related transactions) to, any Person or permit any Person to merge
with or into the Company and the Company will not permit any of its Restricted
Subsidiaries to enter into any such transaction or series of transactions if
such transaction or series of transactions, in the aggregate, would result in
the sale, assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the properties and assets of the Company or the Company and
its Restricted Subsidiaries, taken as a whole, to any other Person or Persons,
unless: (i) the
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Company will be the continuing Person, or the Person (if other than the Company)
(the "Surviving Entity") formed by such consolidation or into which the Company
is merged or that acquired or leased such property and assets of the Company
will be a corporation organized and validly existing under the laws of The
Netherlands, Germany, France, Belgium, the United Kingdom or the United States
of America, any state thereof or the District of Columbia and shall expressly
assume, by a supplemental indenture, executed and delivered to the Trustee, all
of the obligations of the Company with respect to the Notes and under the
Indenture, the Escrow Agreement and the Registration Rights Agreement; (ii)
immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; (iii) immediately after giving
effect to such transaction on a pro forma basis, the Company, or any Person
becoming the successor obligor of the Notes, shall have a Consolidated Net Worth
equal to or greater than the Consolidated Net Worth of the Company immediately
prior to such transaction; (iv) immediately after giving effect to such
transaction on a pro forma basis the Company, or any Person becoming the
successor obligor of the Notes, as the case may be, (A) prior to the third
anniversary of the Issue Date, would have an Indebtedness to Consolidated Cash
Flow Ratio no greater than such ratio immediately prior to such transaction or
(B) on or after the third anniversary of the Issue Date, could Incur at least
$1.00 of Indebtedness under Section 4.4(a); (v) the Company delivers to the
Trustee an Officers' Certificate (attaching the arithmetic computations to
demonstrate compliance with clauses (iii) and (iv)) and an Opinion of Counsel,
in each case stating that such consolidation, merger or transfer and such
supplemental indenture complies with the Indenture and (vi) the Company shall
have delivered to the Trustee an opinion of tax counsel reasonably acceptable to
the Trustee stating that (A) Holders will not recognize income, gain or loss for
U.S. federal or Netherlands income tax purposes as a result of such transaction
and (B) no taxes on income (including taxable capital gains) will be payable
under the tax laws of the Relevant Taxing Jurisdiction by a Holder who is or who
is deemed to be a non-resident of the Relevant Taxing Jurisdiction in respect of
the acquisition, ownership or disposition of the Notes, including the receipt of
principal of, premium and interest paid pursuant to such Notes.
SECTION 5.2 Successor Corporation Substituted. Upon any such
consolidation, merger, assignment, conveyance, lease, transfer or other
disposition in accordance with Section 5.1, the Successor Company will succeed
to, and be substituted for, and may exercise every right and power of, the
Company under this Indenture with the same effect as if such Successor Company
had been named as the Company herein, and thereafter (except in the case of a
sale, assignment, transfer, lease, conveyance or other disposition) the
predecessor corporation will be relieved of all further obligations and
covenants under this Indenture and the Notes.
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ARTICLE VI
DEFAULT AND REMEDIES
SECTION 6.1 Events of Default. Wherever used herein with
respect to any series of the Notes, "Event of Default" means any one of the
following events which shall have occurred and be continuing:
(a) default for 30 days or more in the payment when due of
interest on the Notes or Additional Amounts, if any, or Liquidated Damages, if
any, with respect to the Notes;
(b) default in the payment of principal of (or premium, if
any, on) any Note when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise;
(c) default in the payment of principal or interest on Notes
required to be purchased pursuant to an Asset Sale Offer as described under
Section 4.16 or pursuant to a Change of Control Offer as described under Section
4.15;
(d) failure to perform or comply with the provisions described
in Article V;
(e) default in the performance of or breach of any other
covenant or agreement of the Company in this Indenture or the Escrow Agreement
or under the Notes and such default or breach continues for a period of 30
consecutive days after written notice by the Trustee or the holders of 25% or
more in aggregate principal amount of the Notes;
(f) a default occurs on any other Indebtedness of the Company
or any Restricted Subsidiary if either (x) such default is a failure to pay
principal of such Indebtedness when due after any applicable grace period and
the principal amount of such Indebtedness is in excess of $5.0 million or (y) as
a result of such default, the maturity of such Indebtedness has been accelerated
prior to its scheduled maturity and such default has not been cured within the
shorter of (i) 60 days and (ii) the applicable grace period, and such
acceleration has not been rescinded, and the principal amount of such
Indebtedness together with the principal amount of any other Indebtedness of the
Company and its Restricted Subsidiaries that is in default as to principal, or
the maturity of which has been accelerated, aggregates $5.0 million or more;
(g) failure to pay final judgments and orders against the
Company or any Restricted Subsidiary (not covered by insurance) aggregating in
excess of $5.0 million (treating any deductibles, self-insurance or retention as
not so covered), which final
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judgments remain unpaid, undischarged and unstayed for a period in excess of 30
consecutive days following entry of the final judgment or order that causes the
aggregate amount for all such final judgments or orders outstanding and not
paid, discharged or stayed to exceed $5.0 million;
(h) a court having jurisdiction in the premises enters a
decree or order for (A) relief in respect of the Company or any of its
Significant Subsidiaries in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (B) appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Company or any of its Significant Subsidiaries or for all or
substantially all of the property and assets of the Company or any of its
Significant Subsidiaries or (C) the winding up or liquidation of the affairs of
the Company or any of its Significant Subsidiaries and, in each case, such
decree or order shall remain unstayed and in effect for a period of 30
consecutive days;
(i) the Company or any of its Significant Subsidiaries (A)
commences a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case under any such law, (B) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or any of
its Significant Subsidiaries or for all or substantially all of the property and
assets of the Company or any of its Significant Subsidiaries or (C) effects any
general assignment for the benefit of creditors; or
(j) the Company challenges the Lien on the Escrow Collateral
under the Escrow Agreement prior to such time as the Escrow Collateral is to be
released to the Company, or the Escrow Collateral shall become subject to any
Lien other than the Lien under the Escrow Agreement.
SECTION 6.2 Acceleration. If an Event of Default (other than
an Event of Default specified in Sections 6.1 (h) or (i)) the Trustee or the
Holders of at least 25% in aggregate principal amount of the Notes, then
outstanding, by written notice to the Company, may declare the principal of,
premium, if any, interest and other monetary obligations (including Additional
Amounts, if any, and Liquidated Damages, if any,) on all the then outstanding
Notes to be immediately due and payable. Upon such a declaration, such principal
of, premium, if any, interest and other monetary obligations on the Notes shall
be immediately due and payable. In the event of a declaration of acceleration
because an Event of Default set forth in Section 6.1 (f) above has occurred and
is continuing, such declaration of acceleration shall be automatically rescinded
and annulled if the event of default triggering such Event of Default pursuant
to Section 6.1 (f) shall be remedied or cured by the Company and/or the relevant
Restricted Subsidiaries or waived by the holders of the relevant Indebtedness
within 60 days after the declaration of acceleration with respect thereto. If an
Event of Default specified in Sections 6.1 (h)
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or (i) above occurs, the principal of, premium, if any, accrued interest and
other monetary obligations on the Notes then outstanding shall ipso facto become
and be immediately due and payable without any declaration or other act on the
part of the Trustee or any Holder.
The Trustee shall have no obligation to accelerate the Notes
if in the best judgment of the Trustee acceleration is not in the best interest
of the Holders of such Notes.
SECTION 6.3 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, Additional
Amounts, if any, or Liquidated Damages, if any, on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
SECTION 6.4 The Trustee May Enforce Claims Without Possession
of Securities. All rights of action and claims under this Indenture or the Notes
may be prosecuted and enforced by the Trustee without the possession of any of
the Notes or the production thereof in any proceeding relating thereto.
SECTION 6.5 Rights and Remedies Cumulative. Except as
otherwise provided with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Notes in Section 2.8, no right or remedy herein
conferred upon or reserved to the Trustee or to the Holders of Notes is intended
to be exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent or subsequent
assertion or employment of any other appropriate right or remedy.
SECTION 6.6 Delay or Omission Not Waiver. No delay or omission
of the Trustee or of any Holder of any Note to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee or to the
Holders of Notes may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or by the Holders of Notes.
SECTION 6.7 Waiver of Past Defaults. Subject to Sections 6.10
and 9.2, at any time after a declaration of acceleration with respect to the
Notes as described in Section 6.1, the Holders of at least a majority in
principal amount of the outstanding Notes by written notice to the Company and
to the Trustee, may waive all past defaults and rescind and annul a declaration
of acceleration and its consequences if
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(i) all existing Events of Default, other than the nonpayment of the principal
of, premium, if any, interest and other monetary obligations on the Notes that
have become due solely by such declaration of acceleration, have been cured or
waived and (ii) the rescission would not conflict with any judgment or decree of
a court of competent jurisdiction. Such waiver shall not excuse a continuing
Event of Default in the payment of interest, premium, if any, principal,
Additional Amounts, if any, or Liquidated Damages, if any, on such Note held by
a non-consenting Holder, or in respect of a covenant or a provision which cannot
be amended or modified without the consent of all Holders. In the event of any
Event of Default specified in Section 6.1(f) above, such Event of Default and
all consequences thereof (including, without limitation, any acceleration or
resulting payment default) shall be annulled, waived and rescinded,
automatically and without any action by the Trustee or the Holders of the Notes,
if within 60 days after such Event of Default arose (x) the Indebtedness or
guarantee that is the basis for such Event of Default has been discharged, or
(y) the holders thereof have rescinded or waived the acceleration, notice or
action (as the case may be) giving rise to such Event of Default, or (z) if the
default that is the basis for such Event of Default has been cured. 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. When a Default or Event of Default is waived, it is cured and ceases.
SECTION 6.8 Control by Majority. Subject to Section 2.11, the
Holders of not less than a majority in principal amount of the outstanding Notes
may, by written notice to the Trustee, 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. Subject to Section 7.1, however, the Trustee
may refuse to follow any direction that conflicts with any law or this Indenture
that the Trustee determines may be unduly prejudicial to the rights of another
Holder of Notes, 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 from the Company satisfactory to it in its sole discretion
against any fees, loss, liability, cost or expense caused by taking such action
or following such direction.
SECTION 6.9 Limitation on Suits. A Holder of Notes may not
pursue any remedy with respect to this Indenture or the Notes unless:
(i) the Holder gives to the Trustee written notice of a
continuing Event of Default;
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(ii) the Holder or Holders of at least 25% in principal amount
of the outstanding Notes make a written request to the Trustee to
pursue the remedy;
(iii) such Holder or Holders offer and, if requested, provide
to the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(iv) the Trustee does not comply with the request within 30
days after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(v) during such 30-day period the Holder or Holders of a
majority in principal amount of the outstanding Notes do not give the
Trustee a direction which, in the opinion of the Trustee, is
inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.
SECTION 6.10 Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
to receive payment of principal of, premium, if any, interest, Additional
Amounts, if any and Liquidated Damages, if any, on a Note, on or after the
respective due dates expressed in such Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.11 Collection Suit by Trustee. If an Event of
Default in payment of principal, premium, if any, interest, Additional Amounts,
if any or Liquidated Damages, if any, specified in Section 6.1(a) or (b) 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
Notes for the whole amount of principal and accrued interest remaining unpaid,
together with interest on overdue 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 Notes 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, and any other amounts due the Trustee under Section 7.7.
SECTION 6.12 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, accountants and experts) and the Holders
allowed in any judicial proceedings relating to the Company, its creditors or
its property or other obligor on the Notes, its creditors and its property and
shall be entitled and empowered to collect and receive any
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monies or other property payable or deliverable on any such claims and to
distribute the same, and any Custodian in any such judicial proceedings is
hereby authorized by each Holder 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 Holders, 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 7.7. To the extent
that the payment of any such compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, and any other amounts due the Trustee
under Section 7.7 hereof out of the estate in any such proceeding, shall be
denied for any reason, payment of the same shall be secured by a Lien on, and
shall be paid out of, any and all distributions, dividends, money, securities
and other properties which the Holders of the Notes may be entitled to receive
in such proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise.
SECTION 6.13 Priorities. If the Trustee collects any money or
property pursuant to this Article VI, it shall pay out the money or property in
the following order:
First: to the Trustee, the Agents and their agents and
attorneys for amounts due under Section 7.7, including payment of all
compensation, expense and liabilities incurred, and all advances made,
by the Trustee and the costs and expenses of collection;
Second: to Holders for amounts due and unpaid on the Notes for
principal, premium, if any, interest, Additional Amounts, if any and
Liquidated Damages, if any, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Notes for
principal, premium, if any, interest, Additional Amounts, if any, and
Liquidated Damages, if any, respectively; and
Third: to the Company or any other obligor on the Notes, as
their interests may appear, or as a court of competent jurisdiction may
direct.
The Trustee, upon prior notice to the Company, may fix a
record date and payment date for any payment to Holders pursuant to this Section
6.13; provided that the failure to give any such notice shall not affect the
establishment of such record date or payment date for Holders pursuant to this
Section 6.13.
SECTION 6.14 Restoration of Rights and Remedies. If the
Trustee or any Holder of any Note has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has ben discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or to
such Holder, then and in every such case, subject to any determination in such
proceeding, the Company, the
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Trustee and the Holders of Notes shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and remedies of the
Trustee and the Holders of Notes shall continue as though no such proceeding had
been instituted.
SECTION 6.15 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 6.15
does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section
6.10, or a suit by a Holder or Holders of more than 10% in principal amount of
the outstanding Notes.
SECTION 6.16 Compliance Certificate; Notices of Default. The
Company is required to deliver to the Trustee annually a statement, in the form
of an Officers' Certificate, regarding compliance with this Indenture, and the
Company is required, within five Business Days, upon becoming aware of any
Default or Event of Default or any default under any document, instrument or
agreement representing Indebtedness of the Company, to deliver to the Trustee a
statement, in the form of an Officers' Certificate, specifying such Default or
Event of Default.
ARTICLE VII
TRUSTEE
SECTION 7.1 Duties of Trustee. (a) If an Event of Default
actually known to a Trust Officer of the Trustee has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under this Indenture at the
request of any of the Holders of Notes, unless they shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
(b) Except during the continuance of an Event of Default
actually known to the Trustee:
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(i) The Trustee and the Agents will perform only those duties
as are specifically set forth herein and no others and no implied
covenants or obligations shall be read into this Indenture against the
Trustee or the Agents.
(ii) In the absence of bad faith on their part, the Trustee
and the Agents may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon
certificates or opinions and such other documents delivered to them
pursuant to Section 11.4 hereof furnished to the Trustee and conforming
to the requirements of this Indenture. However, in the case of any such
certificates or opinions which by any provision hereof are required to
be furnished to the Trustee, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) This paragraph does not limit the effect of subsection (b)
of this Section 7.1.
(ii) Neither the Trustee nor Agent shall be liable for any
error of judgment made in good faith by a Trust Officer of such Trustee
or Agent, unless it is proved that the Trustee or such Agent was
negligent in ascertaining the pertinent facts.
(iii) 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 6.8.
(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 an indemnity 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) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject to
subsections (a), (b), (c) and (d) of this Section 7.1.
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(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
(g) Any provision hereof relating to the conduct or affecting
the liability of or affording protection to the Trustee shall be subject to the
provisions of this Section 7.1 and, upon qualification of this Indenture under
the TIA, the TIA.
SECTION 7.2 Rights of Trustee. Subject to Section 7.1:
(a) The Trustee and each Agent may rely conclusively on and
shall be protected from acting or refraining from acting based upon any
document believed by them to be genuine and to have been signed or
presented by the proper person. Neither the Trustee nor any Agent shall
be bound to make any investigation into the facts or matters stated in
any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent order, approval, appraisal, bond, debenture,
note, coupon, security or other paper or document, but the Trustee or
its Agent, as the case may be, in its discretion, may make
reasonable further inquiry or investigation into such facts or matters
stated in such document and if the Trustee or its Agent as the case may
be, shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the
Company, at reasonable times during normal business hours, personally
or by agent or attorney. The Trustee shall not be deemed to have notice
or any knowledge of any matter (including without limitation Defaults
or Events of Default) unless a Trust Officer assigned to and working in
the Trustee's Corporate Trust Administration has actual knowledge
thereof or unless written notice thereof is received by the Trustee,
attention: Corporate Trust Administration and such notice references
the Securities generally, the Company or this Indenture;
(b) Any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by an Officers'
Certificate or Company Order and any resolution of the Board of
Directors of the Company, as the case may be, may be sufficiently
evidenced by a Board Resolution;
(c) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both,
which shall conform to the provisions of Sections 11.4 and 11.5.
Neither the Trustee nor any Agent shall be liable for any action it
takes or omits to take in good faith in reliance on such certificate or
opinion.
(d) The Trustee and any Agent may act through their attorneys
and agents and shall not be responsible for the misconduct or
negligence of any agent (other
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than an agent who is an employee of the Trustee or such Agent)
appointed with due care.
(e) 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 conferred upon it by this
Indenture; provided, however, that the Trustee's conduct does not
constitute willful misconduct, negligence or bad faith.
(f) The Trustee or any Agent 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.
(g) Subject to Section 9.2 hereof, the Trustee may (but shall
not be obligated to), without the consent of the Holders, give any
consent, waiver or approval required by the terms hereof, but shall not
without the consent of the Holders of not less than a majority in
aggregate principal amount of the Notes at the time outstanding (i)
give any consent, waiver or approval or (ii) agree to any
amendment or modification of this Indenture, in each case, that shall
have a material adverse effect on the interests of any Holder. The
Trustee shall be entitled to request and conclusively rely on an
Opinion of Counsel with respect to whether any consent, waiver,
approval, amendment or modification shall have a material adverse
effect on the interests of any Holder.
SECTION 7.3 Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may otherwise deal with the Company, its Subsidiaries, or their respective
Affiliates with the same rights it would have if it were not Trustee. However,
in the event that the Trustee acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the SEC for permission to
continue as trustee or resign. Any Agent may do the same with like rights. The
Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.4 Trustee's Disclaimer. The Trustee and the Agents
shall not be responsible for and make no representation as to the validity,
effectiveness or adequacy of this Indenture or the Notes; it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company or upon the Company's direction under
any provision hereof; it shall not be responsible for the use or application of
any money received by any Paying Agent other than the Trustee and it shall not
be responsible for any statement or recital herein of the Company, or any
document issued in connection with the sale of Notes or any statement in the
Notes other than the Trustee's certificate of authentication.
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SECTION 7.5 Notice of Default. If an Event of Default occurs
and is continuing and a Trust Officer of the Trustee receives actual notice of
such event, the Trustee shall mail to each Holder, as their names and addresses
appear on the list of Holders described in Section 2.5, notice of the uncured
Default or Event of Default within 30 days after the Trustee receives such
notice. Except in the case of a Default or Event of Default in payment of
principal of, premium, if any, interest, Additional Amounts, if any, or
Liquidated Damages, if any, on any Note, including the failure to make payment
on (i) the Change of Control Payment Date pursuant to a Change of Control Offer
or (ii) the Asset Sale Purchase Date pursuant to an Asset Sale Offer, 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 the Holders.
SECTION 7.6 Report by Trustee to Holders. This Section 7.6
shall not be operative as a part of this Indenture until this Indenture is
qualified under the TIA, and, until such qualification, this Indenture shall be
construed as if this Section 7.6 were not contained herein.
Within 60 days after each May 15 beginning with May 15, 1999,
the Trustee shall, to the extent that any of the events described in TIA Section
313(a) occurred within the previous twelve months, but not otherwise, mail to
each Holder a brief report dated as of such date that complies with TIA Section
313(a). The Trustee also shall comply with TIA Sections 313(b), 313(c) and
313(d).
A copy of each report at the time of its mailing to Holders
shall be mailed to the Company and filed with the SEC and each securities
exchange, if any, on which the Notes are listed.
The Company shall promptly notify the Trustee if subsequent to
the date hereof the Notes become listed on any securities exchange or of any
delisting thereof.
SECTION 7.7 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 acceptance of this
Indenture and services hereunder. The Trustee's and the Agents' 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 reasonable fees and expenses of
counsel) incurred or made by it in addition to the compensation for their
services, except any such disbursements, expenses and advances as may be
attributable to the Trustee's or any Agent's negligence or bad faith. Such
expenses shall include the reasonable compensation, disbursements and expenses
of the Trustee's and Agents' accountants, experts and counsel and any taxes or
other expenses incurred by a trust created pursuant to Section 8.4 hereof.
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The Company shall indemnify each of the Trustee, any
predecessor Trustee and the Agents for, and hold them harmless against, any and
all loss, damage, claim, expense or liability including taxes (other than taxes
based on the income of the Trustee) incurred by the Trustee or an Agent without
negligence, willful misconduct or bad faith on its part in connection with
acceptance of administration of this trust and its duties under this Indenture
and the Escrow Agreement, including the reasonable expenses and attorneys' fees
and expenses of defending itself against any claim of liability arising
hereunder. The Trustee and the Agents shall notify the Company promptly of any
claim asserted against the Trustee or such Agent for which it may seek
indemnity. However, the failure by the Trustee or the Agent to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Trustee or such Agent shall cooperate in the
defense (and may employ its own counsel reasonably satisfactory to the Trustee)
at the Company's expense. The Trustee or such Agent may have separate counsel
and the Company shall pay 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. The Company need not reimburse any
expense or indemnify against any loss or liability incurred by the Trustee or
such Agent as a result of the violation of this Indenture by the Trustee or such
Agent if such violation arose from the Trustee's or such Agent's negligence or
bad faith.
To secure the Company's payment obligations in this Section
7.7, the Trustee and the Agents shall have a senior Lien prior to the Notes
against all money or property held or collected by the Trustee and the Agents,
in its capacity as Trustee or Agent, except money or property held in trust to
pay principal or premium, if any, or interest on particular Notes and except for
any assets held in the Escrow Accounts.
When the Trustee or an Agent incurs expenses or renders
services after an Event of Default specified in Section 6.1(h) or Section 6.1(i)
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 7.7 and any claim arising hereunder shall survive
the termination of this Indenture, the resignation or removal of any Trustee or
Agent, the discharge of the Company's obligations pursuant to Article VIII and
any rejection or termination under any Bankruptcy Law.
SECTION 7.8 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 Notes may remove the Trustee by so notifying
the Company and the Trustee in writing and may appoint a successor trustee with
the Company's consent. A resignation or removal of the Trustee and appointment
of a successor Trustee
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shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this section. The Company may remove the Trustee if:
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(iii) a receiver or other public officer takes charge of the
Trustee or its property; or
(iv) the Trustee becomes incapable of acting with respect to
its duties hereunder.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall notify each Holder of
such event and 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 then outstanding Notes may, with the Company's consent, 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. Immediately after that,
the retiring Trustee shall transfer, after payment of all sums then owing to the
Trustee pursuant to Section 7.7, all property held by it as Trustee to the
successor Trustee, subject to the Lien provided in Section 7.7, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Holder.
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 then
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee after written request by any Holder who has
been a Holder for at least six months fails to comply with Section 7.10, such
Holder 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 7.8, the Company's obligations under Section 7.7 shall continue for the
benefit of the retiring
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Trustee and the Company shall pay to any replaced or removed Trustee all amounts
owed under Section 7.7 upon such replacement or removal.
SECTION 7.9 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
association, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee. In case any Notes shall
have been authenticated, but not delivered, by the Trustee then in office, any
successor by consolidation, merger or conversion to such authenticating Trustee
may adopt such authentication and deliver the Notes so authenticated with the
same effect as if such successor Trustee had itself authenticated such Notes.
SECTION 7.10 Corporate Trustee Required; Eligibility. There
shall be at all times a Trustee hereunder which shall be eligible to act as
Trustee under the TIA and shall have a combined capital and surplus of at least
$50,000,000 and have its Corporate Trust Office in the Borough of Manhattan, The
City of New York. If such Person publishes reports of condition at least
annually, pursuant to law or to the requirements of a Federal, State or District
of Columbia supervising or examining authority within the United States of
America, then for the purposes of this Section, the combined capital and surplus
of such Person shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so published. If
at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 7.11 Disqualification; Conflicting Interests. If the
Trustee has or shall acquire a conflicting interest within the meaning of the
TIA, the Trustee shall either eliminate such interest or resign, to the extent
and in the manner provided by, and subject to the provisions of, the TIA and
this Indenture.
SECTION 7.12 Preferential Collection of Claims Against
Company. The Trustee, in its capacity as Trustee hereunder, 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.
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ARTICLE VIII
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.1 Option To Effect Legal Defeasance or Covenant
Defeasance. The Company may, at the option of its Board of Directors evidenced
by a resolution set forth in an Officers' Certificate, at any time, with respect
to the Notes, elect to have either Section 8.2 or 8.3 be applied to all
outstanding Notes upon compliance with the conditions set forth below in this
Article VIII.
SECTION 8.2 Legal Defeasance and Discharge. Upon the Company's
exercise under Section 8.1 of the option applicable to this Section 8.2, the
Company shall be deemed to have been discharged from its obligations with
respect to all outstanding Notes on the date the conditions set forth below are
satisfied (hereinafter, "Legal Defeasance"). For this purpose, such Legal
Defeasance means that the Company shall be deemed to have paid and discharged
all the Obligations relating to the outstanding Notes and the Notes shall
thereafter be deemed to be "outstanding" only for the purposes of Section 8.6,
Section 8.8 and the other Sections of this Indenture referred to below in this
Section 8.2, and to have satisfied all of their other obligations under such
Notes and this Indenture and cured all then existing Events of Default (and the
Trustee, on demand of and at the expense of the Company, shall execute proper
instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (a) the rights of
Holders of outstanding Notes to receive payments in respect of the principal of,
premium, if any, interest, Additional Amounts, if any, and Liquidated Damages,
if any, on such Notes when such payments are due or on the Redemption Date
solely out of the trust created pursuant to this Indenture; (b) the Company's
obligations with respect to Notes concerning issuing temporary Notes, or, where
relevant, registration of such Notes, mutilated, destroyed, lost or stolen Notes
and the maintenance of an office or agency for payment and money for security
payments held in trust; (c) the rights, powers, trusts, duties and immunities of
the Trustee, and the Company's obligations in connection therewith; and (d) this
Article VIII and the obligations set forth in Section 8.6 hereof.
Subject to compliance with this Article VIII, the Company may
exercise its option under Section 8.2 notwithstanding the prior exercise of its
option under Section 8.3 with respect to the Notes.
SECTION 8.3 Covenant Defeasance. Upon the Company's exercise
under Section 8.1 of the option applicable to this Section 8.3, the Company
shall be released from any obligations under the covenants contained in Sections
4.3, 4.4, 4.10, 4.12, 4.13, 4.14, 4.15, and 4.16 hereof with respect to the
outstanding Notes on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter
be deemed not "outstanding" for the
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purposes of any direction, waiver, consent or declaration or act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, such Covenant Defeasance means that, with respect
to the outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or Event of Default under Section 6.1(e),
nor shall any event referred to in Sections 6.1(f) or (g) thereafter constitute
a Default or Event of Default, but, except as specified above, the remainder of
this Indenture and such Notes shall be unaffected thereby.
SECTION 8.4 Conditions to Legal or Covenant Defeasance. The
following shall be the conditions to the application of either Section 8.2 or
Section 8.3 to the outstanding Notes:
(i) the Company must irrevocably deposit, or cause to be
irrevocably deposited, with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S. dollars, Government Securities
or a combination thereof in such amounts as will be sufficient, in the
opinion of an internationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, interest,
Additional Amounts, if any, and Liquidated Damages, if any, due on the
outstanding Notes on the stated maturity date or on the applicable
Redemption Date, as the case may be, of such principal, premium, if
any, interest, Additional Amounts, if any, and Liquidated Damages, if
any, due on the outstanding Notes;
(ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee (A) an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that, subject to
customary assumptions and exclusions, (1) the Company has received
from, or there has been published by, the U.S. Internal Revenue Service
a ruling or (2) since the Issue Date, there has been a change in the
applicable U.S. federal income tax law, in either case to the effect
that, and based thereon such Opinion of Counsel in the United States
shall confirm that, subject to customary assumptions and exclusions,
the Holders of the outstanding Notes will not recognize income, gain or
loss for U.S. federal income tax purposes as a result of such Legal
Defeasance and will be subject to U.S. federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred and (B) an Opinion
of Counsel in The Netherlands reasonably acceptable to the Trustee to
the effect that (1) Holders will not recognize income, gain or loss for
Netherlands income tax purposes as a result of such Legal Defeasance
and will be
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subject to Netherlands income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred and (2) payments from the defeasance trust
will be free and exempt from any and all withholding and other income
taxes of whatever nature imposed or levied by or on behalf of The
Netherlands or any political subdivision thereof or therein having the
power to tax;
(iii) in the case of Covenant Defeasance, the Company shall
have delivered to the Trustee (A) an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that, subject to
customary assumptions and exclusions, the Holders of the outstanding
Notes will not recognize income, gain or loss for U.S. federal income
tax purposes as a result of such Covenant Defeasance and will be
subject to such tax on the same amounts, in the same manner and at the
same times as would have been the case if such Covenant Defeasance had
not occurred and (B) an Opinion of Counsel in The Netherlands
reasonably acceptable to the Trustee to the effect that (1) Holders
will not recognize income, gain or loss for Netherlands income tax
purposes as a result of such Covenant Defeasance and will be subject to
Netherlands income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Covenant Defeasance
had not occurred and (2) payments from the defeasance trust will be
free and exempt from any and all withholding and other income taxes of
whatever nature imposed or levied by or on behalf of The Netherlands or
any political subdivision thereof or therein having the power to tax;
(iv) no Default or Event of Default shall have occurred and be
continuing with respect to certain Events of Default on the date of
such deposit;
(v) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under any
material agreement or instrument to which the Company is a party or by
which the Company is bound;
(vi) the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that, as of the date of such opinion
and subject to customary assumptions and exclusions following the
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally under any applicable Netherlands
and U.S. federal or state law, and that the Trustee has a perfected
security interest in such trust funds for the ratable benefit of the
Holders;
(vii) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the
Company with the intent of defeating, hindering, delaying or defrauding
any creditors of the Company or others; and
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(viii) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel (which opinion of
counsel may be subject to customary assumptions and exclusions) each
stating that all conditions precedent provided for or relating to the
Legal Defeasance or the Covenant Defeasance, as the case may be, have
been complied with.
SECTION 8.5 Satisfaction and Discharge of Indenture. This
Indenture will be discharged and will cease to be of further effect as to all
Notes issued thereunder when either (i) all such Notes theretofore authenticated
and delivered (except lost, stolen or destroyed Notes which have been replaced
or paid and Notes for whose payment money has theretofore been deposited in
trust and thereafter repaid to the Company) have been delivered to the Trustee
for cancellation; or (ii) (A) all such Notes not theretofore delivered to such
Trustee for cancellation have become due and payable by reason of the making of
a notice of redemption or otherwise or will become due and payable within one
year and the Company has irrevocably deposited or caused to be deposited with
such Trustee as trust funds in trust an amount of money sufficient to pay and
discharge the entire indebtedness on such Notes not theretofore delivered to the
Trustee for cancellation for principal, premium, if any, and accrued and unpaid
interest, Additional Amounts, if any, and Liquidated Damages, if any, to the
date of maturity or redemption; (B) no Default with respect to this Indenture or
the Notes shall have occurred and be continuing on the date of such deposit or
shall occur as a result of such deposit and such deposit will not result in a
breach or violation of, or constitute a default under, any other instrument to
which the Company is a party or by which it is bound; (C) the Company has paid,
or caused to be paid, all sums payable by it under this Indenture; and (D) the
Company has delivered irrevocable instructions to the Trustee under this
Indenture to give the notice of redemption and apply the deposited money toward
the payment of such Notes at maturity or the Redemption Date, as the case may
be. In addition, the Company must deliver an Officers' Certificate and an
Opinion of Counsel to the Trustee stating that all conditions precedent to
satisfaction and discharge have been satisfied.
SECTION 8.6 Survival of Certain Obligations. Notwithstanding
the satisfaction and discharge of this Indenture and of the Notes referred to in
Section 8.1, 8.2, 8.3, 8.4 or 8.5, the respective obligations of the Company and
the Trustee under Sections 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.10, 2.11, 2.12, 2.13,
2.14, 4.1, 4.2, 4.5, 4.22, 6.10, Article VII, 8.7, 8.8, 8.9 and 8.10 shall
survive until the Notes are no longer outstanding, and thereafter the
obligations of the Company and the Trustee under Sections 7.7, 8.7, 8.8, 8.9 and
8.10 shall survive. Nothing contained in this Article VIII shall abrogate any of
the obligations or duties of the Trustee under this Indenture.
