<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 22, 1999
REGISTRATION STATEMENT NO. 333-81333
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2 TO FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
VERSATEL TELECOM INTERNATIONAL N.V.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
THE NETHERLANDS 4813 NONE
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
<TABLE>
<S> <C>
PAALBERGWEG 36 CT CORPORATION SYSTEM
1105 BV AMSTERDAM-ZUIDOOST 1633 BROADWAY
THE NETHERLANDS NEW YORK, NY 10019
(31-20) 430 4300 (212) 664-1666
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
---------------
WITH COPIES TO
<TABLE>
<S> <C>
JOHN D. MORRISON JR. WILLIAM R. DOUGHERTY
SHEARMAN & STERLING SIMPSON THACHER & BARTLETT
599 LEXINGTON AVENUE 99 BISHOPSGATE
NEW YORK, NY 10022 LONDON, ENGLAND EC2M 3YH
(212) 848-4000 (44-171) 422-4000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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(c)
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. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED (1) PRICE PER ORDINARY SHARE OFFERING PRICE(2) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ordinary shares par value NLG
0.05 per share(3)............. $255,371,875 $10.45 $255,371,875 $70,993.00
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</TABLE>
(1) Includes ordinary shares that: (i) are to be offered and sold by the
Registrant and selling shareholders in the United States, (ii) are to be
offered outside the United States, but that may be resold from time to
time in the United States during the distribution, and (iii) shares
which the underwriters have the option to purchase to cover
over-allotments. Offers and sales of American Depositary Shares outside
the United States are not registered under this registration statement.
See "Underwriting."
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act.
(3) A separate registration statement on Form F-6 has been filed with the
Securities and Exchange Commission to register the American Depositary
Shares evidenced by American Depositary Receipts. Each American
Depositary Share represents one ordinary share.
THIS REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
The information in this Prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion, dated July 22, 1999
PROSPECTUS
[VERSATEL TELECOM LOGO]
VERSATEL TELECOM INTERNATIONAL N.V.
21,250,000 ORDINARY SHARES
IN THE FORM OF SHARES OR AMERICAN DEPOSITARY SHARES
- --------------------------------------------------------------------------------
THIS IS AN INITIAL PUBLIC OFFERING BY VERSATEL TELECOM INTERNATIONAL N.V. AND A
NUMBER OF SELLING SHAREHOLDERS OF 21,250,000 ORDINARY SHARES IN THE FORM OF
SHARES OR AMERICAN DEPOSITARY SHARES. EACH ADS REPRESENTS ONE ORDINARY SHARE. OF
THE 21,250,000 ORDINARY SHARES OFFERED BY VERSATEL AND THE SELLING SHAREHOLDERS,
SHARES AND ADSS ARE BEING OFFERED INITIALLY IN THE UNITED STATES AND
CANADA, AND SHARES AND ADSS ARE BEING OFFERED INITIALLY OUTSIDE THE
UNITED STATES AND CANADA. THE CLOSING OF THE INTERNATIONAL OFFERING IS A
CONDITION TO THE CLOSING OF THE U.S. OFFERING. VERSATEL IS OFFERING AN AGGREGATE
OF 18,992,508 SHARES AND ADSS, AND THE SELLING SHAREHOLDERS ARE OFFERING AN
AGGREGATE OF 2,257,492 SHARES AND ADSS.
THIS OFFERING IS BEING MADE CONCURRENTLY WITH AN OFFERING BY VERSATEL OF
$150,000,000 SENIOR DOLLAR NOTES DUE 2009 AND E100,000,000 SENIOR EURO NOTES DUE
2009. THE CLOSING OF THIS OFFERING IS CONDITIONED UPON THE CLOSING OF THE NOTES
OFFERING.
NO MARKET CURRENTLY EXISTS FOR OUR SHARES OR OUR ADSs.
AS PART OF THIS OFFERING, WE WILL OFFER TO SELECTED PERSONS, INCLUDING A NUMBER
OF OUR EMPLOYEES, THE RIGHT TO BUY UP TO 5% OF THE SHARES AND ADSS BEING SOLD BY
VERSATEL AT A 10% DISCOUNT TO THE PUBLIC OFFERING PRICE.
THE ADSs WILL BE LISTED ON THE NASDAQ STOCK MARKET'S NATIONAL MARKET UNDER THE
SYMBOL "VRSA" AND THE SHARES WILL BE LISTED ON THE OFFICIAL MARKET OF AMSTERDAM
EXCHANGES N.V. UNDER THE SYMBOL "VRSA".
INVESTING IN THE SHARES AND ADSs INVOLVES RISKS. "RISK FACTORS" BEGINS ON PAGE
12.
<TABLE>
<CAPTION>
PER SHARE PER ADS TOTAL*
----------- ----------- -----------
<S> <C> <C> <C>
Offering Price.......................................... E $ $
Discounts and Commissions............................... E $ $
Proceeds to VersaTel.................................... E $ $
Proceeds to selling shareholders........................ E $ $
</TABLE>
- ------------------------
* Translated at a rate of $ per E1.00
We have granted the underwriters a 30-day option to purchase up to 3,187,500
additional ordinary shares in the form of Shares or ADSs on the same terms and
conditions as set forth above solely to cover over-allotments, if any.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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Sole Global Coordinator and Book Running Manager
LEHMAN BROTHERS
Co-Lead Managers
AEX Listing Agent
ING BARINGS BEAR, STEARNS & CO. INC. PARIBAS CORPORATION
Co-Manager
HAMBRECHT & QUIST
Internet distribution by
E*TRADE SECURITIES, INC.
, 1999
<PAGE> 3
[The inside front cover contains a graph that sets forth VersaTel's local access
and overlay network, a graph of the local access infrastructure, a summary of
VersaTel's product packages as well as a graph that shows the population density
in Western Europe]
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary............................. 1
Risk Factors........................ 12
Disclosure Regarding Forward-Looking
Statements........................ 26
Use of Proceeds..................... 27
Dividend Policy..................... 28
Capitalization...................... 29
Dilution............................ 31
Exchange Rate Information........... 33
Unaudited Pro Forma Consolidated
Financial Information............. 36
Selected Financial Data for
VersaTel.......................... 43
Selected Financial