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SECTION 8.7 Acknowledgement of Discharge by Trustee. Subject
to Section 8.10, after (i) the conditions of Section 8.4 or 8.5 have been
satisfied, (ii) the Company has paid or caused to be paid all other sums payable
hereunder by the Company and (iii) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent referred to in clause (i) above relating to the
satisfaction and discharge of this Indenture have been complied with, the
Trustee upon written request shall acknowledge in writing the discharge of all
of the Company's obligations under this Indenture except for those surviving
obligations specified in this Article VIII.
SECTION 8.8 Application of Trust Moneys. All cash in U.S.
dollars and Government Securities deposited with the Trustee pursuant to Section
8.4 or 8.5 in respect of Notes shall be held in trust and applied by it, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent as the Trustee may determine, to the
Holders of the Notes of all sums due and to become due thereon for principal,
premium, if any, interest, Additional Amounts, if any, and Liquidated Damages,
if any, but such money need not be segregated from other funds except to the
extent required by law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the Government
Securities deposited pursuant to Section 8.4 or 8.5 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 Notes.
SECTION 8.9 Repayment to the Company; Unclaimed Money. The
Trustee and any Paying Agent shall promptly pay or return to the Company upon
Company Order any cash or Government Securities held by them at any time that
are not required for the payment of the principal of, premium, if any, interest,
Additional Amounts, if any, and Liquidated Damages, if any, on the Notes for
which cash or Government Securities have been deposited pursuant to Section 8.4
or 8.5.
Any money held by the Trustee or any Paying Agent under this
Article, in trust for the payment of the principal of, premium, if any,
interest, Additional Amounts, if any, and Liquidated Damages, if any, on any
Note and remaining unclaimed for two years after such principal, premium, if
any, interest, Additional Amounts, if any, and Liquidated Damages, if any, has
become due and payable shall be paid to the Company upon Company Order or if
then held by the Company shall be discharged from such trust; and the Holder of
such Note shall thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, shall thereupon cease; provided,
however, that the Trustee or such Paying Agent, before being required to make
any such repayment, may at the expense of the Company give notice to the Holders
or cause to be published
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notice once, in a leading newspaper having a general circulation in New York
(which is expected to be The Wall Street Journal) and in Amsterdam (which is
expected to be Het Financieele Dagblad ) (and, if and so long as the Notes are
listed on the Luxembourg Stock Exchange and the rules of such Stock Exchange
shall so require, a newspaper having a general circulation in Luxembourg (which
is expected to be the Luxemburger Wort)) or in the case of Definitive Notes,
mail to Holders by first-class mail, postage prepaid, at their respective
addresses as they appear on the registration books of the Registrar (and, if and
so long as the Notes are listed on the Luxembourg Stock Exchange and the rules
of such Stock Exchange shall so require, publish in a newspaper having a general
circulation in Luxembourg (which is expected to be the Luxemburger Wort)), that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such notification, any unclaimed
balance of such money then remaining will be repaid to the Company.
SECTION 8.10 Reinstatement. If the Trustee or Paying Agent is
unable to apply any cash or Government Securities, as applicable, in accordance
with Section 8.2, 8.3, 8.4 or 8.5 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 Notes shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.2, 8.3, 8.4 or 8.5 until such time as
the Trustee or Paying Agent is permitted to apply all such cash or Government
Securities in accordance with Section 8.2, 8.3, 8.4 or 8.5; provided, however,
that if the Company has made any payment of interest on, premium, if any,
principal, Additional Amounts, if any, and Liquidated Damages, if any, of any
Notes because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money or Government Securities, as applicable, held by the Trustee or
Paying Agent.
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1 Without Consent of Holders of Notes.
Notwithstanding Section 9.2 hereof, the Company and the Trustee together may
amend or supplement this Indenture or the Notes without the consent of any
Holder of a Note (i) to cure any ambiguity, omission, defect or inconsistency,
(ii) to provide for uncertificated Notes in addition to or in place of
certificated Notes, (iii) to provide for the assumption of the Company
obligations to Holders of such Notes in the case of a merger or consolidation
pursuant to Article V, (iv) to provide for the assumption of the Company's
obligations to Holders of such Notes, (v) to make any change that would provide
any additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under this Indenture of any such Holder, (vi)
to add
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covenants for the benefit of the Holders or to surrender any right or power
conferred upon the Company, (vii) to comply with requirements of the Commission
in order to effect or maintain the qualification of the Indenture under the TIA
or (viii) to provide for the issuance of the Exchange Notes (which will have
terms identical in all material respects to the Initial Notes except that the
transfer restrictions contained in the Initial Notes will be modified or
eliminated, as appropriate), and which will be treated together with any
outstanding Initial Notes, as a single issue of Notes or (ix) to execute and
deliver any documents necessary or appropriate to release Liens or any Escrow
Collateral as permitted by the Escrow Agreement.
Upon the request of the Company, accompanied by a Board
Resolution authorizing the execution of any such amended or supplemental
indenture, and upon receipt by the Trustee of the documents described in Section
9.6, the Trustee shall join with the Company in the execution of any amended or
supplemental indenture authorized or permitted by the terms of this Indenture
and to make any further appropriate agreements and stipulations which may be
therein contained, but the Trustee shall not be obligated to enter into such
amended or supplemental indenture which adversely affects its own rights, duties
or immunities hereunder or otherwise.
SECTION 9.2 With Consent of Holders of Notes. The Company and
the Trustee may amend or supplement this Indenture or the Notes or any amended
or supplemental indenture with the written consent of the Holders of at least a
majority in principal amount of the Notes then outstanding (including consents
obtained in connection with a tender offer or exchange offer for the Notes), and
any existing Default or Event of Default and its consequences or compliance with
any provision of this Indenture or the Notes may be waived with the consent of
the Holders of at least a majority in principal amount of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for the Notes). However, without the consent of each Holder
affected, an amendment or waiver may not (with respect to any Notes held by a
non-consenting Holder of Notes): (i) reduce the principal amount of the Notes
whose Holders must consent to an amendment, supplement or waiver, (ii) reduce
the principal of or change the fixed maturity of any such Note or alter or waive
the provisions with respect to the redemption of the Notes with respect to the
timing or amount of payment thereof, (iii) reduce the rate of or change the time
for payment of interest, including defaulted interest, on any Note, (iv) waive a
Default in the payment of principal of, premium, if any, interest, Additional
Amounts, if any, or Liquidated Damages, if any, on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment default that
resulted from the acceleration) or in respect of a covenant or provision
contained in this Indenture which cannot be amended or modified without the
consent of all Holders, (v) make any Note payable in money other than that
stated in the Notes, (vi) make any change in the provisions of this Indenture
relating to waivers of past Defaults or the rights of Holders of the Notes to
receive payments of principal,
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premium, if any, interest, Additional Amounts, if any, or Liquidated Damages, if
any, on the Notes, (vii) make any change in the amendment and waiver provisions
contained in this Indenture, (viii) make any change in paragraph 3 of the
Initial Notes or paragraph 2 of the Exchange Notes that adversely affects the
rights of any Holder of the Notes, (ix) amend the terms of the Notes or this
Indenture in a way that would result in the loss of an exemption from any Taxes
or an exemption from any obligation to withhold or deduct Taxes unless the
Company agrees to pay Additional Amounts, if any, in respect thereof, [(x) to
provide for a Guarantee by a Restricted Subsidiary of the Notes pursuant to
Section 4.17,] (xi) impair the right of any Holder of the Notes to receive
payment of principal of, interest, Liquidated Damages, if any, on such Holder's
Notes on or after the due dates therefor or to institute suit for the
enforcement of any payment on or with respect to such Holder's Notes or (xii)
modify the provisions of the Escrow Agreement or the Indenture relating to the
Escrow Collateral in any manner adverse to the Holders or release the Escrow
Collateral from the Lien under the Escrow Agreement or permit any other
obligation to be secured by the Escrow Collateral.
Upon the request of the Company, accompanied by a Board
Resolution authorizing the execution of any such amended or supplemental
indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 9.6, the Trustee shall join
with the Company in the execution of such amended or supplemental indenture
unless such amended or supplemental indenture adversely affects the Trustee's
own rights, duties or immunities hereunder or otherwise, in which case the
Trustee may in its discretion, but shall not be obligated to, enter into such
amended or supplemental indenture.
It shall not be necessary for the consent of the Holders of
Notes under this Section 9.2 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
becomes effective, the Company shall mail to the Holders of Notes 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 amended or
supplemental indenture or waiver.
SECTION 9.3 Compliance with TIA. From the date on which this
Indenture is qualified under the TIA, every amendment, waiver or supplement of
this Indenture or the Notes shall comply with the TIA as then in effect.
SECTION 9.4 Revocation and Effect of Consents. Until an
amendment, supplement or waiver becomes effective, a consent to it by a Holder
of a Note is a continuing consent by the Holder of a Note and every subsequent
Holder of a
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Note or portion of a Note that evidences the same debt as the consenting
Holder's Note, even if notation of the consent is not made on any Note. However,
any such Holder of a Note or subsequent Holder of a Note may revoke the consent
as to its Note if the Trustee receives written notice of revocation before the
date the waiver, supplement or amendment becomes effective. An amendment,
supplement or waiver becomes effective in accordance with its terms and
thereafter binds every Holder of a Note.
The Company may fix a record date for determining which
Holders of the Notes must consent to such amendment, supplement or waiver. If
the Company fixes a record date, the record date shall be fixed at (i) the later
of 30 days prior to the first solicitation of such consent or the date of the
most recent list of Holders of Notes furnished to the Trustee prior to such
solicitation pursuant to Section 2.5 or (ii) such other date as the Company
shall designate.
SECTION 9.5 Notation on or Exchange of Notes. The Trustee may
place an appropriate notation about an amendment, supplement or waiver on any
Note thereafter authenticated. The Company in exchange for all Notes may issue
and the Trustee shall authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 9.6 Trustee To Sign Amendments, Etc. The Trustee shall
execute any amendment, supplement or waiver authorized pursuant to this Article
IX; provided, however, that the Trustee may, but shall not be obligated to,
execute any such amendment, supplement or waiver which adversely affects the
Trustee's own rights, duties or immunities under this Indenture. The Trustee
shall be entitled to receive indemnity reasonably satisfactory to it, and shall
be fully protected in relying upon, an Opinion of Counsel and an Officers'
Certificate each stating that the execution of any amendment, supplement or
waiver authorized pursuant to this Article IX is authorized or permitted by this
Indenture and constitutes the legal, valid and binding obligations of the
Company enforceable in accordance with its terms. Such Opinion of Counsel shall
not be an expense of the Trustee.
ARTICLE X
COLLATERAL AND SECURITY
SECTION 10.1 Escrow Agreement. The due and punctual payment of
the principal of and interest on the Notes when and as the same shall be due and
payable, whether on an Interest Payment Date, at maturity, by acceleration,
repurchase,
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redemption or otherwise, and interest on the overdue principal of and interest
(to the extent permitted by law), if any, on such Notes and performance of all
other obligations of the Company to the Holders of such Notes or the Trustee
under this Indenture with respect to such Notes, and each of the Notes,
according to the terms hereunder or thereunder, shall be secured as provided in
the Escrow Agreement which the Company, the Escrow Agent and the Trustee have
entered into simultaneously with the execution of this Indenture. Each Holder of
each Note, by its acceptance thereof, consents and agrees to the terms of the
Escrow Agreement (including, without limitation, the provisions providing for
foreclosure and disbursement of Escrow Collateral) as the same may be in effect
or may be amended from time to time in accordance with its terms and authorizes
and directs the Escrow Agent and the Trustee to enter into the Escrow Agreement
and to perform its obligations and exercise its rights thereunder in accordance
therewith. The Company shall deliver to the Trustee copies of the Escrow
Agreement, and shall do or cause to be done all such acts and things as may be
necessary or proper, or as may be required by the provisions of the Escrow
Agreement, to assure and confirm to the Trustee (acting on behalf of the Holders
of the Notes) the security interest in the Escrow Collateral with respect to the
Notes contemplated by the Escrow Agreement or any part thereof, as from time to
time constituted, so as to render the same available for the security and
benefit of this Indenture with respect to, and of, such Notes, according to the
intent and purposes expressed in the Escrow Agreement. The Company shall take
any and all actions reasonably required to cause the Escrow Agreement to create
and maintain (to the extent possible under applicable law), as security for the
obligations of the Company hereunder, a valid and enforceable perfected first
priority Lien in and on all the Escrow Collateral with respect to the Notes, in
favor of the Trustee (acting on behalf of the Holders of the Notes) for the
benefit of the Holders of such Notes, superior to and prior to the rights of all
third Persons and subject to no other Liens.
SECTION 10.2 Recording and Opinions. (a) The Company shall
furnish to the Trustee simultaneously with the execution and delivery of this
Indenture an Opinion of Counsel either (i) stating that in the opinion of such
counsel all action has been taken with respect to the recording, registering and
filing of this Indenture, financing statements or other instruments necessary to
make effective the Lien intended to be created by the Escrow Agreement, and
reciting with respect to the security interests in the Escrow Collateral, the
details of such action, or (ii) stating that, in the opinion of such counsel, no
such action is necessary to make such Lien effective.
(b) The Company shall furnish to the Escrow Agent and the
Trustee on May 15, 1999, and on each May 15 thereafter until the date upon which
the balance of Available Funds (as defined in the Escrow Agreement) shall have
been reduced to zero, an Opinion of Counsel, dated as of such date, either (i)
stating that (A) in the opinion of such counsel, action has been taken with
respect to the recording, registering, filing, re-recording, re-registering and
refiling of all supplemental indentures, financing statements, continuation
statements or other instruments of further assurance as is
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necessary to maintain the Lien of the Escrow Agreement and reciting with respect
to the security interests in the Escrow Collateral the details of such action or
referring to prior Opinions of Counsel in which such details are given and (B)
based on relevant laws as in effect on the date of such Opinion of Counsel, all
financing statements and continuation statements have been executed and filed
that are necessary as of such date and during the succeeding 12 months fully to
preserve and protect, to the extent such protection and preservation are
possible by filing, the rights of the Holders of the Notes and the Trustee
hereunder and under the Escrow Agreement with respect to the security interests
in the Escrow Collateral with respect to such Notes or (ii) stating that, in the
opinion of such counsel, no such action is necessary to maintain such Lien and
assignment.
SECTION 10.3 Release of Collateral. (a) Subject to subsections
(b), (c) and (d) of this Section 10.3, Escrow Collateral may be released from
the Lien and security interest created by the Escrow Agreement only in
accordance with the provisions of the Escrow Agreement.
(b) Except to the extent that any Lien on proceeds of Escrow
Collateral is automatically released by operation of Section 9-306 of the
Uniform Commercial Code or other similar law, no Escrow Collateral shall be
released from the Lien and security interest created by the Escrow Agreement
pursuant to the provisions of the Escrow Agreement, other than pursuant to the
terms thereof, unless there shall have been delivered to the Trustee the
certificate required by Section 10.3(d) and Section 10.4.
(c) At any time when an Event of Default shall have occurred
and be continuing and the maturity of the Notes issued on the Issuance Date
shall have been accelerated (whether by declaration or otherwise), no Escrow
Collateral shall be released pursuant to the provisions of the Escrow Agreement,
and no release of Escrow Collateral in contravention of this Section 10.3(c)
shall be effective as against the Holders of Notes, except for the disbursement
of all Available Funds (as defined in the Escrow Agreement) to the Trustee
pursuant to Section 6(c) of the Escrow Agreement.
(d) The release of any Escrow Collateral from the Liens and
security interests created by the Escrow Agreement shall not be deemed to impair
the security under the Escrow Agreement in contravention of the provisions
hereof if and to the extent the Escrow Collateral is released pursuant to the
terms hereof or, subject to complying with the requirements of this Section
10.3, pursuant to the terms of the Escrow Agreement. To the extent applicable,
the Company shall cause TIA Section 314(d) relating to the release of property
or securities from the Lien and security interest of the Escrow Agreement to be
complied with. Any certificate or opinion required by TIA Section 314(d) may be
made by an Officer of the Company except in cases where TIA Section 314(d)
requires that such certificate or opinion be made by an independent Person,
which Person shall be an independent engineer, appraiser or other expert
selected or approved by the Trustee in the exercise of reasonable care.
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SECTION 10.4. Certificates of the Company. The Company shall
furnish to the Trustee, prior to any proposed release of Escrow Collateral other
than pursuant to the express terms of the Escrow Agreement, (i) all documents
required by Section 314(d) of the TIA and (ii) an Opinion of Counsel, which may
be rendered by internal counsel to the Company, to the effect that such
accompanying documents constitute all documents required by Section 314(d) of
the TIA. The Trustee may, to the extent permitted by Sections 7.1 and 7.2,
accept as conclusive evidence of compliance with the foregoing provisions the
appropriate statements contained in such documents and such Opinion of Counsel.
SECTION 10.5. Authorization of Actions to be Taken by the
Trustee Under the Escrow Agreement. Subject to the provisions of Sections 7.1
and 7.2, the Trustee may in the name and on behalf of the Holders of such Notes,
without the consent of the Holders of the Notes, take all actions it deems
necessary or appropriate in order to (a) enforce any of the terms of the Escrow
Agreement and (b) collect and receive any and all amounts payable in respect of
the obligations of the Company hereunder. The Trustee shall have power to
institute and maintain such suits and proceedings as it may deem expedient to
prevent any impairment of the Escrow Collateral by any acts that may be unlawful
or in violation of the Escrow Agreement or this Indenture, and such suits and
proceedings as the Trustee may deem expedient to preserve or protect its
interests and the interests of the Holders of the Notes in the Escrow Collateral
with respect to such Notes (including power to institute and maintain suits or
proceedings to restrain the enforcement of or compliance with any legislative or
other governmental enactment, rule or order that may be unconstitutional or
otherwise invalid if the enforcement of, or compliance with, such enactment,
rule or order would impair the security interest hereunder or be prejudicial to
the interests of the Holders of such Notes or of the Trustee).
SECTION 10.6. Authorization of Receipt of Funds by the Trustee
Under the Escrow Agreement. The Trustee is authorized to receive any funds for
the benefit of the Holders of Notes disbursed under the Escrow Agreement, and to
make further distributions of such funds to the Holders of Notes according to
the provisions of this Indenture.
SECTION 10.7. Termination of Security Interest. Upon the
earliest to occur of (i) the date upon which the balance of Available Funds (as
defined in the Escrow Agreement) shall have been reduced to zero, (ii) the
payment in full of all obligations of the Company under this Indenture and the
Notes, (iii) Legal Defeasance pursuant to Section 8.2 and (iv) Covenant
Defeasance pursuant to Section 8.3, the Trustee shall, at the written request of
the Company, release the Liens pursuant to the Escrow Agreement upon the
Company's compliance with the provisions of the TIA pertaining to release of
collateral.
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ARTICLE XI
MISCELLANEOUS
SECTION 11.1 TIA Controls. If any provision of this Indenture
limits, qualifies, or conflicts with the duties imposed by operation of Section
3.18(c) of the TIA, the imposed duties shall control.
SECTION 11.2 Notices. Any notices or other communications
required or permitted hereunder shall be in writing, and shall be sufficiently
given if made by hand delivery, by telecopier or first-class mail, postage
prepaid, addressed as follows:
if to the Company:
VersaTel Telecom B.V.
Paasheuvelweg 39
1105 BV Amesterdam-Z.O.
The Netherlands
Facsimile No: 31-20-501-10-11
Attention: Raj Raithatha
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Facsimile No: 212-848-7179
Attention: John D. Morrison, Jr. Esq.
if to the Trustee:
United States Trust Company of New York, as Trustee,
Registrar or Paying Agent
114 West 47th Street
New York, New York 10036-1532
Attention: Corporate Trust Administration
Facsimile: (212) 852-1626
Each of the Company and the Trustee by written notice to each
other such Person may designate additional or different addresses for notices to
such Person. Any notice or communication to the Company and the Trustee, shall
be deemed to have been
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given or made as of the date so delivered if personally delivered; when receipt
is acknowledged, if telecopied; and five (5) calendar days after mailing if sent
by first class mail, postage prepaid (except that a notice of change of address
and a Notice to the Trustee shall not be deemed to have been given until
actually received by the addressee).
Any notice or communication mailed to a Holder shall be mailed
to such Person by first-class mail or other equivalent means at such Person's
address as it appears on the registration books of the Registrar and shall be
sufficiently given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders. If
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
Notices regarding the Notes will be (i) published in a leading
newspaper having a general circulation in New York (which is expected to be The
Wall Street Journal) and in Amsterdam (which is expected to be Het Financieele
Dagblad ) (and, if and so long as the Notes are listed on the Luxembourg Stock
Exchange and the rules of such Stock Exchange shall so require, a newspaper
having a general circulation in Luxembourg (which is expected to be the
Luxemburger Wort)) or (ii) in the case of Definitive Notes, mailed to Holders by
first-class mail at their respective addresses as they appear on the
registration books of the Registrar (and, if and so long as the Notes are listed
on the Luxembourg Stock Exchange and the rules of such Stock Exchange shall so
require, published in a newspaper having a general circulation in Luxembourg
(which is expected to be the Luxemburger Wort)). Notices given by publication
will be deemed given on the first date on which publication is made and notices
given by first-class mail, postage prepaid, will be deemed given five calendar
days after mailing.
SECTION 11.3 Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with other Holders with
respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and any other person shall have the protection of TIA
Section 312(c).
SECTION 11.4 Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company to the Trustee or an
Agent to take 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 (which shall include the statements set
forth in Section 11.5), stating that, in the opinion of the signers,
all conditions precedent and covenants, if any,
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provided for in this Indenture relating to the proposed action have
been satisfied or complied with; and
(2) an Opinion of Counsel in form and substance satisfactory
to the Trustee or such Agent (which shall include the statements set
forth in Section 11.5) stating that, in the opinion of such counsel,
all such conditions precedent and covenants have been satisfied or
complied with.
SECTION 11.5 Statements Required in Certificate or Opinion.
Each certificate 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, such
Person has made such examination or investigation as is necessary to
enable such Person to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each
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 11.6 Rules by Trustee, Paying Agent, Registrar. The
Trustee, Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 11.7 Legal Holidays. If a payment date is not a
Business Day, payment may be made on the next succeeding day that is a Business
Day, and no interest shall accrue for the intervening period.
SECTION 11.8 Governing Law. THIS INDENTURE AND THE NOTES SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF NEW YORK.
<PAGE> 100
92
SECTION 11.9 Submission to Jurisdiction; Appointment of Agent
for Service; Waiver. To the fullest extent permitted by applicable law, the
Company irrevocably submits to the non-exclusive jurisdiction of any federal or
state court in the Borough of Manhattan in the City of New York, County and
State of New York, United States of America, in any suit or proceeding based on
or arising under this Indenture and the Notes, and irrevocably agrees that all
claims in respect of such suit or proceeding may be determined in any such
court. The Company, to the fullest extent permitted by applicable law,
irrevocably and fully waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding and hereby irrevocably designates and
appoints CT Corporation (the "Authorized Agent"), as its authorized agent upon
whom process may be served in any such suit or proceeding. The Company
represents that it has notified the Authorized Agent of such designation and
appointment and that the Authorized Agent has accepted the same in writing. The
Company hereby irrevocably authorizes and directs its Authorized Agent to accept
such service. The Company further agrees that service of process upon its
Authorized Agent and written notice of said service to the Company mailed by
first class mail or delivered to its Authorized Agent shall be deemed in every
respect effective service of process upon the Company in any such suit or
proceeding. Nothing herein shall affect the right of any person to serve process
in any other manner permitted by law. The Company agrees that a final action in
any such suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other lawful manner.
Notwithstanding the foregoing, any action against the Company arising out of or
based on this Indenture, the Notes or the transactions contemplated hereby may
also be instituted in any competent court in The Netherlands, and the Company
expressly accepts the jurisdiction of any such court in any such action.
The Company hereby irrevocably waives, to the extent permitted
by law, any immunity to jurisdiction to which it may otherwise be entitled
(including, without limitation, immunity to pre-judgment attachment,
post-judgment attachment and execution) in any legal suit, action or proceeding
against it arising out of or based on this Indenture, the Notes or the
transactions contemplated hereby.
The provisions of this Section 11.9 are intended to be
effective upon the execution of this Indenture and the Notes without any further
action by the Company or the Trustee and the introduction of a true copy of this
Indenture into evidence shall be conclusive and final evidence as to such
matters.
SECTION 11.10 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or debt
agreement of any of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
<PAGE> 101
93
SECTION 11.11 No Personal Liability of Directors, Officers,
Employees, Stockholders or Incorporators. No director, officer, employee,
incorporator or stockholder of the Company shall have any liability for any
obligations of the Company under the Notes or this Indenture or for any claim
based on, in respect of, or by reason of such obligations or their creation.
Each Holder of the Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes.
SECTION 11.12 Currency Indemnity. U.S. dollars are the sole
currency of account and payment for all sums payable by the Company under or in
connection with the Notes, including damages. Any amount received or recovered
in a currency other than U.S. dollars (whether as a result of, or the
enforcement of, a judgment or order of a court of any jurisdiction, in the
winding-up or dissolution of the Company or otherwise) by any Holder of a Note
in respect of any sum expressed to be due to it from the Company shall only
constitute a discharge to the Company to the extent of the U.S. dollar amount
which the recipient is able to purchase with the amount so received or recovered
in that other currency on the date of that receipt or recovery (or, if it is not
practicable to make that purchase on that date, on the first date on which it is
practicable to do so). If that U.S. dollar amount is less than the U.S. dollar
amount expressed to be due to the recipient under any Note, the Company shall
indemnify it against any loss sustained by it as a result. If the dollar amount
is greater than the dollar amount expressed to be due to the recipient under
this Agreement, the Company shall be entitled to the amount of such excess. In
any event, the Company shall indemnify the recipient against the cost of making
any such purchase. For the purposes of this subsection, it will be sufficient
for the Trustee or any Holder of a Note to certify in a satisfactory manner
(indicating the sources of information used) that it would have suffered a loss
had an actual purchase of U.S. dollars been made with the amount so received in
that other currency on the date of receipt or recovery (or, if a purchase of
dollars on such date had not been practicable, on the first date on which it
would have been practicable, it being required that the need for a change of
date be certified in the manner mentioned above). These indemnities constitute a
separate and independent obligation from the Company's other obligations, shall
give rise to a separate and independent cause of action, shall apply
irrespective of any indulgence granted by the Trustee or any Holder of a Note
and shall continue in full force and effect despite any other judgment, order,
claim or proof for a liquidated amount in respect of any sum due under any Note.
SECTION 11.13 Successors. All agreements of the Company in
this Indenture and the Notes shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successor.
<PAGE> 102
94
SECTION 11.14 Counterpart Originals. All parties hereto may
sign any number of copies of this Indenture. Each signed copy or counterpart
shall be an original, but all of them together shall represent one and the same
agreement.
SECTION 11.15 Severability. In case any one or more of the
provisions in this Indenture or in the Notes shall be held invalid, illegal or
unenforceable, in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions shall not in any way be affected or impaired thereby, it being
intended that all of the provisions hereof shall be enforceable to the full
extent permitted by law.
SECTION 11.16 Table of Contents, Headings, etc. The Table of
Contents, Cross-Reference Table and Headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part of this Indenture and shall in no way modify or restrict
any of the terms or provisions hereof.
<PAGE> 103
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, as of the date first written above.
VERSATEL TELECOM B.V.,
By OPEN SKIES INTERNATIONAL, INC., as
Managing Director
By _________________________________
Name: R. Gary Mesch
Title: President & Treasurer
By _____________________________________
Name:
Title:
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee, Registrar and
Paying Agent,
by _____________________________________
Name:
Title:
<PAGE> 104
EXHIBIT A
TO THE INDENTURE
[FORM OF FACE OF INITIAL GLOBAL NOTE]
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO.
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S,
(2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH
SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT OR
ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE
REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER,
SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY, (B) PURSUANT
TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE
TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
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<PAGE> 105
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY AND
THE TRUSTEE SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I)
PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN
EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OR TRANSFER IN THE
FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY
THE TRANSFEROR TO THE TRUSTEE, THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF
THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER REPRESENTATIVE OF
DTC AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTION 2.6 OF THE INDENTURE PURSUANT TO WHICH THEY WERE ISSUED.
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<PAGE> 106
VERSATEL TELECOM B.V.
13.25% Senior Note
due 2008
CUSIP NO.:
[If Regulation S Security - CINS Number _________]
No.____ $____________
VERSATEL TELECOM B.V., a public limited company organized
under the laws of The Netherlands (the "Company", which term includes any
successor corporation), for value received promises to pay Cede & Co. or
registered assigns upon surrender hereof the principal sum indicated on Schedule
A hereof, on May 15, 2008.
Interest Payment Dates: May 15 and November 15, commencing
November 15, 1998
Record Dates: May 1 and November 1
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
<PAGE> 107
VERSATEL TELECOM B.V.,
by OPEN SKIES INTERNATIONAL, INC., as
Managing Director
by ________________________________
Name: R. Gary Mesch
Title: President & Treasurer
by _____________________________________
Name:
Title:
(SEAL)
This is one of the Notes
referred to in the within-mentioned
Indenture:
UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee,
by ________________________________
Name:
Title:
Dated:
A-4
<PAGE> 108
[FORM OF REVERSE]
VERSATEL TELECOM B.V.
13.25% Senior Note
due 2008
1. Interest. VERSATEL TELECOM B.V., a company organized under
the laws of The Netherlands (the "Company"), promises to pay interest on the
principal amount of this Note at the rate and in the manner specified below.
Interest on the Notes will accrue at 13.25% per annum on the principal amount
then outstanding, and be payable semi-annually in arrears on each May 15 and
November 15, or if any such day is not a Business Day on the next succeeding
Business Day, commencing November 15, 1998, to the Holder hereof.
Notwithstanding any exchange of this Note for a Definitive Note during the
period starting on a Record Date relating to such Definitive Note and ending on
the immediately succeeding Interest Payment Date, the interest due on such
Interest Payment Date shall be payable to the Person in whose name this Global
Note is registered at the close of business on the Record Date for such
interest. Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from May 27, 1998.
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 and on
overdue installments of interest (without regard to any applicable grace
periods), on any Additional Amounts, and on any Liquidated Damages, from time to
time on demand at the rate borne by the Notes plus 1.5% per annum to the extent
lawful. Any interest paid on this Note shall be increased to the extent
necessary to pay Additional Amounts as set forth herein.
2. Liquidated Damages. Pursuant to the Registration Rights
Agreement between the Company and the Initial Purchaser on behalf of Holders of
the Initial Notes, the Company has agreed to use its reasonable best efforts to
consummate an exchange offer pursuant to which the Holder of this Note shall
have the right to exchange this Note for the Company's 13.25% Senior Notes due
2008 (the "Exchange Notes"), which have then been registered under the
Securities Act, in like principal amount and having substantially identical
terms in all material respects as the Initial Notes. The Holders shall be
entitled to receive payment of additional interest ("Liquidated Damages") in the
event such exchange offer is not consummated and in certain other events,
subject, in each case, to certain conditions, all pursuant to and in accordance
with the terms of the Registration Rights Agreement. Liquidated Damages which
may be payable pursuant to the Registration Rights Agreement shall be payable in
the same manner as set forth herein with respect to the stated interest. The
provisions of the Registration Rights Agreement relating to such Liquidated
Damages
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<PAGE> 109
are incorporated herein by reference and made a part hereof as if set forth
herein in full.
3. Additional Amounts. All payments made by the Company on the
Notes will be made without withholding or deduction for, or on account of, any
present or future Taxes imposed or levied by or on behalf of The Netherlands or
any jurisdiction in which the Company or any Surviving Entity is organized or is
otherwise resident for tax purposes or any political subdivision thereof or any
authority having power to tax therein or any jurisdiction from or through which
payment is made (each a "Relevant Taxing Jurisdiction"), unless the withholding
or deduction of such Taxes is then required by law. If any deduction or
withholding for, or on account of, any Taxes of any Relevant Taxing
Jurisdiction, shall at any time be required on any payments made by the Company
with respect to the Notes, including payments of principal, redemption price,
interest or premium, the Company will pay such additional amounts (the
"Additional Amounts") as may be necessary in order that the net amounts received
in respect of such payments by the Holders of the Notes or the Trustee, as the
case may be, after such withholding or deduction, equal the respective amounts
which would have been received in respect of such payments in the absence of
such withholding or deduction; except that no such Additional Amounts will be
payable with respect to:
(a) any payments on a Note held by or on behalf of a Holder or
beneficial owner who is liable for such Taxes in respect of such Note
by reason of the Holder or beneficial owner having some connection with
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 by the mere holding of such Note or
enforcement of rights thereunder or the receipt of payments in respect
thereof;
(b) any Taxes that are imposed or withheld as a result of a
change in law after the Issue Date where such withholding or imposition
is by reason of the failure of the Holder or beneficial owner of the
Note to comply with any request by the Company to provide information
concerning the nationality, residence or identity of such Holder or
beneficial owner or to make any declaration or similar claim or satisfy
any information or reporting requirement, which is required or imposed
by a statute, treaty, regulation or administrative practice of the
Relevant Taxing Jurisdiction as a precondition to exemption from all or
part of such Taxes;
(c) except in the case of the winding up of the Company, any
Note presented for payment (where presentation is required) in the
Relevant Taxing Jurisdiction; or
(d) any Note presented for payment (where presentation is
required) more than 30 days after the relevant payment is first made
available for payment to the Holder.
A-6
<PAGE> 110
Such Additional Amounts will also not be payable where, had
the beneficial owner of the Note been the Holder of the Note, he would not have
been entitled to payment of Additional Amounts by reason of clauses (a) to (d)
inclusive above.
4. Method of Payment. The Company shall pay interest on the
Notes (except defaulted interest) to the Person in whose name this Note is
registered at the close of business on the Record Date for such interest.
Holders must surrender Notes to a Paying Agent to collect principal payments.
The Company shall pay principal and interest in dollars or in such other coin or
currency of the United States of America that at the time of payment is legal
tender for payment of public and private debts. Immediately available funds for
the payment of the principal of (and premium, if any), interest, Additional
Amounts, if any, and Liquidated Damages, if any, on this Note due on any
Interest Payment Date, Maturity Date, Redemption Date or other repurchase date
will be made available to the Paying Agent to permit the Paying Agent to pay
such funds to the Holders on such respective dates.
5. Paying Agent and Registrar. Initially, United States Trust
Company of New York will act as Paying Agent and Registrar. The Company may
change any Paying Agent, Registrar or co-Registrar without notice to the
Holders. The Company or any of its Subsidiaries may, subject to certain
exceptions, act in any such capacity.
6. Indenture. The Company issued the Notes under an Indenture,
dated as of May 27, 1998 (the "Indenture"), between the Company and United
States Trust Company of New York (the "Trustee"). This Note is one of a duly
authorized issue of Initial Notes of the Company designated as its 13.25% Senior
Notes due 2008 (the "Initial Notes"). The Notes include the Initial Notes and
the Exchange Notes issued in exchange for the Initial Notes pursuant to the
Indenture. The terms of the Notes 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. Code 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 Notes are subject
to all such terms, and Holders of Notes are referred to the Indenture and the
TIA for a statement of them. The Notes are not secured by any of the assets of
the Company except to the limited extent provided for by the Escrow Agreement,
and will become general unsecured obligations of the Company upon disbursement
in full of the funds in the Escrow Account. The Notes are limited in aggregate
principal amount to $225,000,000 subject to the terms of the Indenture. Each
Holder, by accepting a Note, agrees to be bound by all of the terms and
provisions of the Indenture, as the same may be amended from time to time.
7. Ranking. The Notes will be general unsecured obligations of
the Company and will rank senior in right of payment to all future Indebtedness
of the Company that is, by its terms or by the terms of the agreement or
instrument governing such Indebtedness, expressly subordinated in right of
payment to the Notes and pari
A-7
<PAGE> 111
passu in right of payment with all existing and future unsecured liabilities of
the Company that are not so subordinated.
8. Optional Redemption. The Notes will be redeemable, at the
Company's option, in whole or in part, on and after May 15, 2003 upon not less
than 30 nor more than 60 days' prior notice published in a leading newspaper
having a general circulation in New York (which is expected to be The Wall
Street Journal) and in Amsterdam (which is expected to be Het Financieele
Dagblad ) (and if, and so long as the Notes are listed on the Luxembourg Stock
Exchange and the rules of such Stock Exchange shall so require, a newspaper
having a general circulation in Luxembourg (which is expected to be the
Luxemburger Wort)) or, in the case of Definitive Notes, mailed by first-class
mail to each Holder's registered address (and, if, and so long as the Notes are
listed on the Luxembourg Stock Exchange and the rules of such Stock Exchange
shall so require, published in a newspaper having a general circulation in
Luxembourg (which is expected to be the Luxemburger Wort)), at the redemption
prices (expressed as a percentage of principal amount) set forth below, plus
accrued and unpaid interest, Additional Amounts, if any, and Liquidated Damages,
if any, to the applicable Redemption Date (and in the case of Definitive Notes,
subject to the right of Holders of record on the relevant record date to receive
interest and Additional Amounts, if any, and Liquidated Damages, if any, due on
the relevant interest payment date in respect thereof), if redeemed during the
twelve-month period beginning on May 15, 2003 of each of the years indicated
below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- -----
<S> <C>
2003................................................................ 106.625%
2004................................................................ 104.417
2005................................................................ 102.208
2006 and thereafter................................................. 100.000%
</TABLE>
9. Special Tax Redemption. The Notes may be redeemed, at the
option of the Company in whole but not in part, at any time upon giving not less
than 30 nor more than 60 days' notice to the Holders (which notice shall be
irrevocable), at a redemption price equal to the aggregate principal amount
thereof, plus Liquidated Damages, if any, to the date fixed by the Company for
redemption (a "Tax Redemption Date"), and, all Additional Amounts, if any, then
due and which will become due on the Tax Redemption Date as a result of the
redemption or otherwise, if the Company determines that, as a result of (i) any
change in, or amendment to, the laws or treaties (or any regulations or rulings
promulgated thereunder) of the Netherlands (or any political subdivision or
taxing authority of the Netherlands) affecting taxation which becomes effective
on or after the Issue Date, or (ii) any change in position regarding the
application, administration or any new or different interpretation of such laws,
treaties, regulations or rulings (including a holding, judgment or order by a
court of competent jurisdiction), which change, amendment,
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<PAGE> 112
application or interpretation becomes effective on or after the Issue Date, the
Company is, or on the next Interest Payment Date would be, required to pay
Additional Amounts, and the Company determines that such payment obligation
cannot be avoided by the Company taking reasonable measures. Notwithstanding the
foregoing, no such notice of redemption shall be given earlier than 90 days
prior to the earliest date on which the Company would be obligated to make such
payment or withholding if a payment in respect of the Notes were then due. Prior
to the publication or, where relevant, mailing of any notice of redemption of
the Notes pursuant to the foregoing, the Company will deliver to the Trustee an
opinion of an independent tax counsel of recognized standing to the effect that
the circumstances referred to above exist. The Trustee shall accept such opinion
as sufficient evidence of the satisfaction of the conditions precedent described
above, in which event it shall be conclusive and binding on the Holders.
10. Notice of Redemption. Notice of redemption will be given
at least 30 days but not more than 60 days before the Redemption Date by
publishing in a leading newspaper having a general circulation in New York
(which is expected to be The Wall Street Journal) and in Amsterdam (which is
expected to be Het Financieele Dagblad ) (and, if and so long as the Notes are
listed on the Luxembourg Stock Exchange and the rules of such Stock Exchange
shall so require, a newspaper having a general circulation in Luxembourg (which
is expected to be the Luxemburger Wort)) or in the case of Definitive Notes,
mailed to Holders by first-class mail at their respective addresses as they
appear on the registration books of the Registrar (and, if and so long as the
Notes are listed on the Luxembourg Stock Exchange and the rules of such Stock
Exchange shall so require, published in a newspaper having a general circulation
in Luxembourg (which is expected to be the Luxemburger Wort)). Notes in
denominations of $1,000 may be redeemed only in whole. The Trustee may select
for redemption portions (equal to $1,000 or any integral multiple thereof) of
the principal of Notes that have denominations larger than $1,000.
Except as set forth in the Indenture, from and after any
Redemption Date, if monies for the redemption of the Notes called for redemption
shall have been deposited with the Paying Agent for redemption on such
Redemption Date, then, unless the Company defaults in the payment of such
Redemption Price, the Notes called for redemption will cease to bear interest,
Additional Amounts, if any, or Liquidated Damages, if any, and the only right of
the Holders of such Notes will be to receive payment of the Redemption Price.
11. Change of Control Offer. Upon the occurrence of a Change
of Control, the Company will be required to make an offer to purchase all or any
part (equal to $1,000 aggregate principal amount and integral multiples thereof)
of the Notes on the Change of Control Payment Date at a purchase price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest, thereon to the date of repurchase plus Additional Amounts, if any, and
Liquidated Damages, if any, to the date of repurchase (and in the case of
Definitive Notes, subject to the right of Holders of record on the relevant
record date to receive interest and
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<PAGE> 113
Liquidated Damages, if any, due on the relevant interest payment date and
Additional Amounts, if any, in respect thereof). Holders of Notes that are
subject to an offer to purchase will receive a Change of Control Offer from the
Company prior to any related Change of Control Payment Date and may elect to
have such Notes purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below.
12. Limitation on Disposition of Assets. When the aggregate
amount of Excess Proceeds from Asset Sales exceeds $5.0 million, the Company
will be obligated, within 30 Business Days thereafter, to make an offer to
purchase the maximum principal amount of Notes, that is an integral multiple of
$1,000, that may be purchased out of the Excess Proceeds at an offer price in
cash in an amount equal to 100% of the aggregate principal amount thereof, plus
accrued and unpaid interest thereon, plus Additional Amounts, if any, and
Liquidated Damages, if any, to the date fixed for the closing of such offer
(and, in the case of Definitive Notes, subject to the right of a Holder of
record on the relevant record date to receive interest and Liquidated Damages,
if any, due on the relevant interest payment date and Additional Amounts, if
any, in respect thereof). If the aggregate principal amount of Notes surrendered
by Holders thereof exceeds the amount of Excess Proceeds, subject to applicable
law, the Trustee shall select the Notes to be redeemed in accordance with the
Indenture; provided, however, that no Notes of $1,000 or less shall be purchased
in part. Holders of Notes that are the subject of an offer to purchase will
receive an Asset Sale Offer from the Company prior to any related purchase date
and may elect to have such Notes purchased by completing the form entitled
"Option of Holders to Elect Purchase" appearing below.
13. Denominations; Form. The Global Notes are in registered
global form, without coupons, in denominations of $1,000 and integral multiples
of $1,000.
14. Persons Deemed Owners. The registered Holder of this Note
shall be treated as the owner of it for all purposes, subject to the terms of
the Indenture.
15. Unclaimed Funds. If funds for the payment of principal,
interest, Additional Amounts or Liquidated Damages 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
Agents with respect to such funds shall cease.
16. Legal Defeasance and Covenant Defeasance. The Company may
be discharged from its obligations under the Indenture and the Notes except for
certain provisions thereof ("Legal Defeasance"), and may be discharged from
their obligations to comply with certain covenants contained in the Indenture
("Covenant Defeasance"), in each case upon satisfaction of certain conditions
specified in the Indenture.
17. Amendment; Supplement; Waiver. Subject to certain
exceptions specified in the Indenture, the Indenture or the Notes may be amended
or supplemented with the written consent of the Holders of at least a majority
in principal amount of the
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Notes then outstanding, and any existing Default or Event of Default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the Notes then
outstanding.
18. Restrictive Covenants. The Indenture imposes certain
covenants that, among other things, limit the ability of the Company and its
Restricted Subsidiaries to, incur additional Indebtedness, pay dividends or make
other distributions or investments, repurchase Equity Interests or make certain
other Restricted Payments, enter into certain consolidations or mergers or enter
into certain transactions with Affiliates and consummate certain mergers and
consolidations or sales of all or substantially all assets. 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.
19. Successors. When a successor assumes all the obligations
of its predecessor under the Notes and the Indenture in accordance with the
terms of the Indenture, the predecessor will be released from those obligations.
20. Defaults and Remedies. If an Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable
immediately in the manner and with the effect provided in the Indenture. Holders
of Notes may not enforce the Indenture or the Notes except as provided in the
Indenture. The Trustee is not obligated to enforce the Indenture or the Notes
unless it has received indemnity satisfactory to it. The Indenture permits,
subject to certain limitations therein provided, Holders of a majority in
aggregate principal amount of the Notes then outstanding to direct the Trustee
in its exercise of any trust or power. The Trustee may withhold from Holders of
Notes notice of any continuing Default or Event of Default (except a Default in
payment of principal, premium, interest, Additional Amounts, if any, and
Liquidated Damages, if any, including an accelerated payment) if it determines
that withholding notice is in their interest.
21. Trustee Dealings with Company. The Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or
their respective Affiliates as if it were not the Trustee.
22. No Recourse Against Others. No stockholder, director,
officer, employee or incorporator, as such, of the Company shall have any
liability for any obligation of the Company under the Notes or the Indenture or
for any claim based on, in respect of or by reason of, such obligations or their
creation. Each Holder of the Notes by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for the
issuance of the Notes.
23. Authentication. This Note shall not be valid until the
Trustee or authenticating agent signs the certificate of authentication on this
Note.
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<PAGE> 115
24. Abbreviations and Defined Terms. Customary abbreviations
may be used in the name of a Holder of a Note 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). Unless otherwise
defined herein, terms defined in the Indenture are used herein as defined
therein.
25. CUSIP Numbers. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company will
cause CUSIP numbers to be printed on the Notes immediately prior to the
qualification of the Indenture under the TIA as a convenience to the Holders of
the Notes. No representation is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the other identification
numbers printed hereon.
26. Governing Law THE INDENTURE AND THE NOTES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK.
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SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount at maturity of this Note shall be
$ . The following decreases/increases in the principal amount at maturity
of this Note have been made:
<TABLE>
<CAPTION>
Total Principal
Amount at Notation
Decrease in Increase in Maturity Made by
Date of Principal Principal Following such or on
Decrease/ Amount at Amount at Decrease/ Behalf of
Increase Maturity Maturity Increase Trustee
- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
- ----------- ----------- ----------- ----------- -----------
- ----------- ----------- ----------- ----------- -----------
- ----------- ----------- ----------- ----------- -----------
- ----------- ----------- ----------- ----------- -----------
- ----------- ----------- ----------- ----------- -----------
- ----------- ----------- ----------- ----------- -----------
- ----------- ----------- ----------- ----------- -----------
- ----------- ----------- ----------- ----------- -----------
- ----------- ----------- ----------- ----------- -----------
- ----------- ----------- ----------- ----------- -----------
- ----------- ----------- ----------- ----------- -----------
- ----------- ----------- ----------- ----------- -----------
</TABLE>
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<PAGE> 117
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, check the
appropriate box:
Section 4.15 [ ] Section 4.16 [ ]
If you want to elect to have only part of this Note purchased
by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state
the amount: $
Date:_____________ Your Signature:________________
(Sign exactly as your name appears on the other
side of this Note)
Signature Guarantee: _____________________________________
Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor program reasonably acceptable to the Trustee)
A-14
<PAGE> 118
EXHIBIT B
TO THE INDENTURE
[FORM OF FACE OF INITIAL DEFINITIVE NOTE]
THIS NOTE IS A DEFINITIVE NOTE WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO.
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S,
(2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH
SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT OR
ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE
REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER,
SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY, (B) PURSUANT
TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL
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GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY AND THE TRUSTEE SHALL
HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE
(D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE
FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OR TRANSFER IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE TRUSTEE, THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE
HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
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<PAGE> 120
VERSATEL TELECOM B.V.
13.25% Senior Note
due 2008
CUSIP NO.: 925301AA1
[If Regulation S Security - CINS Number _________]
No.____ $____________
VERSATEL TELECOM B.V., a public limited company organized
under the laws of The Netherlands (the "Company", which term includes any
successor corporation), for value received promises to pay ______________, or
registered assigns, upon surrender hereof the principal sum of
__________________ dollars, on May 15, 2008.
Interest Payment Dates: May 15 and November 15, commencing
November 15, 1998
Record Dates: May 1 and November 1
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
<PAGE> 121
VERSATEL TELECOM B.V.,
by OPEN SKIES INTERNATIONAL, INC., as
Managing Director
by _________________________________
Name: R. Gary Mesch
Title: President & Treasurer
by _____________________________________
Name:
Title:
(SEAL)
This is one of the Notes
referred to in the within-mentioned
Indenture:
UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee,
by _____________________________________
Name:
Title:
Dated:
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[FORM OF REVERSE]
VERSATEL TELECOM B.V.
13.25% Senior Note
due 2008
1. Interest. VERSATEL TELECOM B.V., a company organized under
the laws of The Netherlands (the "Company"), promises to pay interest on the
principal amount of this Note at the rate and in the manner specified below.
Interest on the Notes will accrue at 13.25% per annum on the principal amount
then outstanding, and be payable semi-annually in arrears on each May 15 and
November 15, or if any such day is not a Business Day on the next succeeding
Business Day, commencing November 15, 1998 to the Holder hereof. Interest on the
Notes will accrue from the most recent date to which interest has been paid or,
if no interest has been paid, from May 27, 1998. 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 and on
overdue installments of interest (without regard to any applicable grace
periods), on any Additional Amounts, and on any Liquidated Damages, from time to
time on demand at the rate borne by the Notes plus 1.5% per annum to the extent
lawful. Any interest paid on this Note shall be increased to the extent
necessary to pay Additional Amounts as set forth herein.
2. Liquidated Damages. Pursuant to the Registration Rights
Agreement between the Company and the Initial Purchaser on behalf of Holders of
the Initial Notes, the Company has agreed to use its reasonable best efforts to
consummate an exchange offer pursuant to which the Holder of this Note shall
have the right to exchange this Note for the Company's 13.25% Senior Notes due
2008 (the "Exchange Notes"), which have then been registered under the
Securities Act, in like principal amount and having substantially identical
terms in all material respects as the Initial Notes. The Holders shall be
entitled to receive payment of additional interest ("Liquidated Damages") in the
event such exchange offer is not consummated and in certain other events,
subject, in each case, to certain conditions, all pursuant to and in accordance
with the terms of the Registration Rights Agreement. Liquidated Damages which
may be payable pursuant to the Registration Rights Agreement shall be payable in
the same manner as set forth herein with respect to the stated interest. The
provisions of the Registration Rights Agreement relating to such Liquidated
Damages are incorporated herein by reference and made a part hereof as if set
forth herein in full.
3. Additional Amounts. All payments made by the Company on the
Notes will be made without withholding or deduction for, or on account of, any
present
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<PAGE> 123
or future Taxes imposed or levied by or on behalf of The Netherlands or any
jurisdiction in which the Company or any Surviving Entity is organized or is
otherwise resident for tax purposes or any political subdivision thereof or any
authority having power to tax therein or any jurisdiction from or through which
payment is made (each a "Relevant Taxing Jurisdiction"), unless the withholding
or deduction of such Taxes is then required by law. If any deduction or
withholding for, or on account of, any Taxes of any Relevant Taxing
Jurisdiction, shall at any time be required on any payments made by the Company
with respect to the Notes, including payments of principal, redemption price,
interest or premium, the Company will pay such additional amounts (the
"Additional Amounts") as may be necessary in order that the net amounts received
in respect of such payments by the Holders of the Notes or the Trustee, as the
case may be, after such withholding or deduction, equal the respective amounts
which would have been received in respect of such payments in the absence of
such withholding or deduction; except that no such Additional Amounts will be
payable with respect to:
(a) any payments on a Note held by or on behalf of a Holder or
beneficial owner who is liable for such Taxes in respect of such Note
by reason of the Holder or beneficial owner having some connection with
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 by the mere holding of such Note or
enforcement of rights thereunder or the receipt of payments in respect
thereof;
(b) any Taxes that are imposed or withheld as a result of a
change in law after the Issue Date where such withholding or imposition
is by reason of the failure of the Holder or beneficial owner of the
Note to comply with any request by the Company to provide information
concerning the nationality, residence or identity of such Holder or
beneficial owner or to make any declaration or similar claim or satisfy
any information or reporting requirement, which is required or imposed
by a statute, treaty, regulation or administrative practice of the
Relevant Taxing Jurisdiction as a precondition to exemption from all or
part of such Taxes;
(c) except in the case of the winding up of the Company, any
Note presented for payment (where presentation is required) in the
Relevant Taxing Jurisdiction; or
(d) any Note presented for payment (where presentation is
required) more than 30 days after the relevant payment is first made
available for payment to the Holder.
Such Additional Amounts will also not be payable where, had
the beneficial owner of the Note been the Holder of the Note, he would not have
been entitled to payment of Additional Amounts by reason of clauses (a) to (d)
inclusive above.
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<PAGE> 124
4. Method of Payment. The Company shall pay interest on the
Notes (except defaulted interest) to the bearer hereof. Holders must surrender
Notes to a Paying Agent to collect principal payments. The Company shall pay
principal and interest in dollars or in such other coin or currency of the
United States of America that at the time of payment is legal tender for payment
of public and private debts; provided, however, that with respect to any payment
of principal, interest, Additional Amounts, if any, or Liquidated Damages, if
any, in excess of $100,000 to any payee or group of related payees, such payment
will be made, at the option of the Holder hereof, by wire transfer of same day
funds to the Paying Agent, who in turn will wire such funds to the Holder hereof
or to such individuals as the Holder hereof may in writing to the Paying Agent
direct; provided further that the Paying Agent has received written wire
transfer instructions at least fifteen days prior to the date of any such
payment.
5. Paying Agent and Registrar. Initially, United States Trust
Company of New York will act as Paying Agent and Registrar. The Company may
change any Paying Agent, Registrar or co-Registrar without notice to the
Holders. The Company or any of its Subsidiaries may, subject to certain
exceptions, act in any such capacity.
6. Indenture. The Company issued the Notes under an Indenture,
dated as of May 27, 1998 (the "Indenture"), between the Company and United
States Trust Company of New York (the "Trustee"). This Note is one of a duly
authorized issue of Initial Notes of the Company designated as its 13.25% Senior
Notes due 2008 (the "Initial Notes"). The Notes include the Initial Notes and
the Exchange Notes issued in exchange for the Initial Notes pursuant to the
Indenture. The terms of the Notes 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. Code 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 Notes are subject
to all such terms, and Holders of Notes are referred to the Indenture and the
TIA for a statement of them. The Notes are not secured by any of the assets of
the Company except to the limited extent provided for by the Escrow Agreement,
and will become general unsecured obligations of the Company upon disbursement
in full of the funds in the Escrow Account. The Notes are limited in aggregate
principal amount to $225,000,000 subject to the terms of the Indenture. Each
Holder, by accepting a Note, agrees to be bound by all of the terms and
provisions of the Indenture, as the same may be amended from time to time.
7. Ranking. The Notes will be general unsecured obligations of
the Company and will rank senior in right of payment to all future Indebtedness
of the Company that is, by its terms or by the terms of the agreement or
instrument governing such Indebtedness, expressly subordinated in right of
payment to the Notes and pari passu in right of payment with all existing and
future unsecured liabilities of the Company that are not so subordinated.
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<PAGE> 125
8. Optional Redemption. The Notes will be redeemable, at the
Company's option, in whole or in part, on and after May 15, 2003 upon not less
than 30 nor more than 60 days' prior notice published in a leading newspaper
having a general circulation in New York (which is expected to be The Wall
Street Journal) and in Amsterdam (which is expected to be Het Financieele
Dagblad ) (and if, and so long as the Notes are listed on the Luxembourg Stock
Exchange and the rules of such Stock Exchange shall so require, a newspaper
having a general circulation in Luxembourg (which is expected to be the
Luxemburger Wort)) or, in the case of Definitive Notes, mailed by first-class
mail to each Holder's registered address (and, if, and so long as the Notes are
listed on the Luxembourg Stock Exchange and the rules of such Stock Exchange
shall so require, published in a newspaper having a general circulation in
Luxembourg (which is expected to be the Luxemburger Wort)), at the redemption
prices (expressed as a percentage of principal amount) set forth below, plus
accrued and unpaid interest, Additional Amounts, if any, and Liquidated Damages,
if any, to the applicable Redemption Date (and in the case of Definitive Notes,
subject to the right of Holders of record on the relevant record date to receive
interest and Additional Amounts, if any, and Liquidated Damages, if any, due on
the relevant interest payment date in respect thereof), if redeemed during the
twelve-month period beginning on May 15, 2003 of each of the years indicated
below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- -----
<S> <C>
2003............................................................................ 106.625%
2004............................................................................ 104.417
2005............................................................................ 102.208
2006 and thereafter............................................................. 100.000%
</TABLE>
9. Special Tax Redemption. The Notes may be redeemed, at the
option of the Company in whole but not in part, at any time upon giving not less
than 30 nor more than 60 days' notice to the Holders (which notice shall be
irrevocable), at a redemption price equal to the aggregate principal amount
thereof, plus Liquidated Damages, if any, to the date fixed by the Company for
redemption (a "Tax Redemption Date"), and, all Additional Amounts, if any, then
due and which will become due on the Tax Redemption Date as a result of the
redemption or otherwise, if the Company determines that, as a result of (i) any
change in, or amendment to, the laws or treaties (or any regulations or rulings
promulgated thereunder) of the Netherlands (or any political subdivision or
taxing authority of the Netherlands) affecting taxation which becomes effective
on or after the Issue Date, or (ii) any change in position regarding the
application, administration or any new or different interpretation of such laws,
treaties, regulations or rulings (including a holding, judgment or order by a
court of competent jurisdiction), which change, amendment, application or
interpretation becomes effective on or after the Issue Date, the Company is, or
on the next Interest Payment Date would be, required to pay Additional Amounts,
and the Company determines that such payment obligation cannot be avoided by the
Company taking reasonable measures. Notwithstanding the foregoing, no such
notice of redemption shall be given earlier than 90 days prior to the earliest
date on which the Company would be obligated to make such payment or withholding
if a payment in respect of the Notes were then due. Prior to the publication or,
where
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<PAGE> 126
relevant, mailing of any notice of redemption of the Notes pursuant to the
foregoing, the Company will deliver to the Trustee an opinion of an independent
tax counsel of recognized standing to the effect that the circumstances referred
to above exist. The Trustee shall accept such opinion as sufficient evidence of
the satisfaction of the conditions precedent described above, in which event it
shall be conclusive and binding on the Holders.
10. Notice of Redemption. Notice of redemption will be given
at least 30 days but not more than 60 days before the Redemption Date by
publishing in a leading newspaper having a general circulation in New York
(which is expected to be The Wall Street Journal) and in Amsterdam (which is
expected to be Het Financieele Dagblad ) (and, if and so long as the Notes are
listed on the Luxembourg Stock Exchange and the rules of such Stock Exchange
shall so require, a newspaper having a general circulation in Luxembourg (which
is expected to be the Luxemburger Wort)) or in the case of Definitive Notes,
mailed to Holders by first-class mail at their respective addresses as they
appear on the registration books of the Registrar (and, if and so long as the
Notes are listed on the Luxembourg Stock Exchange and the rules of such Stock
Exchange shall so require, published in a newspaper having a general circulation
in Luxembourg (which is expected to be the Luxemburger Wort)). Notes in
denominations of $1,000 may be redeemed only in whole. The Trustee may select
for redemption portions (equal to $1,000 or any integral multiple thereof) of
the principal of Notes that have denominations larger than $1,000.
Except as set forth in the Indenture, from and after any
Redemption Date, if monies for the redemption of the Notes called for redemption
shall have been deposited with the Paying Agent for redemption on such
Redemption Date, then, unless the Company defaults in the payment of such
Redemption Price, the Notes called for redemption will cease to bear interest,
Additional Amounts, if any, or Liquidated Damages, if any, and the only right of
the Holders of such Notes will be to receive payment of the Redemption Price.
11. Change of Control Offer. Upon the occurrence of a Change
of Control, the Company will be required to make an offer to purchase all or any
part (equal to $1,000 aggregate principal amount and integral multiples thereof)
of the Notes on the Change of Control Payment Date at a purchase price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest, thereon to the date of repurchase plus Additional Amounts, if any, and
Liquidated Damages, if any, to the date of repurchase (and in the case of
Definitive Notes, subject to the right of Holders of record on the relevant
record date to receive interest and Liquidated Damages, if any, due on the
relevant interest payment date and Additional Amounts, if any, in respect
thereof). Holders of Notes that are subject to an offer to purchase will receive
a Change of Control Offer from the Company prior to any related Change of
Control Payment Date and may elect to have such Notes purchased by completing
the form entitled "Option of Holder to Elect Purchase" appearing below.
12. Limitation on Disposition of Assets. When the aggregate
amount of Excess Proceeds from Asset Sales exceeds $5.0 million, the Company
will be obligated, within 30 Business Days thereafter, to make an offer to
purchase the maximum principal amount of Notes, that is an integral multiple of
$1,000, that may
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<PAGE> 127
be purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% of the aggregate principal amount thereof, plus accrued and unpaid
interest thereon, plus Additional Amounts, if any, and Liquidated Damages, if
any, to the date fixed for the closing of such offer (and, in the case of
Definitive Notes, subject to the right of a Holder of record on the relevant
record date to receive interest and Liquidated Damages, if any, due on the
relevant interest payment date and Additional Amounts, if any, in respect
thereof). If the aggregate principal amount of Notes surrendered by Holders
thereof exceeds the amount of Excess Proceeds, subject to applicable law, the
Trustee shall select the Notes to be redeemed in accordance with the Indenture;
provided, however, that no Notes of $1,000 or less shall be purchased in part.
Holders of Notes that are the subject of an offer to purchase will receive an
Asset Sale Offer from the Company prior to any related purchase date and may
elect to have such Notes purchased by completing the form entitled "Option of
Holders to Elect Purchase" appearing below.
13. Denominations; Form. The Global Notes are in registered
global form, without coupons, in denominations of $1,000 and integral multiples
of $1,000.
14. Persons Deemed Owners. The registered Holder of this Note
shall be treated as the owner of it for all purposes, subject to the terms of
the Indenture.
15. Unclaimed Funds. If funds for the payment of principal,
interest, Additional Amounts or Liquidated Damages 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
Agents with respect to such funds shall cease.
16. Legal Defeasance and Covenant Defeasance. The Company may
be discharged from its obligations under the Indenture and the Notes except for
certain provisions thereof ("Legal Defeasance"), and may be discharged from
their obligations to comply with certain covenants contained in the Indenture
("Covenant Defeasance"), in each case upon satisfaction of certain conditions
specified in the Indenture.
17. Amendment; Supplement; Waiver. Subject to certain
exceptions specified in the Indenture, the Indenture or the Notes may be amended
or supplemented with the written consent of the Holders of at least a majority
in principal amount of the Notes then outstanding, and any existing Default or
Event of Default or compliance with any provision of the Indenture or the Notes
may be waived with the consent of the Holders of a majority in principal amount
of the Notes then outstanding.
18. Restrictive Covenants. The Indenture imposes certain
covenants that, among other things, limit the ability of the Company and its
Restricted Subsidiaries to, incur additional Indebtedness, pay dividends or make
other distributions or investments, repurchase Equity Interests or make certain
other Restricted Payments, enter into certain consolidations or mergers or enter
into certain transactions with Affiliates and consummate certain mergers and
consolidations or sales of all or substantially all assets. The limitations are
subject to a number of important
B-10
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qualifications and exceptions. The Company must annually report to the Trustee
on compliance with such limitations.
19. Successors. When a successor assumes all the obligations
of its predecessor under the Notes and the Indenture in accordance with the
terms of the Indenture, the predecessor will be released from those obligations.
20. Defaults and Remedies. If an Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable
immediately in the manner and with the effect provided in the Indenture. Holders
of Notes may not enforce the Indenture or the Notes except as provided in the
Indenture. The Trustee is not obligated to enforce the Indenture or the Notes
unless it has received indemnity satisfactory to it. The Indenture permits,
subject to certain limitations therein provided, Holders of a majority in
aggregate principal amount of the Notes then outstanding to direct the Trustee
in its exercise of any trust or power. The Trustee may withhold from Holders of
Notes notice of any continuing Default or Event of Default (except a Default in
payment of principal, premium, interest, Additional Amounts, if any, and
Liquidated Damages, if any, including an accelerated payment) if it determines
that withholding notice is in their interest.
21. Trustee Dealings with Company. The Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or
their respective Affiliates as if it were not the Trustee.
22. No Recourse Against Others. No stockholder, director,
officer, employee or incorporator, as such, of the Company shall have any
liability for any obligation of the Company under the Notes or the Indenture or
for any claim based on, in respect of or by reason of, such obligations or their
creation. Each Holder of the Notes by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for the
issuance of the Notes.
23. Authentication. This Note shall not be valid until the
Trustee or authenticating agent signs the certificate of authentication on this
Note.
24. Abbreviations and Defined Terms. Customary abbreviations
may be used in the name of a Holder of a Note 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). Unless otherwise
defined herein, terms defined in the Indenture are used herein as defined
therein.
25. CUSIP Numbers. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company will
cause CUSIP numbers to be printed on the Notes immediately prior to the
qualification of the
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Indenture under the TIA as a convenience to the Holders of the Notes. No
representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
26. Governing Law THE INDENTURE AND THE NOTES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK.
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<PAGE> 130
ASSIGNMENT FORM
To assign this Note fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's social security or tax I.D. No.)
and irrevocably appoint agent to transfer this Note on the books
of the Company. The agent may substitute another to act for him.
- --------------------------------------------------------------------
Date: Your Signature:
------------- ----------------------
- --------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Note.
B-13
<PAGE> 131
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, check the
appropriate box:
Section 4.15 [ ] Section 4.16 [ ]
If you want to elect to have only part of this Note purchased
by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state
the amount:
$
Date:_____________ Your Signature:___________________________________
(Sign exactly as your name appears on the other
side of this Note)
Signature Guarantee: _____________________________________
Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor program reasonably acceptable to the Trustee)
B-14
<PAGE> 132
EXHIBIT C
TO THE INDENTURE
[FORM OF FACE OF EXCHANGE GLOBAL NOTE]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER REPRESENTATIVE OF
DTC AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTION 2.6 OF THE INDENTURE PURSUANT TO WHICH THEY WERE ISSUED.
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<PAGE> 133
THIS NOTE IS A GLOBAL NOTE WITHIN THE
MEANING OF THE INDENTURE HEREINAFTER REFERRED TO
VERSATEL TELECOM B.V.
13.25% Senior Note
due 2008
CUSIP No: 925301AB9
No.____ $____________
VERSATEL TELECOM B.V., a company organized under the laws of
The Netherlands (the "Company", which term includes any successor corporation),
for value received promises to pay to Cede & Co. or registered assigns upon
surrender hereof the principal sum indicated on Schedule A hereof, on May 15,
2008.
Interest Payment Dates: May 15 and November 15, commencing
November 15, 1998
Record Dates: May 1 and November 1
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
C-2
<PAGE> 134
VERSATEL TELECOM B.V.,
by
-----------------------------
Name:
Title:
by
-----------------------------
Name:
Title:
(SEAL)
This is one of the Notes
referred to in the within-mentioned
Indenture:
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee,
by
-------------------------
Name:
Title:
Dated:
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<PAGE> 135
[Form of REVERSE]
VERSATEL TELECOM B.V.
13.25% Senior Note
due 2008
1. Interest. VERSATEL TELECOM B.V., a company organized under
the laws of The Netherlands (the "Company"), promises to pay interest on the
principal amount of this Note at the rate and in the manner specified below.
Interest on the Notes will accrue at 13.25% per annum on the principal amount
then outstanding, and be payable semi-annually in arrears on each May 15 and
November 15, or if any such day is not a Business Day on the next succeeding
Business Day, commencing November 15, 1998 to the Holder hereof. Notwithstanding
any exchange of this Note for a Definitive Note during the period starting on a
Record Date relating to such Definitive Note and ending on the immediately
succeeding Interest Payment Date, the interest due on such Interest Payment Date
shall be payable to the Person in whose name this Global Note is registered at
the close of business on the Record Date for such interest. Interest on the
Notes will accrue from the most recent date to which interest has been paid or,
if no interest has been paid, from May 27, 1998. 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 and on
overdue installments of interest (without regard to any applicable grace
periods) and on any Additional Amounts, from time to time on demand at the rate
borne by the Notes plus 1.5% per annum to the extent lawful. Any interest paid
on this Note shall be increased to the extent necessary to pay Additional
Amounts as set forth herein.
2. Additional Amounts. All payments made by the Company on the
Notes will be made without withholding or deduction for, or on account of, any
present or future Taxes imposed or levied by or on behalf of The Netherlands or
any jurisdiction in which the Company or any Surviving Entity is organized or is
otherwise resident for tax purposes or any political subdivision thereof or any
authority having power to tax therein or any jurisdiction from or through which
payment is made (each a "Relevant Taxing Jurisdiction"), unless the withholding
or deduction of such Taxes is then required by law. If any deduction or
withholding for, or on account of, any Taxes of any Relevant Taxing
Jurisdiction, shall at any time be required on any payments made by the Company
with respect to the Notes, including payments of principal, redemption price,
interest or premium, the Company will pay such additional amounts (the
"Additional Amounts") as may be necessary in order that the net amounts received
in respect of such payments by the Holders of the Notes or the Trustee, as the
case may be, after such withholding or deduction, equal the respective amounts
which would
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<PAGE> 136
have been received in respect of such payments in the absence of such
withholding or deduction; except that no such Additional Amounts will be payable
with respect to:
(a) any payments on a Note held by or on behalf of a Holder or
beneficial owner who is liable for such Taxes in respect of such Note
by reason of the Holder or beneficial owner having some connection with
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 by the mere holding of such Note or
enforcement of rights thereunder or the receipt of payments in respect
thereof;
(b) any Taxes that are imposed or withheld as a result of a
change in law after the Issue Date where such withholding or imposition
is by reason of the failure of the Holder or beneficial owner of the
Note to comply with any request by the Company to provide information
concerning the nationality, residence or identity of such Holder or
beneficial owner or to make any declaration or similar claim or satisfy
any information or reporting requirement, which is required or imposed
by a statute, treaty, regulation or administrative practice of the
Relevant Taxing Jurisdiction as a precondition to exemption from all or
part of such Taxes;
(c) except in the case of the winding up of the Company, any
Note presented for payment (where presentation is required) in the
Relevant Taxing Jurisdiction; or
(d) any Note presented for payment (where presentation is
required) more than 30 days after the relevant payment is first made
available for payment to the Holder.
Such Additional Amounts will also not be payable where, had
the beneficial owner of the Note been the Holder of the Note, he would not have
been entitled to payment of Additional Amounts by reason of clauses (a) to (d)
inclusive above.
3. Method of Payment. The Company shall pay interest on the
Notes (except defaulted interest) to the Person in whose name this Note is
registered at the close of business on the Record Date for such interest.
Holders must surrender Notes to a Paying Agent to collect principal payments.
The Company shall pay principal and interest in dollars or in such other coin or
currency of the United States of America that at the time of payment is legal
tender for payment of public and private debts. Immediately available funds for
the payment of the principal of (and premium, if any), interest and Additional
Amounts, if any, on this Note due on any Interest Payment Date, Maturity Date,
Redemption Date or other repurchase date will be made available to the Paying
Agent to permit the Paying Agent to pay such funds to the Holders on such
respective dates.
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<PAGE> 137
4. Paying Agent and Registrar. Initially, United States Trust
Company of New York will act as Paying Agent and Registrar. The Company may
change any Paying Agent, Registrar or co-Registrar without notice to the
Holders. The Company or any of its Subsidiaries may, subject to certain
exceptions, act in any such capacity.
5. Indenture. The Company issued the Notes under an Indenture,
dated as of May 27, 1998 (the "Indenture"), between the Company and United
States Trust Company of New York (the "Trustee"). This Note is one of a duly
authorized issue of Exchange Notes of the Company designated as its 13.25%
Senior Notes due 2008 (the "Exchange Notes"). The terms of the Notes 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. Code 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 Notes are subject to all such terms, and Holders of Notes
are referred to the Indenture and the TIA for a statement of them. The Notes are
not secured by any of the assets of the Company except to the limited extent
provided for by the Escrow Agreement, and will become general unsecured
obligations of the Company upon disbursement in full of the funds in the Escrow
Account. The Notes are limited in aggregate principal amount to $225,000,000
subject to the terms of the Indenture. Each Holder, by accepting a Note, agrees
to be bound by all of the terms and provisions of the Indenture, as the same may
be amended from time to time.
6. Ranking. The Notes will be general unsecured obligations of
the Company and will rank senior in right of payment to all future Indebtedness
of the Company that is, by its terms or by the terms of the agreement or
instrument governing such Indebtedness, expressly subordinated in right of
payment to the Notes and pari passu in right of payment with all existing and
future unsecured liabilities of the Company that are not so subordinated.
7. Optional Redemption. The Notes will be redeemable, at the
Company's option, in whole or in part, on and after May 15, 2003 upon not less
than 30 nor more than 60 days' prior notice published in a leading newspaper
having a general circulation in New York (which is expected to be The Wall
Street Journal) and in Amsterdam (which is expected to be Het Financieele
Dagblad ) (and if, and so long as the Notes are listed on the Luxembourg Stock
Exchange and the rules of such Stock Exchange shall so require, a newspaper
having a general circulation in Luxembourg (which is expected to be the
Luxemburger Wort)) or, in the case of Definitive Notes, mailed by first-class
mail to each Holder's registered address (and, if, and so long as the Notes are
listed on the Luxembourg Stock Exchange and the rules of such Stock Exchange
shall so require, published in a newspaper having a general circulation in
Luxembourg (which is expected to be the Luxemburger Wort)), at the redemption
prices (expressed as a percentage of principal amount) set forth below, plus
accrued and unpaid interest, Additional Amounts, if any, to the applicable
Redemption Date (and in the case of Definitive Notes, subject to the right of
Holders of record on the
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<PAGE> 138
relevant record date to receive interest and Additional Amounts, if any, due on
the relevant interest payment date in respect thereof), if redeemed during the
twelve-month period beginning on May 15, 2003 of each of the years indicated
below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- -----
<S> <C>
2003............................................................................ 106.625%
2004............................................................................ 104.417
2005............................................................................ 102.208
2006 and thereafter............................................................. 100.000%
</TABLE>
8. Special Tax Redemption. The Notes may be redeemed, at the
option of the Company in whole but not in part, at any time upon giving not less
than 30 nor more than 60 days' notice to the Holders (which notice shall be
irrevocable), at a redemption price equal to the aggregate principal amount
thereof to the date fixed by the Company for redemption (a "Tax Redemption
Date") and all Additional Amounts, if any, then due and which will become due on
the Tax Redemption Date as a result of the redemption or otherwise, if the
Company determines that, as a result of (i) any change in, or amendment to, the
laws or treaties (or any regulations or rulings promulgated thereunder) of the
Netherlands (or any political subdivision or taxing authority of the
Netherlands) affecting taxation which becomes effective on or after the Issue
Date, or (ii) any change in position regarding the application, administration
or any new or different interpretation of such laws, treaties, regulations or
rulings (including a holding, judgment or order by a court of competent
jurisdiction), which change, amendment, application or interpretation becomes
effective on or after the Issue Date, the Company is, or on the next Interest
Payment Date would be, required to pay Additional Amounts, and the Company
determines that such payment obligation cannot be avoided by the Company taking
reasonable measures. Notwithstanding the foregoing, no such notice of redemption
shall be given earlier than 90 days prior to the earliest date on which the
Company would be obligated to make such payment or withholding if a payment in
respect of the Notes were then due. Prior to the publication or, where relevant,
mailing of any notice of redemption of the Notes pursuant to the foregoing, the
Company will deliver to the Trustee an opinion of an independent tax counsel of
recognized standing to the effect that the circumstances referred to above
exist. The Trustee shall accept such opinion as sufficient evidence of the
satisfaction of the conditions precedent described above, in which event it
shall be conclusive and binding on the Holders.
9. Notice of Redemption. Notice of redemption will be given at
least 30 days but not more than 60 days before the Redemption Date by publishing
in a leading newspaper having a general circulation in New York (which is
expected to be The Wall Street Journal) and in Amsterdam (which is expected to
be Het Financieele Dagblad ) (and, if and so long as the Notes are listed on the
Luxembourg Stock Exchange and the rules of such Stock Exchange shall so require,
a newspaper having
C-7
<PAGE> 139
a general circulation in Luxembourg (which is expected to be the Luxemburger
Wort)) or in the case of Definitive Notes, mailed to Holders by first-class mail
at their respective addresses as they appear on the registration books of the
Registrar (and, if and so long as the Notes are listed on the Luxembourg Stock
Exchange and the rules of such Stock Exchange shall so require, published in a
newspaper having a general circulation in Luxembourg (which is expected to be
the Luxemburger Wort)). Notes in denominations of $1,000 may be redeemed only in
whole. The Trustee may select for redemption portions (equal to $1,000 or any
integral multiple thereof) of the principal of Notes that have denominations
larger than $1,000.
Except as set forth in the Indenture, from and after any
Redemption Date, if monies for the redemption of the Notes called for redemption
shall have been deposited with the Paying Agent for redemption on such
Redemption Date, then, unless the Company defaults in the payment of such
Redemption Price, the Notes called for redemption will cease to bear interest,
or Additional Amounts, if any, and the only right of the Holders of such Notes
will be to receive payment of the Redemption Price.
10. Change of Control Offer. Upon the occurrence of a Change
of Control, the Company will be required to make an offer to purchase all or any
part (equal to $1,000 aggregate principal amount and integral multiples thereof)
of the Notes on the Change of Control Payment Date at a purchase price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest, thereon to the date of repurchase, plus, Additional Amounts, if any,
to the date of repurchase (and in the case of Definitive Notes, subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date and Additional Amounts, if any, in respect
thereof). Holders of Notes that are subject to an offer to purchase will receive
a Change of Control Offer from the Company prior to any related Change of
Control Payment Date and may elect to have such Notes purchased by completing
the form entitled "Option of Holder to Elect Purchase" appearing below.
11. Limitation on Disposition of Assets. When the aggregate
amount of Excess Proceeds from Asset Sales exceeds $5.0 million, the Company
will be obligated, within 30 Business Days thereafter, to make an offer to
purchase the maximum principal amount of Notes, that is an integral multiple of
$1,000, that may be purchased out of the Excess Proceeds at an offer price in
cash in an amount equal to 100% of the aggregate principal amount thereof, plus
accrued and unpaid interest thereon, plus, Additional Amounts, if any, to the
date fixed for the closing of such offer (and, in the case of Definitive Notes,
subject to the right of a Holder of record on the relevant record date to
receive interest due on the relevant interest payment date and Additional
Amounts, if any, in respect thereof). If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, subject to
applicable law, the Trustee shall select the Notes to be redeemed in accordance
with the Indenture; provided, however, that no Notes of $1,000 or less shall be
purchased in part. Holders of Notes that are the subject of an offer to purchase
will receive an Asset Sale Offer from the Company prior to any related
C-8
<PAGE> 140
purchase date and may elect to have such Notes purchased by completing the form
entitled "Option of Holders to Elect Purchase" appearing below.
12. Denominations; Form. The Global Notes are in registered
global form, without coupons, in denominations of $1,000 and integral multiples
of $1,000.
13. Persons Deemed Owners. The registered Holder of this Note
shall be treated as the owner of it for all purposes, subject to the terms of
the Indenture.
14. Unclaimed Funds. If funds for the payment of principal,
interest or Additional Amounts 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 Agents with respect to
such funds shall cease.
15. Legal Defeasance and Covenant Defeasance. The Company may
be discharged from its obligations under the Indenture and the Notes except for
certain provisions thereof ("Legal Defeasance"), and may be discharged from
their obligations to comply with certain covenants contained in the Indenture
("Covenant Defeasance"), in each case upon satisfaction of certain conditions
specified in the Indenture.
16. Amendment; Supplement; Waiver. Subject to certain
exceptions specified in the Indenture, the Indenture or the Notes may be amended
or supplemented with the written consent of the Holders of at least a majority
in principal amount of the Notes then outstanding, and any existing Default or
Event of Default or compliance with any provision of the Indenture or the Notes
may be waived with the consent of the Holders of a majority in principal amount
of the Notes then outstanding.
17. Restrictive Covenants. The Indenture imposes certain
covenants that, among other things, limit the ability of the Company and its
Restricted Subsidiaries to, incur additional Indebtedness, pay dividends or make
other distributions or investments, repurchase Equity Interests or make certain
other Restricted Payments, enter into certain consolidations or mergers or enter
into certain transactions with Affiliates and consummate certain mergers and
consolidations or sales of all or substantially all assets. 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.
18. Successors. When a successor assumes all the obligations
of its predecessor under the Notes and the Indenture in accordance with the
terms of the Indenture, the predecessor will be released from those obligations.
19. Defaults and Remedies. If an Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable
immediately in the manner and with the effect provided in the Indenture. Holders
of Notes may not enforce the Indenture or the Notes except as provided in the
Indenture. The Trustee is
C-9
<PAGE> 141
not obligated to enforce the Indenture or the Notes unless it has received
indemnity satisfactory to it. The Indenture permits, subject to certain
limitations therein provided, Holders of a majority in aggregate principal
amount of the Notes then outstanding to direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of Notes notice of any
continuing Default or Event of Default (except a Default in payment of
principal, premium, interest and Additional Amounts, if any, including an
accelerated payment) if it determines that withholding notice is in their
interest.
20. Trustee Dealings with Company. The Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or
their respective Affiliates as if it were not the Trustee.
21. No Recourse Against Others. No stockholder, director,
officer, employee or incorporator, as such, of the Company shall have any
liability for any obligation of the Company under the Notes or the Indenture or
for any claim based on, in respect of or by reason of, such obligations or their
creation. Each Holder of the Notes by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for the
issuance of the Notes.
22. Authentication. This Note shall not be valid until the
Trustee or authenticating agent signs the certificate of authentication on this
Note.
23. Abbreviations and Defined Terms. Customary abbreviations
may be used in the name of a Holder of a Note 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). Unless otherwise
defined herein, terms defined in the Indenture are used herein as defined
therein.
24. CUSIP Numbers. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company will
cause CUSIP numbers to be printed on the Notes immediately prior to the
qualification of the Indenture under the TIA as a convenience to the Holders of
the Notes. No representation is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the other identification
numbers printed hereon.
25. Governing Law THE INDENTURE AND THE NOTES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK.
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<PAGE> 142
SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount at maturity of this Note shall be
$ . The following decreases/increases in the principal amount at maturity of
this Note have been made:
<TABLE>
<CAPTION>
Total Principal
Amount at Notation
Decrease in Increase in Maturity Made by
Date of Principal Principal Following such or on
Decrease/ Amount at Amount at Decrease/ Behalf of
Increase Maturity Maturity Increase Trustee
- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C>
- ----------- ----------- ----------- ----------- -----------
- ----------- ----------- ----------- ----------- -----------
- ----------- ----------- ----------- ----------- -----------
- ----------- ----------- ----------- ----------- -----------
- ----------- ----------- ----------- ----------- -----------
- ----------- ----------- ----------- ----------- -----------
- ----------- ----------- ----------- ----------- -----------
- ----------- ----------- ----------- ----------- -----------
- ----------- ----------- ----------- ----------- -----------
- ----------- ----------- ----------- ----------- -----------
- ----------- ----------- ----------- ----------- -----------
- ----------- ----------- ----------- ----------- -----------
</TABLE>
C-11
<PAGE> 143
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, check the
appropriate box:
Section 4.15 [ ] Section 4.16 [ ]
If you want to elect to have only part of this Note purchased
by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state
the amount:
$
Date:_____________ Your Signature:___________________
(Sign exactly as your name appears on the other
side of this Note)
Signature Guarantee: _____________________________________
Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor program reasonably acceptable to the Trustee)
C-12
<PAGE> 144
EXHIBIT D
TO THE INDENTURE
[FORM OF FACE OF EXCHANGE DEFINITIVE NOTE]
THIS NOTE IS A DEFINITIVE NOTE WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO.
CUSIP No. 925301AB9
No. $
VERSATEL TELECOM B.V.
13.25% Senior Note
due 2008
No.____ $____________
VERSATEL TELECOM B.V., a company organized under the laws of
The Netherlands (the "Company", which term includes any successor corporation),
for value received promises to pay to ____________, or registered assigns, upon
surrender hereof the principal sum of ___________ Dollars, on May 15, 2008.
Interest Payment Dates: May 15 and November 15 commencing
November 15, 1998
Record Dates: May 1 and November 1
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
D-1
<PAGE> 145
VERSATEL TELECOM B.V.,
by
-----------------------------
Name:
Title:
by
-----------------------------
Name:
Title:
(SEAL)
This is one of the Notes
referred to in the within-mentioned
Indenture:
UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee,
by _________________________
Name:
Title:
Dated:
D-2
<PAGE> 146
[Form of REVERSE]
VERSATEL TELECOM B.V.
13.25% Senior Note
due 2008
1. Interest. VERSATEL TELECOM B.V., a company organized under
the laws of The Netherlands (the "Company"), promises to pay interest on the
principal amount of this Note at the rate and in the manner specified below.
Interest on the Notes will accrue at 13.25% per annum on the principal amount
then outstanding, and be payable semi-annually in arrears on each May 15 and
November 15, or if any such day is not a Business Day on the next succeeding
Business Day, commencing November 15, 1998 to the Holder hereof. Interest on the
Notes will accrue from the most recent date to which interest has been paid or,
if no interest has been paid, from May 27, 1998. 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 and on
overdue installments of interest (without regard to any applicable grace
periods), and on any Additional Amounts, from time to time on demand at the rate
borne by the Notes plus 1.5% per annum to the extent lawful. Any interest paid
on this Note shall be increased to the extent necessary to pay Additional
Amounts as set forth herein.
2. Additional Amounts. All payments made by the Company on the
Notes will be made without withholding or deduction for, or on account of, any
present or future Taxes imposed or levied by or on behalf of The Netherlands or
any jurisdiction in which the Company or any Surviving Entity is organized or is
otherwise resident for tax purposes or any political subdivision thereof or any
authority having power to tax therein or any jurisdiction from or through which
payment is made (each a "Relevant Taxing Jurisdiction"), unless the withholding
or deduction of such Taxes is then required by law. If any deduction or
withholding for, or on account of, any Taxes of any Relevant Taxing
Jurisdiction, shall at any time be required on any payments made by the Company
with respect to the Notes, including payments of principal, redemption price,
interest or premium, the Company will pay such additional amounts (the
"Additional Amounts") as may be necessary in order that the net amounts received
in respect of such payments by the Holders of the Notes or the Trustee, as the
case may be, after such withholding or deduction, equal the respective amounts
which would have been received in respect of such payments in the absence of
such withholding or deduction; except that no such Additional Amounts will be
payable with respect to:
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(a) any payments on a Note held by or on behalf of a Holder or
beneficial owner who is liable for such Taxes in respect of such Note
by reason of the Holder or beneficial owner having some connection with
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 by the mere holding of such Note or
enforcement of rights thereunder or the receipt of payments in respect
thereof;
(b) any Taxes that are imposed or withheld as a result of a
change in law after the Issue Date where such withholding or imposition
is by reason of the failure of the Holder or beneficial owner of the
Note to comply with any request by the Company to provide information
concerning the nationality, residence or identity of such Holder or
beneficial owner or to make any declaration or similar claim or satisfy
any information or reporting requirement, which is required or imposed
by a statute, treaty, regulation or administrative practice of the
Relevant Taxing Jurisdiction as a precondition to exemption from all or
part of such Taxes;
(c) except in the case of the winding up of the Company, any
Note presented for payment (where presentation is required) in the
Relevant Taxing Jurisdiction; or
(d) any Note presented for payment (where presentation is
required) more than 30 days after the relevant payment is first made
available for payment to the Holder.
Such Additional Amounts will also not be payable where, had
the beneficial owner of the Note been the Holder of the Note, he would not have
been entitled to payment of Additional Amounts by reason of clauses (a) to (d)
inclusive above.
3. Method of Payment. The Company shall pay interest on the
Notes (except defaulted interest) to the bearer hereof. Holders must surrender
Notes to a Paying Agent to collect principal payments. The Company shall pay
principal and interest in dollars or in such other coin or currency of the
United States of America that at the time of payment is legal tender for payment
of public and private debts. Immediately available funds for the payment of the
principal of (and premium, if any), interest and Additional Amounts, if any, in
excess of $100,000 to any payee or group of related payees, such payment will be
made, at the option of the Holder hereof, by wire transfer of same day funds to
the Paying Agent, who in turn will wire such funds to the Holder hereof or to
such individuals as the Holder hereof may in writing to the Paying Agent direct;
provided further that the Paying Agent has received written wire transfer
instructions at least fifteen days prior to the date of any such payment.
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4. Paying Agent and Registrar. Initially, United States Trust
Company of New York will act as Paying Agent and Registrar. The Company may
change any Paying Agent, Registrar or co-Registrar without notice to the
Holders. The Company or any of its Subsidiaries may, subject to certain
exceptions, act in any such capacity.
5. Indenture. The Company issued the Notes under an Indenture,
dated as of May 27, 1998 (the "Indenture"), between the Company and United
States Trust Company of New York (the "Trustee"). This Note is one of a duly
authorized issue of Exchange Notes of the Company designated as its 13.25%
Senior Notes due 2008 (the "Exchange Notes"). The terms of the Notes 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. Code 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 Notes are subject to all such terms, and Holders of Notes
are referred to the Indenture and the TIA for a statement of them. The Notes are
not secured by any of the assets of the Company except to the limited extent
provided for by the Escrow Agreement, and will become general unsecured
obligations of the Company upon disbursement in full of the funds in the Escrow
Account. The Notes are limited in aggregate principal amount to $225,000,000
subject to the terms of the Indenture. Each Holder, by accepting a Note, agrees
to be bound by all of the terms and provisions of the Indenture, as the same may
be amended from time to time.
6. Ranking. The Notes will be general unsecured obligations of
the Company and will rank senior in right of payment to all future Indebtedness
of the Company that is, by its terms or by the terms of the agreement or
instrument governing such Indebtedness, expressly subordinated in right of
payment to the Notes and pari passu in right of payment with all existing and
future unsecured liabilities of the Company that are not so subordinated.
7. Optional Redemption. The Notes will be redeemable, at the
Company's option, in whole or in part, on and after May 15, 2003 upon not less
than 30 nor more than 60 days' prior notice published in a leading newspaper
having a general circulation in New York (which is expected to be The Wall
Street Journal) and in Amsterdam (which is expected to be Het Financieele
Dagblad) (and if, and so long as the Notes are listed on the Luxembourg Stock
Exchange and the rules of such Stock Exchange shall so require, a newspaper
having a general circulation in Luxembourg (which is expected to be the
Luxemburger Wort)) and mailed by first-class mail to each Holder's registered
address), at the redemption prices (expressed as a percentage of principal
amount) set forth below, plus accrued and unpaid interest, Additional Amounts,
if any, to the applicable Redemption Date (and in the case of Definitive Notes,
subject to the right of Holders of record on the relevant record date
to receive interest and Additional Amounts, if any, due on the relevant interest
payment date in
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respect thereof), if redeemed during the twelve-month period beginning on May
15, 2003 of each of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- -----
<S> <C>
2003............................................................................ 106.625%
2004............................................................................ 104.417
2005............................................................................ 102.208
2006 and thereafter............................................................. 100.000%
</TABLE>
8. Special Tax Redemption. The Notes may be redeemed, at the
option of the Company in whole but not in part, at any time upon giving not less
than 30 nor more than 60 days' notice to the Holders (which notice shall be
irrevocable), at a redemption price equal to the aggregate principal amount
thereof to the date fixed by the Company for redemption (a "Tax Redemption
Date"), and all Additional Amounts, if any, then due and which will become due
on the Tax Redemption Date as a result of the redemption or otherwise, if the
Company determines that, as a result of (i) any change in, or amendment to, the
laws or treaties (or any regulations or rulings promulgated thereunder) of the
Netherlands (or any political subdivision or taxing authority of the
Netherlands) affecting taxation which becomes effective on or after the Issue
Date, or (ii) any change in position regarding the application, administration
or any new or different interpretation of such laws, treaties, regulations or
rulings (including a holding, judgment or order by a court of competent
jurisdiction), which change, amendment, application or interpretation becomes
effective on or after the Issue Date, the Company is, or on the next Interest
Payment Date would be, required to pay Additional Amounts, and the Company
determines that such payment obligation cannot be avoided by the Company taking
reasonable measures. Notwithstanding the foregoing, no such notice of redemption
shall be given earlier than 90 days prior to the earliest date on which the
Company would be obligated to make such payment or withholding if a payment in
respect of the Notes were then due. Prior to the publication or, where relevant,
mailing of any notice of redemption of the Notes pursuant to the foregoing, the
Company will deliver to the Trustee an opinion of an independent tax counsel of
recognized standing to the effect that the circumstances referred to above
exist. The Trustee shall accept such opinion as sufficient evidence of the
satisfaction of the conditions precedent described above, in which event it
shall be conclusive and binding on the Holders.
9. Notice of Redemption. Notice of redemption will be given at
least 30 days but not more than 60 days before the Redemption Date by publishing
in a leading newspaper having a general circulation in New York (which is
expected to be The Wall Street Journal) and in Amsterdam (which is expected to
be Het Financieele Dagblad ) (and, if and so long as the Notes are listed on the
Luxembourg Stock Exchange and the rules of such Stock Exchange shall so require,
a newspaper having a general circulation in Luxembourg (which is expected to be
the Luxemburger Wort))
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<PAGE> 150
and, mailed to Holders by first-class mail at their respective addresses as they
appear on the registration books of the Registrar). Notes in denominations of
$1,000 may be redeemed only in whole. The Trustee may select for redemption
portions (equal to $1,000 or any integral multiple thereof) of the principal of
Notes that have denominations larger than $1,000.
Except as set forth in the Indenture, from and after any
Redemption Date, if monies for the redemption of the Notes called for redemption
shall have been deposited with the Paying Agent for redemption on such
Redemption Date, then, unless the Company defaults in the payment of such
Redemption Price, the Notes called for redemption will cease to bear interest,
or Additional Amounts, and the only right of the Holders of such Notes will be
to receive payment of the Redemption Price.
10. Change of Control Offer. Upon the occurrence of a Change
of Control, the Company will be required to make an offer to purchase all or any
part (equal to $1,000 aggregate principal amount and integral multiples thereof)
of the Notes on the Change of Control Payment Date at a purchase price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest, thereon to the date of repurchase, plus, Additional Amounts, if any,
to the date of repurchase (and, subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date and Additional Amounts, if any, in respect thereof). Holders of Notes that
are subject to an offer to purchase will receive a Change of Control Offer from
the Company prior to any related Change of Control Payment Date and may elect to
have such Notes purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below.
11. Limitation on Disposition of Assets. When the aggregate
amount of Excess Proceeds from Asset Sales exceeds $5.0 million, the Company
will be obligated, within 30 Business Days thereafter, to make an offer to
purchase the maximum principal amount of Notes, that is an integral multiple of
$1,000, that may be purchased out of the Excess Proceeds at an offer price in
cash in an amount equal to 100% of the aggregate principal amount thereof, plus
accrued and unpaid interest thereon, plus, Additional Amounts, if any, to the
date fixed for the closing of such offer (and, subject to the right of a Holder
of record on the relevant record date to receive interest due on the relevant
interest payment date and Additional Amounts, if any, in respect thereof). If
the aggregate principal amount of Notes surrendered by Holders thereof exceeds
the amount of Excess Proceeds, subject to applicable law, the Trustee shall
select the Notes to be redeemed in accordance with the Indenture; provided,
however, that no Notes of $1,000 or less shall be purchased in part. Holders of
Notes that are the subject of an offer to purchase will receive an Asset Sale
Offer from the Company prior to any related purchase date and may elect to have
such Notes purchased by completing the form entitled "Option of Holders to Elect
Purchase" appearing below.
12. Denominations; Form. The Definitive Notes are in bearer
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000.
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13. Persons Deemed Owners. The Holder of this Note shall be
treated as the owner of it for all purposes, subject to the terms of the
Indenture.
14. Unclaimed Funds. If funds for the payment of principal,
interest or Additional Amounts 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 Agents with respect to
such funds shall cease.
15. Legal Defeasance and Covenant Defeasance. The Company may
be discharged from its obligations under the Indenture and the Notes except for
certain provisions thereof ("Legal Defeasance"), and may be discharged from
their obligations to comply with certain covenants contained in the Indenture
and the Notes ("Covenant Defeasance"), in each case upon satisfaction of certain
conditions specified in the Indenture.
16. Amendment; Supplement; Waiver. Subject to certain
exceptions specified in the Indenture, the Indenture or the Notes may be amended
or supplemented with the written consent of the Holders of at least a majority
in principal amount of the Notes then outstanding, and any existing Default or
Event of Default or compliance with any provision of the Indenture or the Notes
may be waived with the consent of the Holders of a majority in principal amount
of the Notes then outstanding.
17. Restrictive Covenants. The Indenture imposes certain
covenants that, among other things, limit the ability of the Company and its
Restricted Subsidiaries to, incur additional Indebtedness, pay dividends or make
other distributions or investments, repurchase Equity Interests or make certain
other Restricted Payments, enter into certain consolidations or mergers or enter
into certain transactions with Affiliates and consummate certain mergers and
consolidations or sales of all or substantially all assets. 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.
18. Successors. When a successor assumes all the obligations
of its predecessor under the Notes and the Indenture in accordance with the
terms of the Indenture, the predecessor will be released from those obligations.
19. Defaults and Remedies. If an Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable
immediately in the manner and with the effect provided in the Indenture. Holders
of Notes may not enforce the Indenture or the Notes except as provided in the
Indenture. The Trustee is not obligated to enforce the Indenture or the Notes
unless it has received indemnity satisfactory to it. The Indenture permits,
subject to certain limitations therein provided, Holders of a majority in
aggregate principal amount of the Notes then outstanding to direct the Trustee
in its exercise of any trust or power. The Trustee may withhold from Holders of
Notes notice of any continuing Default or Event of Default
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<PAGE> 152
(except a Default in payment of principal, premium, interest and Additional
Amounts, if any, including an accelerated payment) if it determines that
withholding notice is in their interest.
20. Trustee Dealings with Company. The Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or
their respective Affiliates as if it were not the Trustee.
21. No Recourse Against Others. No stockholder, director,
officer, employee or incorporator, as such, of the Company shall have any
liability for any obligation of the Company under the Notes or the Indenture or
for any claim based on, in respect of or by reason of, such obligations or their
creation. Each Holder of the Notes by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for the
issuance of the Notes.
22. Authentication. This Note shall not be valid until the
Trustee or authenticating agent signs the certificate of authentication on this
Note.
23. Abbreviations and Defined Terms. Customary abbreviations
may be used in the name of a Holder of a Note 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). Unless otherwise
defined herein, terms defined in the Indenture are used herein as defined
therein.
24. CUSIP Numbers. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company will
cause CUSIP numbers to be printed on the Notes immediately prior to the
qualification of the Indenture under the TIA as a convenience to the Holders of
the Notes. No representation is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the other identification
numbers printed hereon.
25. Governing Law THE INDENTURE AND THE NOTES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK.
D-9
<PAGE> 153
*
-----------------------------------------------------------
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's social security or tax I.D. No.)
and irrevocably appoint agent to transfer this Note on the books of
the Company. The agent may substitute another to act for him.
- -----------------------------------------------------------
Date: Your Signature:
------------- ----------------------
- -----------------------------------------------------------
Sign exactly as your name appears on the other side of this Note.
D-10
<PAGE> 154
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, check the
appropriate box:
Section 4.15 [ ] Section 4.16 [ ]
If you want to elect to have only part of this Note purchased
by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state
the amount:
$
Date:_____________ Your Signature:___________________
(Sign exactly as your name appears on the other
side of this Note)
Signature Guarantee: ______________________________________
Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor program reasonably acceptable to the Trustee)
D-11
<PAGE> 155
EXHIBIT E
TO THE INDENTURE
FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM REGULATION S
GLOBAL NOTE TO U.S. GLOBAL NOTE
(Transfers pursuant to Section 2.7(b)
of the Indenture)
VersaTel Telecom B.V.
c/o United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Attention: Corporate Trust Administration
RE: 13.25% Senior Notes due 2008
(the "Notes"), of VersaTel Telecom B.V.
Reference is hereby made to the Indenture dated as of May __,
1998 (the "Indenture") between VersaTel Telecom B.V. and United States Trust
Company of New York, as Trustee. Capitalized terms used but not defined herein
shall have the meanings given them in the Indenture.
This letter relates to U.S.$_________ (being any integral
multiple of U.S.$1,000) principal amount of Notes beneficially held through
interests in the 144A Global Note (CUSIP No. _________) with DTC in the name of
________(the "Transferor") account no. . The Transferor hereby requests that on
[INSERT DATE] such beneficial interest in the U.S. Global Note be transferred or
exchanged for an interest in the Regulation S Global Note (CUSIP (CINS) No.
_________) in the same principal denomination and transfer to (account no.
________). If this is a partial transfer, a minimum amount of U.S.$1,000 and any
integral multiple of U.S.$1,000 in excess thereof of the U.S. Global Note will
remain outstanding.
In connection with such request and in respect of such Notes
the Trans feror does hereby certify that such transfer has been effected in
accordance with the transfer restrictions set forth in the Indenture and the
Notes and pursuant to and in accordance with Rule 903 or 904 of Regulation S
under the United States Securities Act of 1933, as amended (the "Securities
Act"), and accordingly the Transferor further certifies that:
(A) (1) the offer of the Notes was not made to a person in the
United States;
E-1
<PAGE> 156
(2) either (a) at the time the buy order 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 offshore securities market and neither the
Transferor nor any person acting on our behalf knows that the
transaction was prearranged with a buyer in the United
States,
(3) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme
to evade the registration requirements of the Securities Act.
OR
(B) Such transfer is being made in accordance with Rule 144A
under the Securities Act.
E-2
<PAGE> 157
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company. Terms used in this certificate
and not otherwise defined in the Indenture have the meanings set forth in
Regulation S under the Securities Act.
Dated: _____________, ____
[Name of Transferor]
By:________________________
Name:
Title:
Telephone No.:
Please print name and address (including zip code number)
E-3
<PAGE> 158
EXHIBIT F
TO THE INDENTURE
FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM REGULATION S
GLOBAL NOTE TO U.S. GLOBAL NOTE
(Transfers pursuant to Section 2.7(c)
of the Indenture)
VersaTel Telecom B.V.
c/o United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Attention: Corporate Trust Administration
Re: VersaTel Telecom B.V.
Reference is hereby made to the Indenture dated as of May 27,
1998 (the "Indenture") between VersaTel Telecom B.V. and United States Trust
Company of New York, as Trustee. Capitalized terms used but not defined herein
shall have the meanings given them in the Indenture.
This letter relates to U.S.$__________ (being any integral
multiple of U.S.$1,000) principal amount of Notes beneficially held through
interests in the Regulation S Global Note (CUSIP (CINS) No. _________) with
[Euroclear] [Cedel] (Common Code No. _______) through DTC in the name of
_______________ (the "Transferor") [Euroclear] [Cedel] account no. ____. The
Transferor hereby requests that on [INSERT DATE] such beneficial interest in the
Regulation S Global Note be transferred or exchanged for an interest in the U.S.
Global Note (CUSIP No. _________) in the same principal denomination and
transfer to ______________ (DTC account no. ________). If this is a partial
transfer, a minimum of U.S.$1,000 and any integral multiple of U.S.$1,000 in
excess thereof of the Regulation S Global Note will remain outstanding.
In connection with such request, and in respect of such Notes,
the Transferor does hereby certify that such Notes are being transferred in
accordance with Rule 144A under the United States Securities Act of 1933, as
amended (the "Securities Act"), to a transferee that the Transfer or reasonably
believes is purchasing the Notes for its own account or an account with respect
to which the transferee exercises sole investment discretion and the transferee
and any such account is a "qualified institutional buyer" within the meaning of
Rule 144A, in each case in a transaction meeting the requirements of Rule 144A
and in accordance with any applicable securities laws of any state of the United
States or any other jurisdiction.
F-1
<PAGE> 159
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
Dated:_______________, ____
[Name of Transferor]
By:___________________________
Name:
Title:
Telephone No.:
Please print name and address (including zip code number)
F-2
<PAGE> 1
EXHIBIT 4.4
VERSATEL TELECOM B.V.
$225,000,000 13 1/4% Senior Notes due 2008
REGISTRATION RIGHTS AGREEMENT
Dated as of May 27, 1998
Between
VERSATEL TELECOM B.V.
and
LEHMAN BROTHERS INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Definitions............................................................................................ 1
2. Exchange Offer......................................................................................... 4
3. Shelf Registration Statement........................................................................... 7
4. Liquidated Damages..................................................................................... 9
5. Registration Procedures................................................................................ 10
6. Registration Expenses.................................................................................. 18
7. Indemnification and Contribution....................................................................... 19
8. Rule 144A.............................................................................................. 23
9. Underwritten Registrations............................................................................. 23
10. Miscellaneous.......................................................................................... 23
(a) No Inconsistent Agreements.................................................................... 23
(b) Adjustments Affecting Transfer Restricted Securities.......................................... 24
(c) Amendments and Waivers........................................................................ 24
(d) Notices....................................................................................... 24
(e) Successors and Assigns........................................................................ 25
(f) Counterparts.................................................................................. 26
(g) Headings...................................................................................... 26
(h) Governing Law................................................................................. 26
(i) Submission to Jurisdiction; Appointment of Agent for Service; Waiver.......................... 26
(j) Currency Indemnity............................................................................ 27
(k) Severability.................................................................................. 27
(l) Securities Held by the Company or Its Affiliates.............................................. 27
(m) Third Party Beneficiaries..................................................................... 27
(n) Entire Agreement.............................................................................. 27
</TABLE>
i
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated
as of May 27, 1998, between VersaTel Telecom B.V., a company organized under the
laws of The Netherlands and having its corporate seat in Amsterdam, The
Netherlands (the "Company") and Lehman Brothers Inc. (the "Initial Purchaser").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of May 20, 1998, between the Company and the Initial
Purchaser (the "Purchase Agreement") which provides for the sale by the Company
to the Initial Purchaser of 225,000 Units (the "Units") consisting of $1,000
aggregate principal amount of its 13 1/4% Senior Notes due 2008 (the "Notes")
and one warrant to purchase 6.667 ordinary shares of the Company, nominal value
NLG 0.10 per share (the "Ordinary Shares"). The Notes are to be issued under an
indenture, dated as of May 27, 1998 (the "Indenture"), between the Company and
United States Trust Company of New York, as Trustee. The warrants are to be
issued under a Warrant Agreement dated as of May 27, 1998 (the "Warrant
Agreement") between the Company and United States Trust Company of New York, as
Warrant Agent. In order to induce the Initial Purchaser to enter into the
Purchase Agreement, the Company has agreed to provide the registration rights
set forth in this Agreement for the benefit of the Initial Purchaser and its
direct and indirect transferees and assigns.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Advice: See Section 5 hereof.
Agreement: See the first introductory paragraph hereto.
Applicable Period: See Section 2(b) hereof.
Authenticating Agent: The Authenticating Agent as defined in
the Indenture.
Company: See the first introductory paragraph hereto.
Effectiveness Period: See Section 3(a) hereof.
Effectiveness Target Date: The 150th day after the Issue Date.
Event Date: See Section 4(b) hereof.
<PAGE> 4
2
Exchange Act: The Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a) hereof.
Exchange Offer: See Section 2(a) hereof.
Exchange Offer Registration Statement: See Section 2(a)
hereof.
Filing Date: The 90th day after the Issue Date.
Holder: Any holder of Transfer Restricted Securities.
Indenture: See the second introductory paragraph hereto.
Initial Purchaser: See the first introductory paragraph
hereto.
Inspectors: See Section 5(o) hereof.
Issue Date: The date of the issuance of the Notes under the
Indenture.
Liquidated Damages: See Section 4(a) hereof.
NASD: See Section 5(s) hereof.
Notes: See the second introductory paragraph hereto.
Ordinary Shares: See the second introductory paragraph hereto.
Participant: See Section 7(a) hereof.
Participating Broker-Dealer: See Section 2(b) hereof.
Person: An individual, trustee, corporation, partnership,
limited liability company, joint stock company, trust, unincorporated
association, union, business association, firm or other legal entity.
Private Exchange: See Section 2(b) hereof.
Private Exchange Notes: See Section 2(b) hereof.
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration
<PAGE> 5
3
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, 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
hereto.
Records: See Section 5(o) hereof.
Registration Statement: Any registration statement of the
Company, including, but not limited to, the Exchange Offer Registration
Statement or the Shelf Registration Statement, filed with the SEC 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 SEC 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 SEC.
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 SEC.
SEC: The U.S. Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c) hereof.
Shelf Registration Statement: See Section 3(a) hereof.
Transfer Restricted Securities: Each Note until the earliest
to occur of (i) the date on which such Note has been exchanged by a Person
(other than a Participating Broker-Dealer) for Exchange Notes in the Exchange
Offer, (ii) following the exchange by a Participating Broker-Dealer in the
Exchange Offer of such Note for one or more Exchange Notes, the date on which
such Exchange Notes are sold to a purchaser who receives from such
<PAGE> 6
4
Participating Broker-Dealer on or prior to the date of such sale a copy of the
prospectus contained in the Exchange Offer Registration Statement, (iii) the
date on which such Note has been effectively registered under the Securities Act
and disposed of in accordance with the Shelf Registration Statement or (iv) the
date on which such Note is eligible for distribution to the public pursuant to
Rule 144 under the Securities Act.
Trust Indenture Act: The Trust Indenture Act of 1939, as
amended.
Trustee: The trustee under the Indenture and, if existent, the
trustee under any indenture governing the Exchange Notes and Private Exchange
Notes (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.
Units: See the second introductory paragraph hereto.
Warrant Agreement: See the second introductory paragraph
hereto.
2. Exchange Offer
(a) The Company agrees to file at its sole cost and expense
with the SEC no later than the Filing Date, unless prohibited by applicable law
or SEC policy, an offer to exchange (the "Exchange Offer") any and all of the
Transfer Restricted Securities (other than Private Exchange Notes, if any) for a
like aggregate principal amount of notes of the Company, which are substantially
identical in all material respects to the Notes (the "Exchange Notes") (and
which are entitled to the benefits of the Indenture or a trust indenture which
is substantially identical in all material respects to the Indenture (other than
such changes to the Indenture or any such identical trust indenture as are
necessary to comply with any requirements of the SEC to effect or maintain the
qualification thereof under the Trust Indenture Act) and which, in either case,
has been qualified under the Trust Indenture Act), except that the Exchange
Notes (other than Private Exchange Notes, if any) shall have been registered
pursuant to an effective Registration Statement under the Securities Act and
shall contain no restrictive legend thereon. The Exchange Offer shall be
registered under the Securities Act on the appropriate form (the "Exchange Offer
Registration Statement") and shall comply with all applicable tender offer rules
and regulations under the Exchange Act. The Company agrees to (i) use its
reasonable best efforts to cause the Exchange Offer Registration Statement to be
declared effective under the Securities Act on or before the Effectiveness
Target Date; (ii) keep the Exchange Offer open for at least 20 business days (or
longer if required by applicable law) after the date that notice of the Exchange
Offer is mailed to Holders; (iii) (A) file all pre-effective amendments to such
Registration Statement as may be necessary in order to cause such Registration
Statement to become effective, (B) file, if applicable, a post-effective
amendment to such Registration Statement pursuant to Rule 430A under the
Securities Act and (C) cause all necessary filings in connection with the
registration
<PAGE> 7
5
and qualifications of the Exchange Notes to be made under the blue sky laws of
such jurisdictions as are necessary to permit consummation of the Exchange
Offer; and (iv) use its reasonable best efforts to consummate the Exchange Offer
on or prior to 30 days after the date on which the Exchange Offer Registration
Statement is declared effective by the SEC. Upon the Exchange Offer Registration
Statement being declared effective, the Company will offer the Exchange Notes in
exchange for surrender of the Notes. If after such Exchange Offer Registration
Statement is declared effective by the SEC, the Exchange Offer or the issuance
of the Exchange Notes thereunder is interfered with by any stop order,
injunction or other order or requirement of the SEC or any other governmental
agency or court, such Exchange Offer Registration Statement shall be deemed not
to have become effective for purposes of this Agreement. Each Holder who
participates in the Exchange Offer will be required to represent that (i) any
Exchange Notes received by it will be acquired in the ordinary course of its
business, (ii) it has no arrangement or understanding with any Person to
participate in the distribution (within the meaning of the Securities Act) of
the Exchange Notes, (iii) it is not a broker-dealer that acquired Notes directly
from the Company, (iv) it is not an "affiliate" (as defined in Rule 405 under
the Securities Act) of the Company or, if it is such an affiliate, it will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable and (v) it is not acting on behalf of
any Person who could not truthfully make the foregoing representations. If such
Holder is not a broker-dealer, such Holder will be required to represent that it
is not engaged in, and does not intend to engage in, the distribution of the
Exchange Notes. If such Holder is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Notes that were acquired as a result
of market-making activities or other trading activities, it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. Upon consummation of the Exchange Offer in accordance with
this Section 2, the Company shall have no further obligation to register
Transfer Restricted Securities (other than Private Exchange Notes and other than
in respect of any Exchange Notes as to which clause 2(c)(iv) hereof applies)
pursuant to Section 3 hereof. No securities other than the Exchange Notes 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 Purchaser, which shall
contain a summary statement of the positions taken or policies made by the Staff
of the SEC 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 Notes received by such broker-dealer in the Exchange
Offer (a "Participating Broker-Dealer"), whether such positions or policies have
been publicly disseminated by the Staff of the SEC or such positions or
policies, in the judgment of the Initial Purchaser, represent the prevailing
views of the Staff of the SEC. Such "Plan of Distribution" section shall also
expressly permit the use of the Prospectus by all Persons subject to the
prospectus delivery requirements of the Securities Act, including all
Participating Broker-Dealers (unless such Participating Broker-Dealer will be
reselling an unsold allotment from the original sale of the Notes), and include
a statement describing the means by which Participating Broker-Dealers may
resell the Exchange Notes.
<PAGE> 8
6
Upon written request after the consummation of the Exchange
Offer, the Company shall use its 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 any Participating Broker-Dealer subject to the prospectus delivery
requirements of the Securities Act and other Persons, if any, with similar
prospectus delivery requirements for such period of time as is necessary to
comply with applicable law in connection with any resale of the Exchange Notes;
provided, however, that such period shall not exceed 180 days after the
consummation of the Exchange Offer (or such longer period if extended pursuant
to the last paragraph of Section 5 hereof) (the "Applicable Period").
If, prior to consummation of the Exchange Offer, the Initial
Purchaser holds any Notes acquired by it and having, or which are reasonably
likely to be determined to have, the status of an unsold allotment in the
initial distribution, the Company, upon the written request of the Initial
Purchaser simultaneously with the delivery of the Exchange Notes in the Exchange
Offer, shall issue and deliver to the Initial Purchaser in exchange (the
"Private Exchange") for such Notes held by the Initial Purchaser a like
principal amount of notes of the Company, that are substantially identical in
all material respects to the Exchange Notes (the "Private Exchange Notes") (and
which are issued pursuant to the same indenture as the Exchange Notes) except
for the placement of a restrictive legend on such Private Exchange Notes. The
Private Exchange Notes shall bear the same CUSIP number as the Exchange Notes to
the extent permitted by the CUSIP Service Bureau of Standard & Poor's.
Interest on the Exchange Notes and the Private Exchange Notes
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.
In connection with the Exchange Offer, the Company shall:
(1) mail to each Holder a copy of the Prospectus forming part
of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(2) utilize the services of a depositary for the Exchange
Offer with an address in the Borough of Manhattan, The City of New
York, which may be the Trustee or an affiliate of the Trustee;
(3) permit Holders to withdraw tendered Notes at any time
prior to the close of business, New York time, on the last business day
on which the Exchange Offer shall remain open; and
(4) otherwise comply in all material respects with all
applicable laws, rules and regulations.
<PAGE> 9
7
As soon as practicable after the close of the Exchange Offer
or the Private Exchange, as the case may be, the Company shall:
(1) accept for exchange all Notes tendered and not validly
withdrawn pursuant to the Exchange Offer or the Private Exchange;
(2) deliver to the Trustee or Authenticating Agent for
cancellation all Notes so accepted for exchange; and
(3) cause the Trustee promptly to authenticate and deliver to
each Holder of the Notes, Exchange Notes or Private Exchange Notes, as
the case may be, in global form equal in principal amount to the
respective Notes so accepted for exchange, as further set forth in the
Indenture.
The Exchange Notes and the Private Exchange Notes may be
issued under (i) the Indenture or (ii) an indenture substantially identical in
all material respects to the Indenture, which in either event shall provide that
(1) the Exchange Notes shall not be subject to the transfer restrictions set
forth in the Indenture and (2) the Private Exchange Notes shall be subject to
the transfer restrictions set forth in the Indenture. The Indenture or such
indenture substantially identical in all material respects to the Indenture
shall provide that each series of Exchange Notes, Private Exchange Notes and
Notes shall vote and consent together on all matters as one class and that none
of the Exchange Notes, the Private Exchange Notes or the Notes will have the
right to vote or consent as a separate class on any matter.
(c) If (i) the Company is not permitted to file the Exchange
Offer Registration Statement or to consummate the Exchange Offer because the
Exchange Offer is not permitted by applicable law or SEC policy, (ii) any Holder
of Transfer Restricted Securities that is a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act) notifies the Company at least 20
business days prior to the consummation of the Exchange Offer that (a)
applicable law or SEC policy prohibits the Company from participating in the
Exchange Offer, (b) such Holder may not resell the Exchange Notes acquired by it
in the Exchange Offer to the public without delivering a prospectus and the
prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such Holder or (c) such Holder is a
broker-dealer and holds Notes acquired directly from the Company or an affiliate
of the Company, (iii) the Exchange Offer is not for any other reason consummated
within 180 days after the Issue Date, (iv) any Holder (other than a
Participating Broker-Dealer) is not eligible to participate in the Exchange
Offer, or in the case of any Holder that participates in the Exchange Offer,
such Holder does not receive Exchange Notes on the date of the exchange that may
be sold without restriction under federal securities laws (other than due solely
to the status of such Holder as an affiliate of the Company within the meaning
of the Securities Act or due to the requirement that such Holder deliver a
Prospectus in connection with any
<PAGE> 10
8
resale of the Exchange Notes) or (v) the Exchange Offer has been completed and
in the opinion of counsel for the Initial Purchaser a Registration Statement
must be filed and a prospectus must be delivered by the Initial Purchaser in
connection with any offering or sale of Transfer Restricted Securities, then the
Company shall promptly deliver written notice thereof (the "Shelf Notice") to
the Trustee and in the case of clauses (i) and (iii), all Holders, in the case
of clauses (ii), (iv) and (v) the affected Holders, and shall at its own cost
file a Shelf Registration Statement pursuant to Section 3 hereof.
3. Shelf Registration Statement
If a Shelf Notice is delivered as contemplated by Section 2(c)
hereof, then:
(a) Shelf Registration Statement. The Company will use its
reasonable best efforts to: (A) file with the SEC a Registration Statement for
an offering to be made on a continuous basis pursuant to Rule 415 covering all
of the Transfer Restricted Securities (the "Shelf Registration Statement"),
within 90 days of the earliest to occur of clauses (i) through (v) in Section
2(c) above and (B) cause the Shelf Registration Statement to be declared
effective by the SEC on or prior to the 150th day after such obligation arises;
provided, however, that if the Company files a Shelf Registration Statement
pursuant to this Section 3(a), it need not abandon the attempt to cause the SEC
to declare the Exchange Offer Registration Statement effective, and it may
satisfy its obligations to register the Notes pursuant to this Agreement either
by complying with Section 2 and/or Section 3. If the Company shall not have yet
filed an Exchange Offer Registration Statement, the Company shall use its best
efforts to file with the SEC the Shelf Registration Statement on or prior to the
Filing Date. The Shelf Registration Statement shall be on Form F-1 or another
appropriate form permitting registration of such Transfer Restricted Securities
for resale by Holders in the manner or manners designated by them (including,
without limitation, one or more underwritten offerings), or may be an amendment
to the Exchange Offer Registration Statement. The Company shall not permit any
securities other than the Transfer Restricted Securities to be included in the
Shelf Registration Statement.
The Company shall use its reasonable best efforts to keep the
Shelf Registration Statement continuously effective, supplemented and amended to
ensure that it is available for resales of Notes by the holders of Transfer
Restricted Securities entitled to this benefit and to ensure that such Shelf
Registration Statement conforms and continues to conform with the requirements
of this Agreement, the Securities Act and the policies, rules and regulations of
the SEC, as announced from time to time, until the second anniversary of the
Issue Date, subject to extension pursuant to the last paragraph of Section 5
hereof (the "Effectiveness Period"), or such shorter period ending when all
Transfer Restricted Securities covered by the Shelf Registration Statement have
been sold in the manner set forth and as contemplated in the Shelf Registration
Statement or when the Transfer Restricted Securities become eligible for resale
pursuant to Rule 144 under the Securities Act without volume restrictions, if
any.
(b) Withdrawal of Stop Orders. If the 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 best efforts to obtain the
prompt withdrawal of any order suspending the effectiveness thereof.
<PAGE> 11
9
(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, if required by the Securities Act, or if
reasonably requested by the Holders of a majority in aggregate principal amount
of the Transfer Restricted Securities covered by such Registration Statement or
by any underwriter of such Transfer Restricted Securities based on a reasonable
belief that such supplement or amendment is required by law.
4. Liquidated Damages
(a) The Company and the Initial Purchaser 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 ("Liquidated Damages") under the circumstances and to the extent set forth
below (each of which shall be given independent effect and shall not be
duplicative):
(i) if neither the Exchange Offer Registration Statement
nor the Shelf Registration Statement has been filed on or prior to the
Filing Date, then, commencing on the 91st day after the Issue Date,
Liquidated Damages shall accrue on the Notes over and above the stated
interest at a rate of 0.50% per annum for the first 90 days immediately
following the Filing Date, such Liquidated Damages rate increasing by
an additional 0.50% per annum at the beginning of each subsequent
90-day period, or part thereof;
(ii) if neither the Exchange Offer Registration Statement
nor the Shelf Registration Statement is declared effective by the SEC
on or prior to the Effectiveness Target Date, then, commencing on the
151st day after the Issue Date, Liquidated Damages shall accrue on the
Notes included or which should have been included in such Registration
Statement over and above the stated interest at a rate of 0.50% per
annum for the first 90 days immediately following the Effectiveness
Target Date, such Liquidated Damages rate increasing by an additional
0.50% per annum at the beginning of each subsequent 90-day period, or
part thereof; or
(iii) if the Exchange Offer has not been consummated
within 30 days after the Effectiveness Target Date with respect to the
Exchange Offer Registration Statement Liquidated Damages shall accrue
on the Notes over and above the stated interest at a rate of 0.50% per
annum for the first 90 days commencing on the 31st day after the
Effectiveness Target Date, such Liquidated Damages rate increasing by
an additional 0.50% per annum at the beginning of each subsequent
90-day period, or part thereof; or
(iv) (A) the Exchange Offer Registration Statement is
filed and declared effective but thereafter ceases to be effective or
fails to be usable for its intended
<PAGE> 12
10
purpose at any time prior to the time that the Exchange Offer is
consummated and is not declared effective within five business days
thereafter or (B) the Shelf Registration Statement is filed and
declared effective but thereafter ceases to be effective or fails to be
usable for its intended purpose at any time during the Effectiveness
Period and is not declared effective again within five business days
thereafter, Liquidated Damages shall accrue on the Notes over and above
the stated interest rate at a rate of 0.50% per annum for the first 90
days commencing on the day the applicable Registration Statement ceases
to be effective or usable for its intended purpose without being
declared effective again within 5 business days, such Liquidated
Damages rate increasing by an additional 0.50% per annum at the
beginning of each such subsequent 90-day period, or part thereof (it
being understood and agreed that, notwithstanding any provision to the
contrary, so long as any Note which is the subject of a Shelf Notice is
then covered by an effective Shelf Registration Statement, no
Liquidated Damages shall accrue on such Note);
provided, however, that Liquidated Damages may accrue at a maximum rate of 1.50%
per annum of the principal amount of Notes; and 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)), (3) upon the consummation of the Exchange Offer (in
the case of clause (iii) of this Section 4(a)), and (4) upon the effectiveness
or usability of the Exchange Offer Registration Statement which had ceased to
remain effective or be usable (in the case of clause (iv)(A) of this Section
4(a)), or upon the effectiveness or usability of the Shelf Registration
Statement which had ceased to remain effective or be usable (in the case of
clause (iv)(B) of this Section 4(a)), Liquidated Damages on the affected Notes
as a result of such clause (or the relevant subclause thereof), as the case may
be, shall cease to accrue.
(b) The Company shall notify the Trustee within five business
days after each and every date on which an event occurs in respect of which
Liquidated Damages is required to be paid (an "Event Date"). Any amounts of
Liquidated Damages due pursuant to (a)(i), (a)(ii), (a)(iii) or (a)(iv) of this
Section 4 will be payable to the Depositary or its nominee in its capacity as
the registered holder of affected Notes in cash semi-annually on each May 15 and
November 15 (to the holders of record on the May 1 and November 1 immediately
preceding such dates), commencing with the first such date occurring after any
such Liquidated Damages commences to accrue. The amount of Liquidated Damages
will be determined by multiplying the applicable Liquidated Damages rate by the
principal amount of the affected Notes of such Holders, multiplied by a
fraction, the numerator of which is the number of days such Liquidated Damages
rate was applicable during such period (determined on the basis of a 360-day
year comprised of twelve 30-day months and, in the case of a partial month, the
actual number of days elapsed), and the denominator of which is 360. The Company
shall notify the Trustee within five business days of the cessation of any
requirement to pay Liquidated Damages hereunder.
<PAGE> 13
11
5. Registration Procedures
In connection with the filing of any Registration Statement
pursuant to Sections 2 or 3 hereof, the Company shall effect such
registration(s) to permit the sale of the securities covered thereby in
accordance with the intended method or methods of disposition thereof, and
pursuant thereto and in connection with any Registration Statement filed by the
Company hereunder the Company shall:
(a) Prepare and file with the SEC prior to the Filing Date, a
Registration Statement or Registration Statements as prescribed by Sections 2 or
3 hereof, and use its 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 hereof, or (2) a Prospectus
contained in an Exchange Offer Registration Statement filed pursuant to Section
2 hereof is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes 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 Transfer Restricted Securities covered by such Registration
Statement or each such Participating Broker-Dealer, as the case may be, their
counsel and the managing underwriters, if any, a reasonable opportunity to
review copies of all such documents (including copies of any documents to be
incorporated by reference therein and all exhibits thereto) proposed to be filed
(in each case at least five business days prior to such filing).
(b) Prepare and file with the SEC 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 or
the Applicable Period or until consummation of the Exchange Offer, as the case
may be; cause the related Prospectus to be supplemented by any Prospectus
supplement required by applicable law, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) promulgated under
the Securities Act; and comply with the provisions of the Securities Act and the
Exchange Act 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.
Notwithstanding the foregoing, if the Board of Managing Directors of the Company
determines in good faith that it is in the best interests of the Company not to
disclose the existence of or facts surrounding any proposed or pending material
event or transaction involving the Company or its subsidiaries, the Company may
(i) in the event a Shelf Registration Statement has been filed, allow the Shelf
Registration Statement to fail to be effective or usable as a result of such
nondisclosure for up to 60 days during the Effectiveness Period, but in no event
for any period in excess of 30 consecutive days, and (ii) in the event the
Exchange Offer is consummated, allow the Exchange Offer Registration Statement
to fail to be effective or usable as a result of such non-disclosure for up to
15 days during the Applicable Period. The Company shall be deemed not to have
used its best efforts to keep a
<PAGE> 14
12
Registration Statement effective during the Applicable Period if it voluntarily
takes any action that would result in selling Holders of the Transfer Restricted
Securities covered thereby or Participating Broker-Dealers seeking to sell
Exchange Notes not being able to sell such Transfer Restricted Securities or
such Exchange Notes during that period unless such action is required by
applicable law or unless the Company complies with this Agreement, including
without limitation, the provisions of paragraph 5(k) hereof and the last
paragraph of this Section 5.
(c) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, notify the Holders of
Transfer Restricted Securities, or each such Participating Broker-Dealer, as the
case may be, their counsel and the managing underwriters, if any, promptly (but
in any event within five business days), and, if requested by such Persons,
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 under the Securities Act (including in such notice a written statement
that any Holder may, upon request, obtain, at the sole expense of the Company,
one conformed copy of such Registration Statement or post-effective amendment
including financial statements and schedules, documents incorporated or deemed
to be incorporated by reference and exhibits), (ii) of the issuance by the SEC
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 Transfer Restricted Securities or resales of Exchange Notes by
Participating Broker-Dealers the representations and warranties of the Company
contained in any agreement (including any underwriting agreement), contemplated
by Section 5(n) hereof 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
Transfer Restricted Securities or the Exchange Notes 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, the existence of any condition 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 or amendments or supplements to 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 light of the circumstances under which they were made, not misleading, and
(vi) of the determination by
<PAGE> 15
13
the Company that a post-effective amendment to a Registration Statement would be
appropriate.
(d) Use its 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 Transfer Restricted Securities
or the Exchange Notes for sale in any jurisdiction, and, if any such order is
issued, to use its 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 reasonably requested by the managing underwriter or
underwriters (if any), or the Holders of a majority in aggregate principal
amount of the Transfer Restricted Securities being sold in connection with an
underwritten offering or any Participating Broker-Dealer, (i) promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or underwriters (if any), such Holders,
any Participating Broker-Dealer or counsel for any of them may reasonably
request to be included therein, (ii) make all required filings of such
prospectus supplement or such post-effective amendment as soon as practicable
after the Company has received notification of the matters to be incorporated in
such prospectus supplement or post-effective amendment, and (iii) supplement or
make amendments to such Registration Statement.
(f) If (l) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, furnish to each selling
Holder of Transfer Restricted Securities and to each such Participating
Broker-Dealer who so requests and to counsel and each managing underwriter, if
any, at the sole expense of the Company, one conformed copy of the Registration
Statement or Registration Statements and each post-effective amendment thereto,
including financial statements and schedules, and, if requested, all documents
incorporated or deemed to be incorporated therein by reference and all exhibits.
(g) If (l) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, deliver to each Holder of
Transfer Restricted Securities, or each such Participating Broker-Dealer, as the
case may be, their respective counsel, and the underwriters, if any, at the sole
expense of the Company, 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 Holders of Transfer Restricted
<PAGE> 16
14
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 Transfer Restricted Securities covered by, or the sale
by Participating Broker-Dealers of the Exchange Notes pursuant to, such
Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Transfer Restricted
Securities or Exchange Notes or any delivery of a Prospectus contained in the
Exchange Offer Registration Statement by any Participating Broker-Dealer who
seeks to sell Exchange Notes during the Applicable Period, use its reasonable
best efforts to register or qualify (and to cooperate with selling Holders of
Transfer Restricted Securities or each such Participating Broker-Dealer, as the
case may be, the managing underwriter or underwriters, if any, and their
respective counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Transfer Restricted
Securities) for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any selling Holder, Participating
Broker-Dealer, or the managing underwriter or underwriters reasonably request;
provided, however, that where Exchange Notes held by Participating
Broker-Dealers or Transfer Restricted Securities are offered other than through
an underwritten offering, the Company agrees to cause its counsel to perform
Blue Sky investigations and file registrations and qualifications required to be
filed pursuant to this Section 5(h); keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any and all other
acts or things reasonably necessary or advisable to enable the disposition in
such jurisdictions of the Exchange Notes held by Participating Broker-Dealers or
the Transfer Restricted Securities covered by the applicable Registration
Statement; provided, however, that the Company shall not 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 any such jurisdiction where it is not then so subject.
(i) If a Shelf Registration Statement is filed pursuant to
Section 3 hereof, cooperate with the selling Holders of Transfer Restricted
Securities and the managing underwriter or underwriters, if any, to facilitate
the timely preparation and delivery of certificates representing Transfer
Restricted Securities to be sold, which certificates shall not bear any
restrictive legends and shall be in a form eligible for deposit with The
Depository Trust Company; and enable such Transfer Restricted Securities to be
in such denominations and registered in such names as the managing underwriter
or underwriters, if any, or Holders may request.
(j) Use its best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement and the Exchange Notes to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to enable the selling Holders thereof or the underwriter or
underwriters, if any, to dispose of such Transfer Restricted Securities or
Exchange Notes, except as may be required solely as a consequence of the nature
<PAGE> 17
15
of a 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.
(k) If (l) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, upon the occurrence of any
event contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as
practicable prepare and (subject to Section 5(b) hereof) file with the SEC, at
the sole 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 Transfer Restricted Securities being sold thereunder or to the purchasers of
the Exchange Notes 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 light of the circumstances under
which they were made, not misleading.
(l) Unless the rating in effect for the Notes is equally
applicable and in effect for the Exchange Notes and the Transfer Restricted
Securities, use its best efforts to cause the Transfer Restricted Securities
covered by a Registration Statement or the Exchange Notes, as the case may be,
to be rated with the appropriate rating agencies.
(m) Prior to the effective date of the first Registration
Statement relating to the Transfer Restricted Securities, provide a CUSIP
number, ISIN Code and Common Code for each series of Transfer Restricted
Securities or Exchange Notes, as the case may be.
(n) In connection with any underwritten offering of Transfer
Restricted Securities pursuant to a Shelf Registration Statement, enter into an
underwriting agreement as is customary in underwritten offerings of debt
securities similar to the Notes and take all such other actions as are
reasonably requested by the managing underwriter or underwriters in order to
facilitate the registration or the disposition of such Transfer Restricted
Securities and, in such connection, (i) make such representations and warranties
to, and covenants with, the underwriters with respect to the business of the
Company and its subsidiaries (including any acquired business, properties or
entity, if applicable) 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 of debt securities similar to the Notes, and confirm the same in
writing if and when requested; (ii) obtain the written opinion of counsel to the
Company and written updates thereof in form, scope and substance reasonably
satisfactory to the managing underwriter or underwriters, addressed to the
underwriters covering the matters customarily covered in opinions requested in
underwritten offerings of debt similar to the Notes and such other matters as
may be reasonably requested by the managing underwriter or underwriters; (iii)
<PAGE> 18
16
obtain "cold comfort" letters and updates thereof in form, scope and substance
reasonably satisfactory to the managing underwriter or 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 for which financial statements and
financial data are, or are required to be, included or incorporated by reference
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 of
debt similar to the Notes and such other matters as reasonably requested by the
managing underwriter or underwriters; and (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and procedures
substantially similar to those set forth in Section 7 hereof (or such other
provisions and procedures acceptable to Holders of a majority in aggregate
principal amount of Transfer Restricted Securities covered by such Registration
Statement and the managing underwriter or underwriters or agents) with respect
to all parties to be indemnified pursuant to said Section, including, without
limitation, the Holders of Transfer Restricted Securities and the underwriters.
The above 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 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, make available for
inspection by any selling Holder of such Transfer Restricted Securities being
sold, or each such Participating Broker-Dealer, as the case may be, any
underwriter participating in any such disposition of Transfer Restricted
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 financial and other
records, pertinent corporate documents and instruments of the Company and its
subsidiaries (collectively, the "Records") as shall be reasonably 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 reasonably requested by any such Inspector in connection
with such Registration Statement. Records which the Company determines, in good
faith, to be confidential and any Records which it 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) disclosure of such information is, in the opinion of counsel for any
Inspector and after consultation with the Company, necessary in connection with
any action, claim, suit or proceeding, directly or indirectly, involving or
potentially involving such Inspector and arising out of, based upon, relating
to, or involving this Agreement, or any transactions contemplated hereby or
arising hereunder, or (iv) the information in such Records has been made
generally available to the public. Each selling Holder of such Transfer
Restricted Securities and each such Participating Broker-Dealer will
<PAGE> 19
17
be required to agree that information obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Company unless and
until such information is generally available to the public. Each selling Holder
of such Transfer Restricted Securities and each such Participating Broker-Dealer
or underwriter, as the case may be, will be required further to agree that it
will, upon learning that disclosure of such Records is sought in a court of
competent jurisdiction, give notice to the Company and allow the Company at its
sole expense to undertake appropriate action to prevent disclosure of the
Records deemed confidential.
(p) Provide an indenture trustee for the Transfer Restricted
Securities or the Exchange Notes, as the case may be, and cause the Indenture or
the trust indenture provided for in Section 2(a) hereof, as the case may be, to
be qualified under the Trust Indenture Act not later than the effective date of
the first Registration Statement relating to the Transfer Restricted Securities;
and in connection therewith, cooperate with the trustee under any such indenture
and the Holders of the Transfer Restricted 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 Trust Indenture Act; furnish the trustee with
an officer's certificate certifying that such indenture has been so qualified
under the Trust Indenture Act and that the Transfer Restricted Securities are
the subject of a Registration Statement; 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 SEC to enable such indenture to be so qualified in a timely manner.
(q) Comply with all applicable rules and regulations of the
SEC and make generally available to its securityholders earnings 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 Transfer Restricted 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) If an Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Transfer Restricted Securities by Holders to
the Company (or to such other Person as directed by the Company) in exchange for
the Exchange Notes or the Private Exchange Notes, as the case may be, the
Company shall mark, or cause to be marked, on such Transfer Restricted
Securities that such Transfer Restricted Securities are being cancelled in
exchange for the Exchange Notes or the Private Exchange Notes, as the case may
be; in no event shall such Transfer Restricted Securities be marked as paid or
otherwise satisfied.
(s) Cooperate with each seller of Transfer Restricted
Securities covered by any Registration Statement and each underwriter, if any,
participating in the disposition of
<PAGE> 20
18
such Transfer Restricted Securities and their respective counsel in connection
with any filings required to be made with the National Association of Securities
Dealers, Inc. (the "NASD").
(t) Use its best efforts to take all other steps necessary or
advisable to effect the registration of the Exchange Notes and/or Transfer
Restricted Securities covered by a Registration Statement contemplated hereby.
(u) Make an application to list the Exchange Notes on the
Luxembourg Stock Exchange and to use its best efforts to have the Exchange Notes
admitted to trading on the Luxembourg Stock Exchange as promptly as practicable.
The Company may require each seller of Transfer Restricted
Securities as to which any Shelf Registration Statement is being effected to (i)
furnish to the Company such information regarding such seller and the
distribution of such Transfer Restricted Securities and (ii) make such
representations, in each case as the Company may, from time to time, reasonably
request. The Company may exclude from such registration the Transfer Restricted
Securities of any seller who unreasonably fails to furnish such information or
make such representations within a reasonable time after receiving such request.
Each seller as to which any Shelf Registration Statement is being effected
agrees to furnish promptly to the Company all information required to be
disclosed in order to make the information previously furnished to the Company
by such seller not materially misleading.
Each Holder of Transfer Restricted Securities and each
Participating Broker-Dealer agrees by acquisition of such Transfer Restricted
Securities or Exchange Notes to be sold by such Participating Broker-Dealer, as
the case may be, that, upon actual 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) hereof, such Holder will forthwith discontinue disposition
of such Transfer Restricted Securities covered by such Registration Statement or
Prospectus or Exchange Notes to be sold by such Holder or Participating
Broker-Dealer, as the case may be, until such Holder's or Participating
Broker-Dealer's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(k) hereof, 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. In
the event the Company shall give any such notice, each of the Effectiveness
Period and the Applicable Period shall be extended by the number of days during
such periods from and including the date of the giving of such notice to and
including the date when each seller of Transfer Restricted Securities covered by
such Registration Statement or Exchange Notes to be sold by such Participating
Broker-Dealer, as the case may be, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof or (y)
the Advice.
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
<PAGE> 21
19
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,
(B) fees and expenses of compliance with state securities or Blue Sky laws
(including, without limitation, reasonable fees and disbursements of counsel in
connection with Blue Sky qualifications of the Transfer Restricted Securities or
Exchange Notes and determination of the eligibility of the Transfer Restricted
Securities or Exchange Notes for investment under the laws of such jurisdictions
(x) where the holders of Transfer Restricted Securities are located, in the case
of the Exchange Notes, or (y) as provided in Section 5(h) hereof, in the case of
Transfer Restricted Securities or Exchange Notes to be sold by a Participating
Broker-Dealer during the Applicable Period)), and (C) all expenses and fees in
connection with the obtaining of any approval from the Stichting Toezicht
Effectenverkeer or any other relevant authority in The Netherlands; (ii)
printing expenses, including, without limitation, the printing of prospectuses
if the printing of prospectuses is requested by the managing underwriter or
underwriters, if any, by the Holders of a majority in aggregate principal amount
of the Transfer Restricted Securities included in any Registration Statement or
by any Participating Broker-Dealer, as the case may be, (iii) reasonable fees
and disbursements of counsel for the Company and reasonable fees and
disbursements of special counsel for the sellers of Transfer Restricted
Securities (subject to the provisions of Section 6(b) hereof), (iv) reasonable
fees and disbursements of all independent certified public accountants referred
to in Section 5(n)(iii) hereof (including, without limitation, the expenses of
any special audit and "cold comfort" letters required by or incident to such
performance), (v) rating agency fees, if any, and any fees associated with
making the Exchange Notes eligible for trading through The Depository Trust
Company, (vi) Securities Act liability insurance, if the Company desires such
insurance, (vii) reasonable fees and expenses of all other Persons retained by
the Company, (viii) internal expenses of the Company (including, without
limitation, all salaries and expenses of officers and employees of the Company
performing legal or accounting duties), (ix) the expense of any annual audit,
(x) the reasonable fees and expenses incurred in connection with the listing of
the securities to be registered on any securities exchange, if applicable, and
(xi) 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.
(b) The Company shall reimburse the Holders of the Transfer
Restricted Securities being registered in a Shelf Registration Statement 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 Transfer Restricted Securities to be included in such
Registration Statement (which counsel shall be Simpson Thacher & Bartlett unless
otherwise affirmatively stated by the Holders).
7. Indemnification and Contribution
<PAGE> 22
20
(a) The Company shall indemnify and hold harmless each Holder
of Transfer Restricted Securities offered pursuant to a Shelf Registration
Statement, each Participating Broker-Dealer selling Exchange Notes during the
Applicable Period and the Initial Purchaser and the officers and employees and
each Person, if any, who controls any such Person within the meaning of the
Securities Act (each a "Participant") from and against any loss, claim, damage
or liability, joint or several, or any action in respect thereof (including, but
not limited to, any loss, claim, damage, liability or action relating to the
exchange of or sales of the Transfer Restricted Securities), to which that
Participant may become subject, under the Securities Act or otherwise, insofar
as such loss, claim, damage, liability or action arises out of, or is based
upon, (i) any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement or Prospectus, or any amendment or
supplement thereto, or any related preliminary prospectus, or in any blue sky
application or other document prepared or executed by the Company (or based upon
any written information furnished by the Company) specifically for the purpose
of qualifying any or all of the Transfer Restricted Securities under the
securities laws of any state or other jurisdiction (such application, document
or information being hereinafter called a "Blue Sky Application"), (ii) the
omission or alleged omission to state therein any material fact required to be
stated therein or necessary to make the statements therein not misleading or
(iii) any act or failure to act, or any alleged act or failure to act, by any
Participant in connection with, or relating in any manner to, the Transfer
Restricted Securities or the registration contemplated hereby, and which is
included as part of or referred to in any loss, claim, damage, liability or
action arising out of or based upon matters covered by clause (i) or (ii) above
(provided that the Company shall not be liable in the case of any matter covered
by this clause (iii) to the extent that it is determined in a final judgment by
a court of competent jurisdiction that such loss, claim, damage, liability or
action resulted directly from any such act or failure to act undertaken or
omitted to be taken by such Participant through its gross negligence or wilful
misconduct), and shall reimburse each Participant promptly upon demand for any
legal or other expenses reasonably incurred by that Participant in connection
with investigating or defending or preparing to defend against any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of, or is
based upon, any untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement or Prospectus, or in any
such amendment or supplement, or in any Blue Sky Application in reliance upon
and in conformity with the written information furnished to the Company by or on
behalf of any Participant specifically for inclusion therein; provided, further,
that with respect to any such untrue statement in or omission from any
preliminary prospectus, the indemnity agreement contained in this Section 7(a)
shall not inure to the benefit of any such Participant to the extent that the
sale to the Person asserting any such loss, claim, damage, liability or action
was an initial resale by such Participant and any such loss, claim, damage,
liability or action of or with respect to such Participant results from the fact
that both (A) to the extent required by applicable law, a copy of the Prospectus
was not sent or given to such Person at or prior to the written confirmation of
the sale of such securities to such Person and (B) the untrue statement in or
omission from such preliminary prospectus was corrected in the Prospectus
unless, in either case, such failure to deliver the
<PAGE> 23
21
Prospectus was a result of non-compliance by the Company with Section 5(g) of
this Agreement. The foregoing indemnity agreement is in addition to any
liability which the Company may otherwise have to any Participant.
(b) Each Holder of Transfer Restricted Securities offered
pursuant to a Shelf Registration Statement, each Participating Broker-Dealer
selling Exchange Notes during the Applicable Period and the Initial Purchaser
(each a "Participant Indemnifying Party") severally and not jointly, shall
indemnify and hold harmless the Company, its officers and employees, each of its
directors and each Person, if any, who controls the Company within the meaning
of the Securities Act from and against any loss, claim, damage or liability,
joint or several, or any action in respect thereof, to which the Company or any
such director, officer or controlling Person may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained (A) in any preliminary prospectus
or the Registration Statement or Prospectus, or in any amendment or supplement
thereto, or (B) in any Blue Sky Application or (ii) the omission or alleged
omission to state therein any material fact required to be stated therein or
necessary to make the statements therein not misleading, but in each case only
to the extent that the untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with the written
information furnished to the Company by that Participant Indemnifying Party
specifically for inclusion therein, and shall reimburse the Company and any such
director, officer or controlling Person for any legal or other expenses
reasonably incurred by the Company or any such director, officer or controlling
Person in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such expenses are
incurred. The foregoing indemnity agreement is in addition to any liability
which any Participant Indemnifying Party may otherwise have to the Company or
any such director, officer or controlling Person.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 7, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent it has
been materially prejudiced by such failure and, provided, further, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 7.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other
<PAGE> 24
22
than reasonable costs of investigation; provided, however, that any indemnified
party shall have the right to employ separate counsel in any such action and to
participate in the defense thereof but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the employment
thereof has been specifically authorized by the indemnifying party in writing,
(ii) such indemnified party shall have been advised by such counsel that there
may be one or more legal defenses available to it which are different from or
additional to those available to the indemnifying party and in the reasonable
judgement of such counsel it is advisable for such indemnified party to employ
separate counsel or (iii) the indemnifying party has failed to assume the
defense of such action and employ counsel reasonably satisfactory to the
indemnified party, in which case, if such indemnified party notifies the
indemnifying party in writing that it elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action on behalf of such indemnified party,
it being understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys at any time for all such indemnified
parties, which firm shall be designated in writing by the Initial Purchaser, if
the indemnified parties under this Section 7 consist of any Participants, or by
the Company, if the indemnified parties under this Section consist of the
Company or any of the Company's directors, officers, employees or controlling
Persons. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 7(a) and 7(b), shall use its reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall (i) without the prior written consent of the
indemnified parties (which consent shall not be unreasonably withheld) settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent (a) includes an unconditional
release of each indemnified party from all liability arising out of such claim,
action, suit or proceeding and (b) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party, or (ii) be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment of the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss of
liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 7
shall for any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 7(a) or 7(b) in respect of any loss, claim,
damage or liability, or any action in respect thereof, referred to therein, then
each indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the Participants on the other from
the offering of the Notes or (ii) if the
<PAGE> 25
23
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and the Participants on the other with respect to the statements or
omissions which resulted in such losses, claims, damages or liabilities, 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 net proceeds from the offering of the
Notes (before deducting expenses underwriting discounts and commissions)
received by the Company bear on the one hand, and the total underwriting
discounts and commissions received by the Participants with respect to the Notes
purchased under the Purchase Agreement, on the other hand, bear to the total
gross proceeds from the offering of the Notes under the Purchase Agreement. The
relative fault shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or the
Participants, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Participants agree that it would not be just and equitable
if contributions pursuant to this Section 7(d) were to be determined by pro rata
allocation (even if the Participants were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 7(d) shall be
deemed to include, for purposes of this Section 7(d), any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7(d), no Participant shall be required to contribute
any amount in excess of the amount by which the total price at which the Notes
purchased by it were resold exceeds the amount of any damages which such has
otherwise paid or become liable to pay by reason of any 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 Participant's obligations to contribute as
provided in this Section 7(d) are several in proportion to their respective
purchase obligations and not joint.
8. Rule 144A
Whether or not required by the rules and regulations of the
SEC and until such time as none of the Notes remain outstanding, the Company
covenants to furnish to the holders of the Notes, (i) all annual and quarterly
financial information that would be required to be contained in a filing with
the SEC on Forms 20-F and 10-Q if the Company were required to file such Forms
(which financial statements shall be prepared in accordance with U.S. GAAP),
including a "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and, with respect to the annual financial information, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the SEC on Form 8-K if
the Company were required to file such reports. Such
<PAGE> 26
24
quarterly financial information shall be furnished to the holders of the Notes
within 45 days following the end of each fiscal quarter of the Company, and such
annual financial information shall be furnished within 90 days following the end
of each fiscal year of the Company. Such annual financial information shall
include the geographic segment financial information required to be disclosed by
the Company under Item 101(d) of Regulation S-K under the Securities Act. The
Company will also be required (a) to file with the Trustee copies of such
reports and documents within 15 days after the date on which the Company files
such reports and documents with the SEC or the date on which the Company would
be required to file such reports and documents if the Company were so required,
and (b) if filing such reports and documents with the SEC is not accepted by the
SEC or is prohibited under the Exchange Act, to supply at the Company's cost
copies of such reports and documents to any prospective holder promptly upon
request. In addition, the Company covenants to furnish to the holders of the
Notes and to prospective investors, upon the request of such holder, any
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act so long as the Notes are not freely transferable under the
Securities Act.
9. Underwritten Registrations
If any of the Transfer Restricted 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 Transfer Restricted Securities included in such
offering and shall be reasonably acceptable to the Company.
No Holder of Transfer Restricted Securities may participate in
any underwritten registration hereunder unless such Holder (a) agrees to sell
such Holder's Transfer Restricted Securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
10. Miscellaneous
(a) No Inconsistent Agreements. The Company has not, as of the
date hereof, nor will it, 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 Transfer Restricted Securities in this
Agreement or otherwise conflicts with the provisions hereof. The Company will
not enter into any agreement with respect to any of its securities which will
grant to any Person piggy-back registration rights with respect to the Exchange
Offer Registration Statement or the Shelf Registration Statement.
(b) Adjustments Affecting Transfer Restricted Securities. The
Company shall not, directly or indirectly, take any action with respect to the
Transfer Restricted Securities as a class that would adversely affect the
ability of the Holders of Transfer
<PAGE> 27
25
Restricted Securities to include such Transfer Restricted Securities in a
registration undertaken pursuant to this Agreement.
(c) Amendments and Waivers. 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 with the
prior written consent of (A) the Holders of not less than a majority in
aggregate principal amount of any series of the then outstanding Transfer
Restricted Securities with respect to such series of Transfer Restricted
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 any series of the Exchange
Notes held by all Participating Broker-Dealers with respect to such series of
Exchange Notes; provided, however, that Section 7 and this Section 10(c) may not
be amended, modified or supplemented without the prior written consent of each
Holder and each Participating Broker-Dealer (including any Person who was a
Holder or Participating Broker-Dealer of Transfer Restricted Securities or
Exchange Notes, as the case may be, disposed of pursuant to any Registration
Statement). 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 any series of Transfer Restricted 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 Transfer Restricted Securities may be given by Holders of at least a
majority in aggregate principal amount of the Transfer Restricted Securities
being sold by such Holders pursuant to such Registration Statement; provided,
however, that the provisions of this sentence may not be amended, modified or
supplemented except in accordance with the provisions of the immediately
preceding sentence.
(d) 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 facsimile:
(1) if to a Holder of the Transfer Restricted
Securities or any Participating Broker-Dealer, at the most current
address of such Holder or Participating Broker-Dealer, as the case may
be, set forth on the records of the registrar under the Indenture, with
a copy in like manner to the Initial Purchaser as follows:
Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Facsimile No: 212-528-8822
Attention: Syndicate Department
<PAGE> 28
26
with a copy to:
Simpson Thacher & Bartlett
99 Bishopsgate
21st Floor
London EC2M 3YH
Facsimile No: 44-171-422-4022
Attention: William R. Dougherty, Esq.
(2) if to the Initial Purchaser, at the addresses specified in
Section 10(d)(1);
(3) if to the Company, as follows:
VersaTel Telecom B.V.
Paasheuvelweg 39
1105 BV Amesterdam-Z.O.
The Netherlands
Facsimile No: 31-20-501-10-11
Attention: Raj Raithatha
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Facsimile No: 212-848-7179
Attention: John D. Morrison, Jr. Esq.
Any such statements, requests, notices or agreements shall
take effect at the time of receipt thereof. The Company shall be entitled to act
and rely upon any request, consent, notice or agreement given or made on behalf
of the Initial Purchaser.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee at
the address and in the manner specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto and the Holders; provided, however, that this Agreement shall not inure
to the benefit of or be binding upon a successor or assign of a Holder unless
and to the extent such successor or assign holds Transfer Restricted Securities.
<PAGE> 29
27
(f) 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.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
(i) Submission to Jurisdiction; Appointment of Agent for
Service; Waiver. To the fullest extent permitted by applicable law, the Company
irrevocably submits to the non-exclusive jurisdiction of any federal or state
court in the Borough of Manhattan in the City of New York, County and State of
New York, United States of America, in any suit or proceeding based on or
arising under this Agreement, and irrevocably agrees that all claims in respect
of such suit or proceeding may be determined in any such court. The Company, to
the fullest extent permitted by applicable law, irrevocably and fully waives the
defense of an inconvenient forum to the maintenance of such suit or proceeding
and hereby irrevocably designates and appoints CT Corporation (the "Authorized
Agent"), as its authorized agent upon whom process may be served in any such
suit or proceeding. The Company represents that it has notified the Authorized
Agent of such designation and appointment and that the Authorized Agent has
accepted the same in writing. The Company hereby irrevocably authorizes and
directs its Authorized Agent to accept such service. The Company further agrees
that service of process upon its Authorized Agent and written notice of said
service to the Company mailed by first class mail or delivered to its Authorized
Agent shall be deemed in every respect effective service of process upon the
Company in any such suit or proceeding. Nothing herein shall affect the right of
any person to serve process in any other manner permitted by law. The Company
agrees that a final action in any such suit or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment or in any
other lawful manner. Notwithstanding the foregoing, any action against the
Company arising out of or based on this Agreement or the transactions
contemplated hereby may also be instituted by the Initial Purchaser, its
officers and employees or any person who controls the Initial Purchaser within
the meaning of the Securities Act in any competent court in The Netherlands, and
the Company expressly accepts the jurisdiction of any such court in any such
action.
The Company hereby irrevocably waives, to the extent permitted
by law, any immunity to jurisdiction to which it may otherwise be entitled
(including, without limitation, immunity to pre-judgment attachment,
post-judgment attachment and execution) in any legal suit, action or proceeding
against it arising out of or based on this Agreement or the transactions
contemplated hereby.
<PAGE> 30
28
The provisions of this Section 10(i) are intended to be
effective upon the execution of this Agreement without any further action by the
Company or the Initial Purchaser and the introduction of a true copy of this
Agreement into evidence shall be conclusive and final evidence as to such
matters.
(j) Currency Indemnity. The Company shall indemnify each
Participant against any loss incurred by it as a result of any judgment or order
being given or made and expressed and paid in a currency (the "Judgment
Currency") other than U.S. dollars and as a result of any variation as between
(i) the rate of exchange at which the U.S. dollar amount is converted into the
Judgment Currency for the purpose of such judgment or order and (ii) the spot
rate of exchange in New York, New York at which such Participant on the date of
payment of such judgment or order is able to purchase U.S. dollars with the
amount of the Judgment Currency actually received by such Participant. If the
U.S. dollars so purchased are greater than the amount originally due to such
Participant hereunder, such Participant agrees to pay to the Company an amount
equal to the excess of the U.S. dollars so purchased over the amount originally
due to such Participant hereunder. The foregoing shall constitute a separate and
independent obligation of the Company and the Participant, as the case may be,
and 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, U.S. dollars.
(k) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the 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 best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(l) Securities Held by the Company or Its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Transfer
Restricted Securities is required hereunder, Transfer Restricted Securities held
by the Company or its "affiliates" (as such term is defined in Rule 405 under
the Securities Act) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
(m) Third Party Beneficiaries. Holders of Transfer Restricted
Securities and Participating Broker-Dealers are intended third party
beneficiaries of this Agreement, and this Agreement may be enforced by such
Persons.
(n) Entire Agreement. This Agreement, together with the
Purchase Agreement, the Unit Agreement, the Warrant Agreement, the Escrow
Agreement and the
<PAGE> 31
29
Indenture, is intended by the parties as a final and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein and any and all prior oral or written
agreements, representations, or warranties, contracts, understandings,
correspondence, conversations and memoranda between the Initial Purchaser on the
one hand and the Company on the other, or between or among any agents,
representatives, parents, subsidiaries, affiliates, predecessors in interest or
successors in interest with respect to the subject matter hereof and thereof are
merged herein and replaced hereby.
<PAGE> 32
30
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
VERSATEL TELECOM B.V.
By: OPEN SKIES INTERNATIONAL, INC., as
Managing Director
By:_____________________________
Name: R. Gary Mesch
Title: President and Treasurer
LEHMAN BROTHERS INC.
By:___________________________
Authorized Representative
<PAGE> 1
EXHIBIT 4.5
================================================================================
VERSATEL TELECOM B.V.,
UNITED STATES TRUST COMPANY OF NEW YORK,
as Escrow Agent and
Securities Intermediary
AND
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
----------------------
ESCROW AGREEMENT
Dated as of May 27, 1998
----------------------
225,000 Units Consisting of 13 1/4% Senior Notes due 2008
and Warrants to Purchase 1,500,000 Ordinary Shares
================================================================================
<PAGE> 2
ESCROW AGREEMENT
This ESCROW AGREEMENT (this "Agreement"), dated as of May 27, 1998,
among United States Trust Company of New York, a New York banking corporation,
as escrow agent and securities intermediary (in such capacities, the "Escrow
Agent"), United States Trust Company of New York, as Trustee (in such capacity,
the "Trustee") under the Indenture (as defined herein), and VersaTel Telecom
B.V., a company organized under the laws of The Netherlands (the "Company").
WITNESSETH:
WHEREAS, pursuant to the Unit Agreement, dated as of May 27, 1998 (the "Unit
Agreement"), between the Company and United States Trust Company of New York, as
Unit Agent (in such capacity, the "Unit Agent"), VersaTel is issuing 225,000
Units (the "Units") consisting of $1,000 aggregate principal amount of its 13
1/4% Senior Notes due 2008 (the "Notes") and one warrant to purchase 6.667
ordinary shares of the Company, par value NLG 0.10 per share (the "Common
Stock"). The Notes are to be issued under an indenture, dated as of May 27, 1998
(the "Indenture"), between the Company and the Trustee. The warrants are to be
issued under a Warrant Agreement, dated as of May 27, 1998, between the Company
and United States Trust Company of New York, as Warrant Agent.
WHEREAS, as security for its obligations under the Notes and the
Indenture, the Company hereby grants to the Trustee and any predecessor Trustee
under the Indenture (any such Trustee acting in the name and on behalf of the
Beneficiaries (as defined herein)) for the benefit of the Beneficiaries, a
security interest in and lien upon the Escrow Account (as defined herein).
WHEREAS, the parties have entered into this Agreement in order to set
forth the conditions upon which, and the manner in which, funds will be
disbursed from the Escrow Account (as defined herein) and released from the
security interest and lien described above.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Defined Terms. All terms used but not defined herein shall have the
meanings ascribed to them in the Indenture. All terms defined in the UCC (as
defined herein) and not otherwise defined herein shall have the respective
meanings given to those terms in the UCC, except where the context otherwise
requires. In addition to any other defined terms used herein, the following
terms shall constitute defined terms for purposes of this Agreement and shall
have the meanings set forth below:
<PAGE> 3
"Agent" means, with respect to the Escrow Account at any date, any
investment advisor or advisors appointed by the Company from time to time, with
notice in writing to the Escrow Agent and the Trustee. Only those persons
identified in an Officers' Certificate of the Agent delivered to the Escrow
Agent at the time of notice of appointment as Agent, or any such persons
identified in a further certificate delivered by an authorized person at the
Agent to the Escrow Agent, shall be authorized to instruct the Escrow Agent
pursuant to the terms of this Agreement.
"Applied" means that disbursed funds have been applied (i) to the
payment of interest on the Notes, (ii) pursuant to Section 3(c) hereof or (iii)
pursuant to Section 6(b)(iii) hereof.
"Available Funds" mean, with respect to each Escrow Account at any
date, (A) the sum of (i) the Pledged Securities and any funds or Cash
Equivalents and (ii) interest earned or dividends paid on the Pledged Securities
and any funds or Cash Equivalents, less (B) the aggregate disbursements made
prior to such date in accordance with the terms of this Agreement.
"Beneficiaries" shall have the meaning set forth in Section 2(b)(ii).
"Cash Equivalents" mean, with respect to the Escrow Account, (i) U.S.
dollars and (ii) U.S. Government Securities having maturities of not later than
May 15, 2001.
"Collateral" shall have the meaning set forth in Section 6(a).
"Escrow Account" means the escrow account established for the benefit
of the Trustee, any predecessor Trustee under the Indenture and the holders of
the Notes pursuant to Section 2(b)(i).
"entitlement holder" means a Person which is both an "entitlement
holder" (as defined in UCC Section 8-102(a)(7)) and an "entitlement holder" (as
defined in 31 C.F.R. Section 357.2 or, as applicable, the corresponding Federal
Book-Entry Regulations).
"Escrow Funds" shall have the meaning set forth in Section 6(c).
"Federal Book-Entry Regulations" means (a) the federal regulations
contained in Subpart B ("Treasury/Revenue Automated Debt Entry System (TRADES)"
governing Book-Entry Securities consisting of U.S. Treasury bonds, notes and
bills) and Subpart D ("Additional Provisions") of 31 C.F.R Part 357, 31 C.F.R.
Section 357.10 through Section 357.14 and Section 357.41 through Section 357.44
(including related defined terms in 31 C.F.R. Section 357.2); and (b) to the
extent substantially identical to the federal regulations referred to in clause
(a) above (as in effect from time to time), the federal regulations governing
other U.S. Government Securities.
"Initial Escrow Amount" means $81,554,215.56.
-2-
<PAGE> 4
"Interest Payment Date" means May 15 and November 15 of each year,
commencing on November 15, 1998 until the Notes are paid in full.
"Issue Date" means the date on which the Notes are originally issued
under the Indenture.
"Payment Notice and Disbursement Request" means a notice signed by an
Officer of the Company sent by the Company to the Escrow Agent requesting a
disbursement of funds from an Escrow Account, in substantially the form of
Exhibit A hereto.
"Pledged Securities" mean, the U.S. Government Securities purchased by
the Company with a portion of the net proceeds from the Offering and deposited
in the Escrow Account.
"Secured Obligations" shall have the meaning set forth in Section 6(a).
"securities intermediary" means a Person that is both a "securities
intermediary" (as defined in UCC Section 8-102(a)(14)) and a "securities
intermediary" (as defined in 31 C.F.R. Section 357.2 or, as applicable, the
corresponding Federal Book-Entry Regulations).
"UCC" shall mean the Uniform Commercial Code as in effect from time to
time in the State of New York.
"U.S. Government Securities" mean direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which obligations
or guarantee the full faith and credit of the United States is pledged and are
not callable or redeemable at the option of the issuer thereof, which
obligations in each case, are governed by the Federal Book-Entry Regulations.
2. Escrow Account; Escrow Agent.
(a) Appointment of Escrow Agent. The Company and the Trustee hereby
appoint United States Trust Company of New York, as the Escrow Agent, and United
States Trust Company of New York, hereby accepts such appointment under the
terms and conditions of this Agreement.
(b) Establishment of the Escrow Account.
(i) On the Issue Date, the Escrow Agent shall establish an escrow
account in the name of the Trustee entitled the "Escrow Account pledged by
VersaTel Telecom B.V. to United States Trust Company of New York, as Trustee,
acting in the name and on behalf of the Beneficiaries" at its office located at
United States Trust Company of New York, 114 West 47th Street, New York, NY. The
Escrow Account shall be a "securities account" as such term is defined in the
UCC.
-3-
<PAGE> 5
(ii) All U.S. dollar funds, including the Initial Escrow Amount,
Pledged Securities and any Cash Equivalents accepted by the Escrow Agent
pursuant to this Agreement shall be held by the Escrow Agent for the Trustee for
the exclusive benefit of the holders of the Notes, as secured parties hereunder
(collectively, the "Beneficiaries"). All such funds shall be held in the Escrow
Account until disbursed or paid in accordance with the terms hereof.
(iii) On the Issue Date, the Company shall deliver, or cause the
delivery of, either (x) the Initial Escrow Amount to the Escrow Agent for
deposit into the Escrow Account against the Escrow Agent's written
acknowledgement and receipt of the Initial Escrow Amount, and the Escrow Agent
shall purchase pursuant to written instructions of the Company or its Agent,
Pledged Securities, with all or a portion of the Initial Escrow Amounts, or (y)
the Pledged Securities and deliver or cause to be delivered such Pledged
Securities to the Escrow Agent for deposit into the Escrow Account against the
Escrow Agent's written acknowledgement and receipt of such Pledged Securities.
Such Pledged Securities shall be held by the Escrow Agent acting in the name and
on behalf of the Beneficiaries and deposited into the Escrow Account for the
exclusive benefit of the Beneficiaries. All payments of interest and principal
on the Pledged Securities shall be deposited into the Escrow Account to be paid
or disbursed in accordance with the terms hereof or, to the extent permitted by
Section 2(d)(i) hereof, reinvested in Cash Equivalents.
(c) Escrow Agent Compensation. The Company shall pay to the Escrow
Agent such compensation for services to be performed by it under this Agreement
as the Company and the Escrow Agent may agree in writing from time to time. The
Escrow Agent shall be paid any compensation owed to it directly by the Company
and shall not disburse from the Escrow Account any such amounts nor shall the
Escrow Agent have any interest in the Escrow Account with respect to such
amounts.
The Company shall reimburse the Escrow Agent upon request for all
reasonable expenses, disbursements and advances incurred or made by the Escrow
Agent in implementing any of the provisions of this Agreement, including
compensation and the reasonable expenses and disbursements of its counsel. The
Escrow Agent shall be paid any such expenses owed to it directly by the Company
and shall not disburse from any of the Escrow Account any such amounts nor shall
the Escrow Agent have any interest in the Escrow Account with respect to such
amounts.
(d) Investment of Funds in the Escrow Account. Any funds on deposit in
the Escrow Account which are not invested may be invested or reinvested, at the
Company's option, only upon the following terms and conditions:
(i) Acceptable Investments with respect to the Escrow Account. All
funds deposited or held in the Escrow Account at any time shall be invested by
the Escrow Agent in Cash Equivalents in accordance with the written instructions
of the Company or its Agent from time to time to the Escrow Agent; provided,
however, that (A) the Company or its Agent shall only designate investment of
funds in Cash Equivalents maturing in an amount sufficient to
-4-
<PAGE> 6
and/or generating interest income sufficient to, when added to the balance of
funds held in the Escrow Account, provide for the payment of interest on the
outstanding Notes on each Interest Payment Date beginning on and including
November 15, 1998 and through and including the Interest Payment Date on May 15,
2001, and the Company or its Agent shall designate, and hereby designates, that
all cash which may from time to time be placed or deposited in or credited,
transferred or delivered to such Escrow Account, be invested as promptly and to
the fullest extent practicable in U.S. Government Securities; and (B) any such
written instructions shall specify the particular investment to be made, shall
state that such investment is authorized to be made hereby and in particular
satisfies the requirements of the preceding clause (A) of this proviso, shall
contain the certification referred to in Section 2(d)(ii), if required, and
shall be executed by an Officer of the Company. The Escrow Agent shall have no
responsibility for determining whether funds held in the Escrow Account shall
have been invested in such a manner so as to comply with the requirements of
this clause (i). All such Cash Equivalents shall be assigned to and held in the
possession of, or, in the case of Cash Equivalents maintained in book entry form
with the Federal Reserve Bank, transferred to a book entry account in the name
of the Escrow Agent for the benefit of the Beneficiaries, except that Cash
Equivalents maintained in book entry form with the Federal Reserve Bank shall be
transferred to a book entry account in the name of the Escrow Agent at the
Federal Reserve Bank that includes only Cash Equivalents held by the Escrow
Agent for its customers and segregated by separate recordation in the books and
records of the Escrow Agent. The Escrow Agent shall not be liable for losses on
any investments made by it pursuant to and in compliance with such written
instructions. In the absence of instructions from the Company that meet the
requirements of this Section 2(d)(i), the Escrow Agent shall have no obligation
to invest funds held in the Escrow Account.
(ii) Security Interest in Investments. No investment of funds in the
Escrow Account shall be made unless the Company has certified to the Escrow
Agent and the Trustee that, upon such investment, the Trustee (acting in the
name and on behalf of the Beneficiaries as appropriate) will have a first
priority perfected security interest in the applicable investment. On the date
of this Agreement, and on each anniversary thereof (upon receipt of written
notice from the Escrow Agent), until the date upon which the balance of the
Available Funds with respect to each Escrow Account shall have been reduced to
zero, each of the Trustee and the Escrow Agent shall receive an Opinion of
Counsel to the Company, dated such date as applicable, which opinion shall
confirm the foregoing and in respect to the Escrow Account, shall meet the
requirements of Section 314(b) of the United States Trust Indenture Act of 1939,
as amended (the "TIA") and shall comply with Sections 11.4 and 11.5 of the
Indenture. If a certificate or opinion as to a class of investments has been
provided to the Escrow Agent, a certificate or opinion need not be issued with
respect to individual investments in securities in that class if the certificate
or opinion applicable to the class remains accurate with respect to such
individual investments, which continued accuracy the Escrow Agent may
conclusively assume.
(iii) Interest and Dividends. All interest earned and dividends paid on
the Pledged Securities in the Escrow Account or any funds invested in Cash
Equivalents in the
-5-
<PAGE> 7
Escrow Account shall be deposited in the Escrow Account as additional Collateral
for the exclusive benefit of the Beneficiaries and, if not required to be
disbursed in accordance with the terms hereof, subject to subsections 6(b)(iii),
6(e) and 6(f), shall be reinvested in accordance with paragraph 2(d)(i) above,
acknowledged by the Trustee, in accordance with the terms hereof unless the
Trustee has provided written notice to the Escrow Agent that a Default or Event
of Default under the Indenture has occurred or the Trustee has notified the
Escrow Agent that it should only take direction from the Trustee or should no
longer take direction from the Company in which case the Escrow Agent shall take
directions from the Trustee.
(iv) Limitation on the Escrow Agent's Responsibilities. The Escrow
Agent's sole responsibilities under this Section 2 shall be (A) to retain
possession of certificated Cash Equivalents and to be the registered or
designated owner of the Pledged Securities and any Cash Equivalents which are
not certificated, (B) to follow written instructions of the Company or its Agent
given in accordance with Section 2(d)(i), (C) to invest and reinvest funds
pursuant to this Section 2(d) and (D) to use reasonable efforts to reduce to
cash such Cash Equivalents as may be required to fund any disbursement or
payment in accordance with Section 3. In connection with clause (d)(iv)(A)
above, the Escrow Agent will maintain continuous possession in the jurisdiction
of its principal place of business of certificated Cash Equivalents and cash
included in the Collateral and will cause the Pledged Securities and any
uncertificated dollar Cash Equivalents to be registered in the book-entry system
of, and transferred to an account of the Escrow Agent or a sub-agent of the
Escrow Agent at, any Federal Reserve Bank. Except as provided in Section 6, the
Escrow Agent shall have no other responsibilities with respect to perfecting or
maintaining the perfection of the security interest in the Collateral and shall
not be required to file any instrument, document or notice in any public office
at any time or times. In connection with clause (d)(iv)(A) above and subject to
the following sentence, the Escrow Agent shall not be required to reduce to cash
any Cash Equivalents to fund any disbursement or payment in accordance with
Section 3 in the absence of written instructions signed by an Officer of the
Company specifying the particular investment to liquidate. If no such written
instructions are received, the Escrow Agent may liquidate those Cash Equivalents
having the lowest interest rate per annum or if none such exist, those having
the nearest maturity.
(e) Substitution of the Escrow Agent. The Escrow Agent may resign by
giving no less than 20 Business Days prior written notice to the Company and the
Trustee. Such resignation shall take effect upon the later to occur of (i)
delivery of all funds, the Pledged Securities and any Cash Equivalents
maintained by the Escrow Agent hereunder and copies of all books, records, plans
and other documents in the Escrow Agent's possession relating to such funds, the
Pledged Securities or any Cash Equivalents or this Agreement to a successor
escrow agent mutually approved by the Company and the Trustee (which approvals
shall not be unreasonably withheld or delayed) and (ii) the Company, the Trustee
and such successor escrow agent entering into this Agreement or any written
successor agreement no less favorable to the interests of the holders of the
Notes and the Trustee than this Agreement and the taking of such other steps as
may be necessary to give the successor escrow agent a first priority security
interest in the Pledged Securities, and the Escrow Agent shall thereupon
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<PAGE> 8
be discharged of all obligations under this Agreement and shall have no further
duties, obligations or responsibilities in connection herewith, except as set
forth in Section 4. If a successor escrow agent has not been appointed or has
not accepted such appointment within 30 Business Days after notice of
resignation is given to the Company, the Escrow Agent may apply to a court of
competent jurisdiction for the appointment of a successor escrow agent.
(f) Escrow Account Statement. At least 30 days prior to each Interest
Payment Date, the Escrow Agent shall deliver to the Company and the Trustee a
statement setting forth with reasonable particularity the balance of funds then
in the Escrow Account and the manner in which such funds are invested. The
parties hereto irrevocably instruct the Escrow Agent that on the first date upon
which the balance in the Escrow Account (including the holdings of all Cash
Equivalents) is reduced to zero, the Escrow Agent shall deliver to the Company
and to the Trustee a notice that the balance in the Escrow Account has been
reduced to zero.
3. Disbursements
(a) Payment Notice and Disbursement Request, Disbursements. No later
than five Business Days prior to an Interest Payment Date, the Company shall
submit to the Escrow Agent with respect to the Notes, acknowledged by the
Trustee, a completed Payment Notice and Disbursement Request substantially in
the form of Exhibit A hereto.
The Escrow Agent's disbursement pursuant to any Payment Notice and
Disbursement Request shall be subject to the satisfaction of the applicable
conditions set forth in Section 3(b). Provided such Payment Notice and
Disbursement Request is not rejected by it, the Escrow Agent, as soon as
reasonably practicable on the Interest Payment Date, but in no event later than
11:00 a.m. (New York City time) on the Interest Payment Date, shall disburse the
funds requested in such Payment Notice and Disbursement Request by wire or
book-entry transfer of immediately available funds to the account of the Trustee
for the benefit of the Beneficiaries. The Escrow Agent shall notify the Trustee
as soon as reasonably practicable (but not later than two (2) Business Days from
the date of receipt of the Payment Notice and Disbursement Request) if any
Payment Notice and Disbursement Request is rejected and the reasons(s) therefor.
In the event such rejection is based upon nonsatisfaction of the condition in
Section 3(b)(I), the Company shall thereupon resubmit the Payment Notice and
Disbursement Request with appropriate changes.
(b) Conditions Precedent to Disbursement. The Escrow Agent's payment of
any disbursement shall be made only if: (I) the Company shall have submitted, in
accordance with the provisions of Section 3(a), a completed Payment Notice and
Disbursement Request to the Escrow Agent substantially in the form of Exhibit A
with blanks appropriately filled in, and (II) the Escrow Agent shall not have
received any written notice from the Trustee that as a result of an Event of
Default under the Indenture the indebtedness represented by the Notes has been
accelerated and has become due and payable (in which event the Escrow Agent
shall apply all Available Funds as required by Section 6(b)(iii)).
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(c) Company Payments. If the Company makes any interest payment or
portion of an interest payment on the Notes from a source of funds other than
the Escrow Account ("Company Funds"), the Company may, after payment in full of
such interest payment, direct the Escrow Agent to release to the Company or at
the direction of the Company an amount of funds from the Escrow Account less
than or equal to the amount of Company Funds so expended. Upon receipt of a
request from the Company (including the certificate described in the following
sentence), the Escrow Agent will pay over to the Company the requested amount.
Concurrently with any release of funds to the Company pursuant to this Section
3(c), the Company will deliver to the Escrow Agent an Officers' Certificate
stating that such release has been duly authorized by all necessary corporate
action, and does not contravene, or constitute a default under, any provision of
applicable law or regulation or of the Articles of Association of the Company or
of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Company or result in the creation or imposition of any Lien on
any assets of the Company.
(d) If at any time the principal of and interest on the Collateral
exceeds 101% of the amount sufficient, in the written opinion of an
internationally recognized firm of independent accountants selected by the
Company and delivered to the Escrow Agent and the Trustee, to provide for
payment in full of the interest on the outstanding Notes on each Interest
Payment Date beginning on and including November 15, 1998 and through and
including the Interest Payment Date on May 15, 2001 (or, in the event one or
more interest payments have been made thereon, an amount sufficient to provide
for the payment in full of any and all interest payments on the Notes then
remaining, up to and including the sixth scheduled interest payment), the
Company may direct the Escrow Agent and the Trustee to release any such
overfunded amount to the Company or to such other party as the Company may
direct. Upon receipt of written instructions executed by the Company in the form
of an Officers' Certificate, the Escrow Agent shall pay, or shall cause the
payment, over to the Company or the Company's designee, as the case may be, any
such overfunded amount.
(e) It is understood that the Escrow Agent and the Beneficiary's bank
in any funds transfer may rely solely upon any account numbers or similar
identifying number provided by either of the other parties hereto in accordance
with the provisions of this Agreement to identify (i) the Beneficiary, (ii) the
Beneficiary's bank, or (iii) an intermediary bank. The Escrow Agent may apply
any of the Escrow Collateral under its control for any payment order it executes
using any such identifying number, even where its use may result in a Person
other than the Beneficiary being paid, or the transfer of funds to a bank other
than the Beneficiary's bank or a designated intermediary bank.
4. Escrow Agent.
(a) Limitation of the Escrow Agent's Liability; Responsibilities of the
Escrow Agent. Except as otherwise provided herein (and in any event, without
prejudice to the Escrow Agent's representations, warranties, covenants and
agreements in its capacity as securities intermediary contained herein), the
Escrow Agent's responsibility and liability under
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<PAGE> 10
this Agreement shall be limited as follows: (i) the Escrow Agent does not
represent, warrant or guaranty to the holders of the Notes from time to time the
performance of the Company; (ii) the Escrow Agent shall have no responsibility
to the Company or holders of the Notes or the Trustee from time to time as a
consequence of performance or non-performance by the Escrow Agent hereunder,
except for any bad faith, gross negligence or wilful misconduct of the Escrow
Agent; (iii) the Company shall remain solely responsible for all aspects of the
Company's business and conduct; and (iv) the Escrow Agent is not obligated to
supervise, inspect or inform the Company or any third party of any matter
referred to above. In no event shall the Escrow Agent be liable (x) for acting
in accordance with or relying upon any instruction, notice, demand, certificate
or document from the Company or any entity acting on behalf of the Company
delivered in accordance with the terms hereof, (y) for any consequential,
punitive or special damages or (Z) for an amount in excess of the value of the
Escrow Account valued as of the date of deposit.
No implied covenants or obligations shall be inferred from this
Agreement against the Escrow Agent, nor shall the Escrow Agent be bound by the
provisions of any agreement beyond the specific terms hereof. Specifically and
without limiting the foregoing, the Escrow Agent shall in no event have any
liability in connection with its investment, reinvestment or liquidation, in
good faith and in accordance with the terms hereof, of any funds, the Pledged
Securities or Cash Equivalents held by it hereunder, including without
limitation any liability for any delay not resulting from bad faith, gross
negligence or wilful misconduct in such investment, reinvestment or liquidation,
or for any loss of principal or income incident to any such delay.
The Escrow Agent shall be entitled to rely upon any judicial or
administrative order or judgment, upon any opinion of counsel or upon any
certification, instruction, notice or other writing delivered to it by the
Company or the Trustee in compliance with the provisions of this Agreement
without being required to determine the authenticity or the correctness of any
fact stated therein or the propriety or validity of service thereof. The Escrow
Agent may act or refrain from acting in reliance upon any instrument comporting
with the provisions of this Agreement or signature believed by it to be genuine
and may assume that any Person purporting to give notice or receipt or advice or
make any statement or execute any document in connection with the provisions
hereof has been duly authorized to do so.
At any time the Escrow Agent may request in writing an instruction in
writing from the Company (other than with respect to any disbursement pursuant
to Section 6(b)(iii)), and may at its own option but in no case is obliged to,
include in such request the course of action it proposes to take and the date on
which it proposes to act, regarding any matter arising in connection with its
duties and obligations hereunder; provided, however, that the Escrow Agent shall
state in such request that it believes in good faith that such proposed course
of action is consistent with another identified provision of this Agreement. The
Escrow Agent shall not be liable to the Company for acting without the Company's
consent in accordance with such a proposal on or after the date specified
therein if (i) the specified date is at least two Business Days after the
Company received the Escrow Agent's request for instructions and its
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proposed course of action, and (ii) prior to so acting, the Escrow Agent has not
received the written instruction requested from the Company.
At the expense of the Company, the Escrow Agent may act pursuant to the
advice of counsel chosen by it with respect to any matter relating to this
Agreement and (subject to clause (ii) of the preceding paragraph) shall not be
liable for any action taken or omitted in good faith and without gross
negligence or wilful misconduct in accordance with such advice.
The Escrow Agent shall not be called upon to advise any party as to
selling or retaining, or taking or refraining from taking any action with
respect to, any securities or other property deposited hereunder.
In the event of any ambiguity in the provisions of this Agreement with
respect to any funds, securities or property deposited hereunder, the Escrow
Agent shall be entitled to refuse to comply with any and all claims, demands or
instructions with respect to such funds, securities or property, and the Escrow
Agent shall not be or become liable for its failure or refusal to comply with
conflicting claims, demands or instructions. The Escrow Agent shall be entitled
to refuse to act until either any conflicting or adverse claims or demands shall
have been finally determined by a court of competent jurisdiction or settled by
agreement between the conflicting claimants as evidenced in a writing,
satisfactory to the Escrow Agent, or the Escrow Agent shall have received
security or an indemnity satisfactory to the Escrow Agent sufficient to hold the
Escrow Agent harmless from and against any and all loss, liability or expense
which the Escrow Agent may incur by reason of its acting. The Escrow Agent may
in addition elect in its sole option to commence an interpleader action or seek
other judicial relief or orders as the Escrow Agent may deem necessary. The
costs and expenses (including reasonable attorney's fees and expenses) incurred
in connection with such proceedings shall be paid by, and shall be deemed an
obligation of, the Company.
No provision of this Agreement shall require the Escrow Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder.
The Escrow Agent shall not incur any liability for not performing any
act or fulfilling any duty, obligation or responsibility hereunder by reason of
any occurrence beyond the control of the Escrow Agent (including but not limited
to any act or provision of any present or future law or regulation or
governmental authority, any act of God or war, or the unavailability of the
Federal Reserve Bank wire).
5. Indemnity. The Company shall indemnify, hold harmless and, if
required or requested by the Trustee or the Escrow Agent, defend the Trustee and
the Escrow Agent, as the case may be, and their respective directors, officers,
agents, employees and controlling Persons, from and against any and all claims,
actions, obligations, liabilities and expenses, including reasonable defense
costs, reasonable investigative fees and costs, reasonable legal
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<PAGE> 12
fees, and claims for damages, arising from the Trustee's or the Escrow Agent's
performance or non-performance, or in connection with the Escrow Agent's
acceptance of appointment as Escrow Agent under this Agreement, except (i) to
the extent that such liability, expense or claim is solely and directly
attributable to the bad faith, gross negligence or wilful misconduct of any of
the foregoing Persons or (ii) to the extent that any such claim, action,
obligation, liability or expense arises from the Escrow Agent's performance or
non-performance (including, without limitation, its failure to perform or
observe its obligations) as securities intermediary hereunder, to the extent
that such liability, expense or claim is solely and directly attributable to the
bad faith, negligence or wilful misconduct of the Escrow Agent. The provisions
of Section 2(c) and this Section 5 shall survive any termination, satisfaction
or discharge of this Agreement as well as the resignation or removal of the
Escrow Agent.
6. Grant of Security Interest, Instructions to the Escrow Agent.
(a) The Company hereby irrevocably grants a first priority security
interest in and lien on, and pledges, assigns, transfers and sets over to the
Trustee for the ratable benefit of the Beneficiaries, all of the Company's
right, title and interest in the Escrow Account and all property now or
hereafter placed or deposited in, or credited to, or transferred or delivered to
the Escrow Agent for placement or deposit in, or credit to the Escrow Account,
including, without limitation, all of the following (whether consisting of
certificated or uncertificated securities, accounts, chattel paper, documents,
financial assets, security entitlements, other investment property, general
intangibles, instruments, deposit accounts, bank accounts, securities accounts
or other collateral accounts, money, proceeds or other items comprising such
property), whether now owned by the Company or hereafter acquired and whether
now existing or hereafter coming into existence; the Pledged Securities, all
funds held therein, all Cash Equivalents held by (or otherwise maintained in the
name of) the Escrow Agent pursuant to Section 2, all rights of the Company under
this Agreement and all proceeds of the Collateral (including, without
limitation, all interest, dividends or other earnings, income, collections and
distributions from or in respect of investments or reinvestments, of the
Collateral) (collectively, the "Collateral"), in order to secure all obligations
and indebtedness of the Company under the Indenture, the Notes and any other
obligation, now or hereafter arising, of every kind and nature, owed by the
Company under the Indenture or the Notes to the holders of the Notes or to the
Trustee or any predecessor Trustee (the "Secured Obligations"). The Escrow Agent
hereby acknowledges the Trustee's security interest and lien as set forth above.
The Company shall take all actions necessary on its part to insure the
continuance of a first priority security interest in the Collateral in favor of
the Trustee in order to secure all such obligations and indebtedness.
(b) The Company and the Trustee hereby irrevocably instruct the
Escrow Agent to, and the Escrow Agent shall:
(i) in respect of the Collateral, (A) maintain the Escrow Account
for the sole dominion and control (including, without limitation, "control"
within the meaning of UCC Section 9-115) of the Trustee, in the name and on
behalf of the Beneficiaries, over the Pledged
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<PAGE> 13
Securities, any Cash Equivalents and any and all other property in the Escrow
Account for the benefit of the Trustee, (B) maintain, or cause its agent within
the jurisdiction of its principal place of business to maintain, possession of
all certificated Cash Equivalents purchased hereunder that are physically
possessed by the Escrow Agent in order for the Trustee to enjoy a continuous
perfected first priority security interest therein under the laws of the State
of New York pursuant hereto and pursuant to any instructions received pursuant
hereto (the Company hereby agreeing that in the event any certificated Cash
Equivalents are in the possession of the Company or a third party, the Company
shall use its best efforts to deliver all such certificates to the Escrow
Agent), (C) take all reasonable steps specified by the Company pursuant to
paragraphs (a) and (b) of this Section 6 to cause the Trustee, acting in the
name and on behalf of the Beneficiaries, to enjoy a continuous perfected first
priority security interest under any applicable law of the State of New York in
all Cash Equivalents purchased hereunder that are not certificated and (D) use
its best efforts to maintain the Collateral free and clear of any security
interests senior to the security interest created hereby in favor of the Trustee
and use reasonable efforts to maintain the Collateral free and clear of all
liens, security interests, safekeeping or other charges, demands and claims
against the Escrow Agent of any nature now or hereafter existing in favor of
anyone other than the Trustee;
(ii) promptly notify the Trustee if the Escrow Agent receives
written notice that any Person has a lien or security interest upon any portion
of the Collateral other than the liens created hereby;
(iii) in addition to disbursing amounts held in escrow pursuant to
any Payment Notice and Disbursement Requests given to it pursuant to Section 3,
upon receipt of written notice from the Trustee of the acceleration of maturity
of the Notes, and direction from the Trustee to disburse all Available Funds to
the Trustee, as promptly as is practicable, disburse all funds held in the
Escrow Account to the Trustee and transfer title to all Cash Equivalents held by
the Escrow Agent hereunder to the Trustee. In addition, upon an Event of Default
under the Indenture and for so long as such Event of Default continues, the
Trustee may exercise in respect of the Collateral, in addition to other rights
and remedies provided for herein or otherwise available to it, all the rights
and remedies of a secured party under the UCC or other applicable law, and the
Trustee may also upon obtaining possession of the Collateral as set forth
herein, without notice to the Company except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any exchange, broker's board or at any of the Trustee's offices or elsewhere,
for cash, on credit or for future delivery, and upon such other terms as the
Trustee may deem commercially reasonable. The Company acknowledges and agrees
that any such private sale may result in prices and other terms less favorable
to the seller than if such sale were a public sale. The Company agrees that, to
the extent notice of sale shall be required by law, at least ten (10) days'
notice to the Company of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification.
The Trustee shall not be obligated to make any sale regardless of notice of sale
having been given. The Trustee may adjourn any public or private sale from time
to time by announcement at the time and place
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fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned; and
(iv) comply in all respects with its covenants and agreements
contained in Section 8.
The lien and security interest provided for by this Section 6 shall
automatically terminate and cease as to, and shall not extend or apply to, and
the Trustee and the Escrow Agent shall have no security interest in, any funds
disbursed by the Escrow Agent whether for payment of interest on the Notes or to
the Company pursuant to this Agreement to the extent not inconsistent with the
terms hereof. Notwithstanding any other provision contained in this Agreement,
the Escrow Agent shall act solely as the Trustee's agent in connection with its
duties herein relating to the Escrow Account or the Pledged Securities or any
funds or Cash Equivalents held thereunder. The Escrow Agent shall not have any
right to receive compensation from the Trustee and shall have no authority to
obligate the Trustee or to compromise or pledge its security interest hereunder.
Accordingly, the Escrow Agent is hereby directed to cooperate with the Trustee
in the exercise of its rights in the Collateral provided for herein.
(c) Any money and Cash Equivalents collected by the Trustee
pursuant to Section 6(b)(iii) shall be applied as provided in Section 6.13 of
the Indenture. Any surplus of such cash or cash proceeds held by the Trustee and
remaining after indefeasible payment in full of all the obligations under the
Indenture (the "Escrow Funds") shall be paid over to the Company or as a court
of competent jurisdiction may direct.
(d) The Company will execute and deliver or cause to be executed
and delivered, or use its best efforts to procure, all stock powers, proxies,
assignments, instruments and other documents, deliver any instruments to the
Trustee and take any other actions that are necessary or desirable to perfect,
continue the perfection of, or protect the first priority of the Trustee's
security interest in and to the Collateral, to protect the Collateral against
the rights, claims, or interests of third parties or to effect the purposes of
this Agreement. The Company also hereby authorizes the Trustee to file any
financing or continuation statements with respect to the Collateral without the
signature of the Company (to extent permitted by applicable law). The Company
will pay all reasonable costs incurred in connection with any of the foregoing.
It being understood that the Trustee has no duty to determine whether to file or
record any document or instrument relating to Collateral.
(e) The Company hereby appoints the Trustee as its attorney-in-fact
with full power of substitution to do any act which the Company is obligated
hereby to do, and the Trustee may, but shall not be obligated to, exercise such
rights as the Company might exercise with respect to the Collateral and take any
action in the Company's name to protect the Trustee's security interest
hereunder.
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(f) If at any time the Escrow Agent shall receive an "entitlement
order" (within the meaning of Section 8-102(a)(8) of the UCC) issued by the
Trustee and relating to the Escrow Account, the Escrow Agent shall comply with
such entitlement order without further consent by the Company or any other
Person.
7. Termination. This Agreement and the security interest in the
Collateral evidenced by this Agreement shall terminate automatically and be of
no further force or effect upon the payment in full in cash of all interest
(including any Additional Amounts, if any and Liquidated Damages, if any) due
through the Interest Payment Date occurring on May 15, 2001, and the remaining
Collateral, if any, shall promptly be paid over and transferred to the Company;
provided, however, that the obligations of the Company under Section 2(c),
Section 5 and Section 13 (and any existing claims thereunder) shall survive
termination of this Agreement and the resignation of the Escrow Agent. At such
time, the Escrow Agent shall, pursuant to an Officer's Certificate stating that
no Default or Event of Default is then continuing and that all required payments
have been made delivered by the Company, reassign and redeliver to the Company
all of the Collateral hereunder that has not been sold, disposed of, retained or
applied by the Escrow Agent in accordance with the terms of this Agreement. Such
reassignment and delivery shall be without warranty by or recourse to the Escrow
Agent in its capacity as such, except as to the absence of any Liens on the
Collateral created by the Escrow Agent, and shall be at the sole expense of the
Company.
8. Representations and Warranties.
(a) The Company hereby represents and warrants that:
(i) The execution, delivery and performance by the Company of
this Agreement are within the Company's corporate powers, have been
duly authorized by all necessary corporate action, and do not
contravene, or constitute a default under, any provision applicable law
or regulation or the Articles of Association of the Company or any
agreement, judgment, injunction, order, decree or other instrument
binding upon the Company or result in the creation or imposition of any
Lien on any assets of the Company, except for the security interests
granted under this Agreement.
(ii) Prior to delivering the same pursuant hereto, the Company
is the beneficial owner of the Collateral, free and clear of any Lien
or claims of any Person or entity (except for the security interest,
granted under this Agreement). No financing statement covering the
Collateral is on file in any public office other than the financing
statements, if any, filed pursuant to this Agreement.
(iii) This Agreement has been duly executed and delivered by
the Company and assuming the due authorization and valid execution and
delivery of this Agreement by the Trustee and the Escrow Agent and
enforceability of this Agreement against the Escrow Agent and the
Trustee in accordance
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with its terms, constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
except that the enforcement thereof may be limited by (w) the effect of
any applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally, (x) general
principles of equity (whether considered in a proceeding in equity or
at law) and an implied covenant of good faith and fair dealing, (y) the
exculpation provisions and rights to indemnification hereunder may be
limited by U.S. federal and state securities laws and public policy
considerations and (iv) the waiver of rights and defenses contained in
Section 15 (j) hereof.
(iv) The Company will deliver, or cause to be delivered, such
Pledged Securities to the Escrow Agent in such amount as shall be
sufficient upon scheduled interest and principal payments of such
Pledged Securities to provide for the payment in full of the first six
scheduled interest payments on the Notes (excluding any Additional
Amounts or Liquidated Damages).
(v) Upon the delivery to the Escrow Agent of the certificates
or instruments, if any, representing the Collateral and the filing of
financing statements, if any, required by the UCC and the transfer and
pledge to the Escrow Agent of the Collateral and the acquisition by the
Escrow Agent of a security entitlement thereto in accordance with
Section 6, the pledge of the Collateral pursuant to this Agreement
creates a valid and perfected first priority security interest in and
to the Collateral, securing the payment of the Company's Secured
Obligations for the benefit of the Beneficiaries, enforceable as such
against all creditors of the Company and any Persons purporting to
purchase any of the Collateral from the Company other than as permitted
by the Indenture.
(vi) No consent of any other Person and no consent,
authorization, approval, or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required either
(x) for the pledge by the Company of the Collateral pursuant to this
Agreement or for the execution, delivery or performance of this
Agreement by the Company (except for any filings necessary to perfect
Liens on the Collateral) or (y) for the exercise by the Trustee of the
rights provided for in this Agreement or the remedies in respect of the
Collateral pursuant to this Agreement, except, in each case, as may be
required in connection with such disposition by laws affecting the
offering and sale of securities.
(vii) No litigation, investigation or proceeding of or before
any arbitrator or governmental authority is pending or, to the
knowledge of the Company, threatened by or against the Company with
respect to this Agreement or any of the transactions contemplated
hereby, other than as described in the Offering Memorandum, dated May
20, 1998.
(viii) The pledge of the Collateral pursuant to this Agreement
is not prohibited by any applicable law or governmental regulation,
release, interpretation or opinion of
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the Board of Governors of the Federal Reserve System or other
regulatory agency (including, without limitation, Regulations G, T, U
and X of the Board of Governors of the Federal Reserve System) or any
comparable or other laws, regulations or rules of any other government
or governmental agency or body in The Netherlands.
(b) The Escrow Agent represents, warrants, covenants and agrees:
(i) the Escrow Agent is a securities intermediary and it shall act as
such with respect to the Escrow Account, the Collateral and the Trustee, which
is (and which the Escrow Agent as securities intermediary shall treat as) the
entitlement holder and has (and which the Escrow Agent as securities
intermediary shall treat as the person with) sole dominion and control
(including, without limitation, "control" within the meaning of UCC Section
9-115) over the Escrow Account and the Collateral.
(ii) all Collateral (other than cash) will be deemed to constitute
"financial assets" (as defined in UCC Section 8-102(a)(7) and the Trustee will
be entitled to all rights and remedies to which an entitlement holder or a
person in control of financial assets is entitled pursuant to Part 5 of UCC
Article 8 and UCC Article 9.
(iii) the Escrow Agent, as securities intermediary, (x) agrees to
credit to the Escrow Account any and all assets and properties (but only the
assets and properties) required to be transferred, placed, delivered or credited
therein or thereto, (y) represents, warrants, covenants and agrees (a) that it
is and will remain a "Participant", and (b) that it maintains and will continue
to be eligible to maintain and to maintain a "Participant's Securities Account"
(as such terms are defined in 31 C.F.R. Section 357.2 or, as applicable, the
corresponding Federal Book-Entry Regulations) with the Federal Reserve Bank of
New York.
(iv) the Escrow Agent will maintain the Escrow Account and the
Collateral in the State of New York.
9. Covenants.
(a) The Company covenants and agrees with the Beneficiaries from
and after the date of this Agreement until the earlier of payment in
full in cash of (1) all interest due through the Interest Payment Date
occurring on May 15, 2001 or (2) all obligations due and owing under
the Indenture and the Notes in the event such obligations become due
and payable prior to the payment of the first six scheduled interest
payments on the Notes:
(A) The Company agrees that it will not (i) sell or
otherwise dispose of, or grant any option or warrant with
respect to, any of the Collateral or (ii) create or permit
to exist any Lien upon or with respect to any of the
Collateral (except for the Lien created pursuant to this
Agreement) and at all times will be the sole beneficial
owner of the Collateral.
-16-
<PAGE> 18
(B) The Company agrees that it will not (i) enter into any
agreement or understanding that purports to or may restrict
or inhibit the Trustee's rights or remedies hereunder,
including, without limitation, the Trustee's right to sell
or otherwise dispose of the Collateral or (ii) fail to pay
or discharge any tax, assessment or levy of any nature not
later than five days prior to the date of any proposed sale
under any judgment, writ or warrant of attachment with
regard to the Collateral.
(b) The Company covenants and agrees with the Beneficiaries that
it will promptly make all filings which may be necessary or appropriate
in the United States which are or may be required to create a valid and
perfected first priority security interest in and to the Collateral.
10. Power of Attorney.
In addition to all of the powers granted to the Trustee pursuant
to Article 7 of the Indenture, the Company hereby appoints and constitutes the
Trustee as the Company's attorney-in-fact to exercise to the fullest extent
permitted by law all of the following powers upon and at any time after the
occurrence and during the continuance of an Event of Default: (i) collection of
proceeds of any Collateral; (ii) conveyance of any item of Collateral to any
purchaser thereof; (iii) giving of any notices or recording of any Liens under
Section 6; (iv) making of any payments or taking any acts under Section 11; and
(v) paying or discharging taxes or Liens levied or placed upon the Collateral,
the legality or validity thereof and the amounts necessary to discharge the same
to be determined by the Trustee in its sole discretion, and such payments made
by the Trustee to become the obligations of the Company to the Trustee, due and
payable immediately upon demand. The Trustee's authority hereunder shall
include, without limitation, the authority to endorse and negotiate any checks
or instruments representing proceeds of Collateral in the name of the Company,
execute and give receipt for any certificate of ownership or any document
constituting Collateral, transfer title to any item of Collateral, sign the
Company's name on all financing statements (to the extent permitted by
applicable law) or any other documents deemed necessary or appropriate by the
Trustee to preserve, protect or perfect this security interest in the Collateral
and to file the same, prepare, file and sign the Company's name of any notice of
Lien, to take any other actions arising from or incident to the powers granted
to the Trustee in this Agreement. This power of attorney is coupled with an
interest and is irrevocable by the Company.
11. Trustee May Perform.
If the Company fails to perform any agreement contained herein,
the Trustee may itself perform, but shall not be obligated to, or cause
performance of, such agreement, and the reasonable expenses of the Trustee
incurred in connection therewith shall be payable by the Company under Section
13 hereof.
12. No Assumption of Duties; Reasonable Care.
-17-
<PAGE> 19
18
The rights and powers granted to the Trustee and Escrow Agent
hereunder are being granted in order to preserve and protect the Trustee's and
the holders' of Notes security interest in and to the Collateral granted hereby
and shall not be interpreted to, and shall not, impose any duties on the Trustee
and Escrow Agent in connection therewith other than those imposed under
applicable law. Except as provided by applicable law or by the Indenture, the
Trustee and Escrow Agent shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that which the Trustee
accords similar property in similar situations, it being understood that the
Trustee and Escrow Agent shall not have any responsibility for (i) ascertaining
or taking action with respect to calls, conversions, exchanges, maturities,
tenders or other matters relative to any Collateral, whether or not the Trustee
or Escrow Agent has or is deemed to have knowledge of such matters or (ii)
taking any necessary steps to preserve rights against any parties with respect
to any Collateral.
13. Expenses.
The Company will upon demand pay to the Trustee the amount of any
and all reasonable expenses, including, without limitation, the reasonable fees,
expenses and disbursements of its counsel, experts and agents retained by the
Trustee that the Trustee may incur in connection with (i) the administration of
this Agreement, (ii) the custody or preservation of, or the sale of, collection
from, or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of the Beneficiaries hereunder or (iv) the
failure by the Company to perform or observe any of the provisions hereof.
14. Security Interest Absolute.
To the extent permitted by applicable law, all rights of the
Beneficiaries and security interests hereunder, and all obligations of the
Company hereunder, shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Indenture or any
other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the
Indenture;
(c) any exchange, surrender, release or nonperfection of any Liens
on any other collateral for all or any of the Secured Obligations; or
(d) to the extent permitted by applicable law, any other
circumstance which might otherwise constitute a defense available to,
or a discharge of, the Company in respect of the Secured Obligations or
of this Agreement.
<PAGE> 20
19
15. Miscellaneous.
(a) Waiver. Any party hereto may specifically waive any breach of
this Agreement by any other party, but no such waiver shall be deemed
to have been given unless such waiver is in writing, signed by the
waiving party and specifically designating the breach waived, nor shall
any such waiver constitute a continuing waiver of or for similar or
other breaches.
(b) Invalidity. If for any reason whatsoever any one or more of
the provisions of this Agreement shall be held or deemed to be
inoperative, unenforceable or invalid in a particular case or in all
cases, such circumstances shall not have the effect of rendering any of
the other provisions of this Agreement inoperative, unenforceable or
invalid, and the inoperative, unenforceable or invalid provision shall
be construed as if it were written so as to effect, to the maximum
extent possible, the parties' intent.
(c) Assignment. This Agreement is personal to the parties hereto,
and the rights and duties of any party hereunder shall not be
assignable except with the prior written consent of the other parties.
Notwithstanding the foregoing, this Agreement shall inure to and be
binding upon the parties and their successors and permitted assigns.
(d) Benefit. The parties hereto and their successors and permitted
assigns, but no others, shall be bound hereby and entitled to the
benefits hereof; provided, however, that the Beneficiaries (including
holders of the Notes) and their assigns shall be entitled to the
benefits hereof and to enforce this Agreement.
(e) Time. Time is of the essence with respect to each provision of
this Agreement.
(f) Entire Agreement; Amendments. This Agreement and, with respect
to the Trustee and the Company, the Indenture, contain the entire
agreement among the parties with respect to the subject matter hereof
and supersede any and all prior agreements, understandings and
commitments, whether oral or written. Any amendment or waiver of any
provision of this Agreement and any consent to any departure by the
Company from any provision of this Agreement shall be effective only if
made or duly given in compliance with all of the terms and provisions
of the Indenture, and none of the Escrow Agent, the Trustee or any
Holder of Notes shall be deemed, by any act, delay, indulgence,
omission or otherwise, to have waived any right to remedy hereunder or
to have acquiesced in any Default or Event of Default under the
Indenture or in any breach of any of the terms and conditions hereof.
Failure of the Escrow Agent, the Trustee or any holder of Notes to
exercise, or delay in exercising, any right, power or privilege
hereunder shall not operate as a waiver thereof. Written notice of any
amendment shall be promptly provided by the Company
<PAGE> 21
20
to its Agent. No single or partial exercise of any right, power or
privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any
right, power or privilege. A waiver by the Escrow Agent, the Trustee or
any holder of Notes of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy that
the Escrow Agent, the Trustee or such holder of Notes would otherwise
have on any future occasion. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not
exclusive of any rights or remedies provided by law.
(g) Notices. Any notices or other communications required or
permitted hereunder shall be in writing, and shall be sufficiently
given if made by hand delivery, by telecopier or first-class mail,
postage prepaid, addressed as follows:
if to the Company:
VersaTel Telecom B.V.
Paasheuvelweg 39
1105 BV Amsterdam-Z.O.
The Netherlands
Facsimile No: 31-20-501-10-11
Attention: Raj Raithatha
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Facsimile No: 212-848-7179
Attention: John D. Morrison, Jr. Esq.
if to the Escrow Agent or Trustee:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Facsimile: (212) 852-1627
Attention: Corporate Trust Administration
Each of the Company, the Escrow Agent and the Trustee by written
notice to each other such Person may designate additional or different addresses
for notices to such Person. Any notice or communication to the Company, the
Escrow Agent and the Trustee, shall be deemed to have been given or made as of
the date so delivered if personally delivered;
<PAGE> 22
21
when receipt is acknowledged, if telecopied; and five (5) calendar days after
mailing if sent by first class mail, postage prepaid (except that a notice of
change of address shall not be deemed to have been given until actually received
by the addressee). All notices with respect to the Escrow Agent will be deemed
to have been given on the date received by the Escrow Agent.
(h) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
(i) Captions. Captions in this Agreement are for convenience only and
shall not be considered or referred to in resolving questions of
interpretation of this Agreement.
(j) GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL;
WAIVER OF DAMAGES.
(i) EACH PARTY HERETO AGREES THAT, FOR ALL PURPOSES OF THIS AGREEMENT
(INCLUDING, WITHOUT LIMITATION, FOR PURPOSES OF AND WITHIN THE
MEANING OF UCC SECTION 8- 110, UCC SECTIONS 9-103(6) AND 31
C.F.R.Section 357.11 (OR, AS APPLICABLE, THE CORRESPONDING FEDERAL
BOOK-ENTRY REGULATIONS), THIS AGREEMENT (INCLUDING, WITHOUT
LIMITATION, THE CREATION, PERFECTION, EFFECTS OF PERFECTION AND
PRIORITY OF THE LIENS AND SECURITY INTERESTS OF THE TRUSTEE ON AND
IN THE ESCROW ACCOUNT AND THE COLLATERAL AND THE ESTABLISHMENT AND
MAINTENANCE OF THE ESCROW AGENT'S PARTICIPANT'S SECURITIES ACCOUNT
AND THE ACCOUNTS) AND THE RIGHTS, INTEREST, DUTIES AND OBLIGATIONS
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK,
EXCLUDING (TO THE GREATEST EXTENT PERMITTED BY LAW) ANY RULE OF
LAW THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK. EACH PARTY HERETO
IRREVOCABLY WAIVES ANY OBJECTION ON THE GROUNDS OF VENUE, FORUM
NON- CONVENIENS OR ANY SIMILAR GROUNDS. THE COMPANY HEREBY
IRREVOCABLY DESIGNATES AND APPOINTS CT CORPORATION (THE
"AUTHORIZED AGENT"), AS ITS AUTHORIZED AGENT UPON WHOM PROCESS MAY
BE SERVED IN ANY SUCH SUIT OR PROCEEDING. THE COMPANY REPRESENTS
THAT IT HAS NOTIFIED THE AUTHORIZED AGENT OF SUCH DESIGNATION AND
APPOINTMENT AND THAT THE AUTHORIZED AGENT HAS ACCEPTED THE SAME IN
WRITING. THE COMPANY HEREBY IRREVOCABLY AUTHORIZES AND DIRECTS ITS
<PAGE> 23
22
AUTHORIZED AGENT TO ACCEPT SUCH SERVICE. THE COMPANY FURTHER
AGREES THAT SERVICE OF PROCESS UPON ITS AUTHORIZED AGENT AND
WRITTEN NOTICE OF SAID SERVICE TO THE COMPANY MAILED BY FIRST
CLASS MAIL OR DELIVERED TO ITS AUTHORIZED AGENT SHALL BE DEEMED IN
EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE COMPANY IN ANY
SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
ANY PERSON TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY
FEDERAL OR STATE COURT IN THE BOROUGH OF MANHATTAN IN THE CITY OF
NEW YORK, COUNTY AND STATE OF NEW YORK, UNITED STATES OF AMERICA,
IN ANY SUIT OR PROCEEDING BASED ON OR ARISING UNDER THIS ESCROW
AGREEMENT, AND IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF
SUCH SUIT OR PROCEEDING MAY BE DETERMINED IN ANY SUCH COURT.
(ii) THE COMPANY AGREES THAT THE TRUSTEE SHALL, IN ITS CAPACITY AS THE
TRUSTEE OR IN THE NAME AND ON BEHALF OF ANY HOLDER OF NOTES, HAVE
THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED
AGAINST THE COMPANY OR ITS PROPERTY IN A COURT IN ANY LOCATION
REASONABLY SELECTED IN GOOD FAITH (AND HAVING PERSONAL OR IN REM
JURISDICTION OVER THE COMPANY OR ITS PROPERTY, AS THE CASE MAY BE)
TO ENABLE THE TRUSTEE TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE TRUSTEE. THE
COMPANY AGREES THAT IT WILL NOT ASSERT ANY COUNTERCLAIMS, SETOFFS
OR CROSSCLAIMS IN ANY PROCEEDING BROUGHT BY THE TRUSTEE TO REALIZE
ON SUCH PROPERTY OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN
FAVOR OF THE TRUSTEE, EXCEPT FOR SUCH COUNTERCLAIMS, SETOFFS OR
CROSSCLAIMS WHICH, IF NOT ASSERTED IN ANY SUCH PROCEEDING, COULD
NOT OTHERWISE BE BROUGHT OR ASSERTED. THE COMPANY WAIVES ANY
OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH
THE TRUSTEE HAS COMMENCED A PROCEEDING DESCRIBED IN THIS PARAGRAPH
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS.
<PAGE> 24
23
(iii) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY AND THE
TRUSTEE EACH WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTES RESOLVED IN
COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
(iv) THE COMPANY AGREES THAT NONE OF THE ESCROW AGENT, THE TRUSTEE OR
ANY HOLDER OF NOTES SHALL HAVE ANY LIABILITY TO THE COMPANY
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) FOR LOSSES
SUFFERED BY THE COMPANY IN CONNECTION WITH, ARISING OUT OF, OR IN
ANY WAY RELATED TO, THE TRANSACTIONS CONTEMPLATED AND THE
RELATIONSHIP ESTABLISHED BY THIS AGREEMENT, OR ANY ACT, OMISSION
OR EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS
DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OF A COURT THAT
IS BINDING ON THE ESCROW AGENT, THE TRUSTEE OR SUCH HOLDER OF
NOTES, AS THE CASE MAY BE, THAT SUCH LOSSES WERE THE RESULT OF
ACTS OR OMISSIONS ON THE PART OF THE ESCROW AGENT, THE TRUSTEE OR
SUCH HOLDER OF NOTES, AS THE CASE MAY BE, CONSTITUTING BAD FAITH,
GROSS NEGLIGENCE OR WILFUL MISCONDUCT.
(v) TO THE EXTENT PERMITTED BY APPLICABLE LAW, AND EXCEPT AS
OTHERWISE PROVIDED IN THIS AGREEMENT, THE COMPANY WAIVES ALL
RIGHTS OF NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE BY
THE TRUSTEE OR ANY HOLDER OF NOTES OF ITS RIGHTS DURING THE
CONTINUANCE OF AN EVENT OF DEFAULT TO REPOSSESS THE COLLATERAL
WITH JUDICIAL PROCESSOR TO REPLEVY, ATTACH OR LEVY UPON THE
COLLATERAL OR OTHER SECURITY FOR THE SECURED OBLIGATIONS. TO THE
EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY WAIVES THE
POSTING OF ANY BOND OTHERWISE REQUIRED OF THE ESCROW AGENT, THE
TRUSTEE OR ANY HOLDER OF NOTES IN CONNECTION WITH ANY JUDICIAL
PROCESS OR PROCEEDING TO OBTAIN POSSESSION OF, REPLEVY, ATTACH OR
LEVY UPON THE COLLATERAL OR OTHER SECURITY FOR THE SECURED
OBLIGATIONS, TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER ENTERED
IN FAVOR OF THE ESCROW AGENT, THE TRUSTEE OR ANY HOLDER OF NOTES,
<PAGE> 25
24
OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING
ORDER OR PRELIMINARY OR PERMANENT INJUNCTION, THIS AGREEMENT OR
ANY OTHER AGREEMENT OR DOCUMENT BETWEEN THE COMPANY ON THE ONE
HAND AND THE ESCROW AGENT, THE TRUSTEE AND/OR THE HOLDERS OF
NOTES ON THE OTHER HAND.
(vi) IN FURTHERANCE OF THE FOREGOING, EACH PARTY HERETO AGREES THAT
REGARDLESS OF ANY PROVISION IN ANY OTHER AGREEMENT, THE
"SECURITIES INTERMEDIARY'S JURISDICTION" (WITHIN THE MEANING OF
UCC SECTIONS 8-110 AND 9-103(b) AND 31 C.F.R.Section 357.11 (OR,
AS APPLICABLE, THE CORRESPONDING FEDERAL BOOK-ENTRY REGULATIONS)
OF THE ESCROW AGENT WITH RESPECT TO THE ESCROW ACCOUNT AND THE
COLLATERAL IS THE STATE OF NEW YORK.
(vii) THE PROVISIONS OF THIS SECTION 15(J) ARE INTENDED TO BE EFFECTIVE
UPON THE EXECUTION OF THIS ESCROW AGREEMENT WITHOUT ANY FURTHER
ACTION BY THE COMPANY, THE ESCROW AGENT OR THE TRUSTEE AND THE
INTRODUCTION OF A TRUE COPY OF THIS ESCROW AGREEMENT INTO
EVIDENCE SHALL BE CONCLUSIVE AND FINAL EVIDENCE AS TO SUCH
MATTERS.
(k) No Adverse Interpretation of Other Agreements. This Agreement may
not be used to interpret another pledge, security or debt agreement of
the Company or any subsidiary thereof. No such pledge, security or debt
agreement may be used to interpret this Agreement.
(l) Benefits of Agreement. Nothing in this Agreement, express or
implied, shall give to any Person, other than the parties hereto and
their successors hereunder, and the Holders of Notes, any benefit or
any legal or equitable right, remedy or claim under this Agreement.
(m) Interpretation of Agreement. All terms not defined herein or in the
Indenture shall have the meaning set forth in the UCC, except where the
context otherwise requires. To the extent a term or provision of this
Agreement conflicts with the Indenture, the Indenture shall control
with respect to the subject matter of such term or provision.
Acceptance of or acquiescence in a course of performance rendered under
this Agreement shall not be relevant to determine the meaning of this
Agreement even though the accepting or acquiescing party had knowledge
of the nature of the performance and opportunity for objection.
<PAGE> 26
25
(n) Survival of Provisions. All representations, warranties and
covenants of the Company contained herein shall survive the execution
and delivery of this Agreement, and shall terminate only upon the
termination of this Agreement.
(o) Waivers. The Company waives presentment and demand for payment of
any of the Company's Secured Obligations, protest and notice of
dishonor or default with respect to any of the Company's Secured
Obligations, and all other notices to which the Company might otherwise
be entitled, except as otherwise expressly provided herein or in the
Indenture.
(p) Agent for Service; Submission to Jurisdiction; Waiver of
Immunities. By the execution and delivery of this Agreement, the
Company (i) acknowledges that it has, by separate written instruments,
designated and appointed CT Corporation System, 1633 Broadway, New
York, NY 10019 ("CT Corporation System") (and any successor entity), as
its authorized agent upon which process may be served in any suit or
proceeding arising out of or relating to this Agreement that may be
instituted in any federal or state court in the Borough of Manhattan,
City of New York, State of New York or brought under federal or state
securities laws, and represent and warrant that CT Corporation System
has accepted such designation, (ii) submits 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 to be 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 Escrow Agent and
the Trustee, 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) 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 the
Escrow Account or actions
<PAGE> 27
26
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.
(q) U.S. Dollar Judgment Currency. U.S. dollars are the sole currency
of account and payment for all sums payable by the Company under or in
connection with the Escrow Account including damages. Any amount
received or recovered in a currency other than dollars (whether as a
result of, or the enforcement of, a judgment or order of a court of any
jurisdiction, in the winding-up or dissolution of the Company or
otherwise) by the Escrow Agent or the Trustee in respect of any sum
expressed to be due to it from the Company shall only constitute a
discharge to the Company to the extent of the dollar amount which the
recipient is able to purchase with the amount so received or recovered
in that other currency on the date of that receipt or recovery (or, if
it is not practicable to make that purchase on that date, on the first
date on which it is practicable to do so). If that dollar amount is
less than the dollar amount expressed to be due to the recipient under
this Agreement, the Company shall indemnify it against any loss
sustained by it as a result. If that dollar amount is greater than the
dollar amount expressed to be due to the recipient under this
Agreement, the Company shall be entitled to the amount of such excess.
In any event, the Company shall indemnify the recipient against the
cost of making any such purchase. For the purposes of this paragraph,
it will be sufficient for the Escrow Agent or Trustee to certify in a
satisfactory manner (indicating the sources of information used) that
it would have suffered a loss had an actual purchase of dollars been
made with the amount so received in that other currency on the date of
receipt or recovery (or, if a purchase of dollars on such date had not
been practicable, on the first date on which it would have been
practicable, it being required that the need for a change of date be
certified in the manner mentioned above). These indemnities constitute
a separate and independent obligation from the Company's other
obligations, shall give rise to a separate and independent cause of
action, shall apply irrespective of any indulgence granted by the
Escrow Agent and Trustee, and shall continue in full force and effect
despite any other judgment, order, claim or proof for a liquidated
amount in respect of any sum due under the Escrow Account.
(r) Notwithstanding any other provision of this Agreement, in no
event shall the Escrow Agent be liable for special, indirect or consequential
losses or damages of any kind whatsoever (including but not limited to lost
profits), even if the Escrow Agent has been advised of the likelihood of such
loss or damage and regardless of the form of action.
(s) Each party hereto, except the Escrow Agent, shall provide the
Escrow Agent, as soon as practicable, with their Tax Identification Number as
assigned by the Internal Revenue Service. All interest or other income earned
under the Escrow Agreement shall be allocated and paid as provided herein and
reported by the recipient to the Internal Revenue Service as having been so
allocated and paid.
<PAGE> 28
27
(t) Notwithstanding any other provision of this Agreement, prior
to termination hereof as contemplated by Section 7, any instruction by the
Company to the Escrow Agent with respect to the Escrow Account or the Collateral
shall be effective only to the extent acknowledged or expressly permitted (in
each case, in writing by notice of the Trustee to the Escrow Agent) by the
Trustee.
SECTION 16. Successors. All agreements of the Company in this
Agreement shall bind its successors. All agreements of the Escrow Agent in this
Agreements shall bind its successors.
<PAGE> 29
IN WITNESS WHEREOF, the parties have executed and delivered
this Escrow Agreement as of the day first above written.
VERSATEL TELECOM B.V.
By: OPEN SKIES INTERNATIONAL, INC., as
Managing Director
By: ______________________________
Name: R. Gary Mesch
Title: President and Treasurer
UNITED STATES TRUST COMPANY OF NEW
YORK, as Escrow Agent and Securities
Intermediary
By: ______________________________
Name:
Title:
UNITED STATES TRUST COMPANY OF NEW
YORK, as Trustee
By: ______________________________
Name:
Title:
<PAGE> 30
EXHIBIT A
Form of Payment Notice and Disbursement Request
[Letterhead of the Company]
{Date}
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Re: Disbursement Request No. ____
Ladies and Gentlemen:
We refer to the Escrow Agreement, dated as of May 27, 1998 (the "Escrow
Agreement"), among you (the "Escrow Agent"), United States Trust Company of New
York, as the Trustee (the "Trustee"), and VersaTel Telecom B.V., a company
organized under the laws of The Netherlands (the "Company"). Capitalized terms
used herein shall have the meaning given in the Escrow Agreement.
This letter constitutes a Payment Notice and Disbursement Request under
the Escrow Agreement.
{choose one or more of the following, as applicable}
{The undersigned hereby notifies you that a scheduled interest payment
in the amount of $________ is due and payable on __________, ___ with respect to
the Notes and requests a disbursement of funds contained in the Escrow Account
in such amount to the Trustee.}
{The undersigned hereby notifies you and certifies to you that the
release of [$________ of funds from the Escrow Account] to the Company (to an
account designated by the Company in writing), is currently permitted to be
released in accordance with Section 3(c) of the Escrow Agreement, a duly
executed Officers' Certificate which complies with the requirements of the
applicable Section of the Escrow Agreement and with the Indenture is attached
hereto, and such amount shall be so remitted to the Company.}
{The undersigned hereby notifies you that the Escrow Agreement has been
terminated in accordance with Section 7 thereof, a duly executed Officers'
Certificate which complies with the requirements of the applicable Section of
the Escrow Agreement and with the Indenture is attached hereto, and requests
that you release the remaining Collateral contained in the Escrow Account to the
Company.}
<PAGE> 31
2
{The undersigned hereby notifies you that there has been an
acceleration of the maturity of the Notes. Accordingly, you are hereby requested
to disburse all remaining funds contained in the Escrow Account to the Trustee
such that the balance in the Escrow Account is reduced to zero.}
In connection with the requested disbursement, the undersigned hereby
notifies you that:
1. {The Notes have not, as a result of an Event of Default under the
Indenture, been accelerated and become due and payable.}
2. {All prior disbursements from the Escrow Account have been
Applied.}
3. {add wire instructions}
The Escrow Agent is entitled to rely on the foregoing in disbursing
funds relating to this Payment Notice and Disbursement Request.
VERSATEL TELECOM B.V.
By: _________________________
Name:
Title:
ACKNOWLEDGED BY
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
By: ________________________
Name:
Title:
<PAGE> 1
Exhibit 21.1
LIST OF SUBSIDIARIES
1. VersaTel Telecom Europe B.V.
2. VersaTel Telecom Netherlands B.V.
3. VersaTel Telecom Belgium N.V.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
Registration Statement on Form F-4 for VersaTel Telecom B.V.
/s/ Arthur Andersen
-----------------------------------
ARTHUR ANDERSEN
Amsterdam, The Netherlands
July 27, 1998
<PAGE> 1
EXHIBIT 23.3
STIBBE SIMONT MONAHAN DUHOT
July 24, 1998
VersaTel Telecom B.V.
Attn.: R. Gary Mesch
Paalbergweg 36
1105 BV Amsterdam-Zuidoost
The Netherlands
Dear Mr. Mesch:
We hereby consent to the reference to our firm under the heading "Legal
Matters" in the Registration Statement on Form F-4 for VersaTel Telecom B.V.
and to file this consent as an Exhibit to such Registration Statement. We also
consent to all references to our firm included in such Registration Statement.
Very Truly Yours,
/s/ Rian Kalden
STIBBE SIMONT MONAHAN DUHOT
<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)
==============
VERSATEL TELECOM B.V.
(Exact name of obligor as specified in its charter)
NETHERLANDS 00-0000000
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
PAASHEUVELWEG 39
1105 BV AMSTERDAM-Z.O.
(Address of principal executive offices) (Zip Code)
$225,000,000 13 1/4% SENIOR NOTES DUE 2008
(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 June 8, 1998, 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 requirement 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 8th of
June 1998.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By: /s/ Gerard F. Ganey
------------------------------------------
Gerard F. Ganey
Senior Vice President
<PAGE> 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
June 8, 1998
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
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
MARCH 31, 1998
($ IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Cash and Due from Banks $ 303,692
Short-Term Investments 325,044
Securities, Available for Sale 640,954
Loans 1,717,101
Less: Allowance for Credit Losses 16,546
----------
Net Loans 1,700,555
Premises and Equipment 58,868
Other Assets 120,865
----------
Total Assets $3,159,978
==========
LIABILITIES
Deposits:
Non-Interest Bearing $ 602,769
Interest Bearing 1,955,571
----------
Total Deposits 2,558,340
Short-Term Credit Facilities 293,185
Accounts Payable and Accrued Liabilities 136,396
----------
Total Liabilities $2,987,921
==========
STOCKHOLDER'S EQUITY
Common Stock 14,995
Capital Surplus 49,541
Retained Earnings 105,214
Unrealized Gains on Securities
Available for Sale (Net of Taxes) 2,307
----------
Total Stockholder's Equity 172,057
----------
Total Liabilities and Stockholder's Equity $3,159,978
==========
</TABLE>
I, Richard E. Brinkmann, Senior Vice President & 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, SVP & Controller
May 6, 1998
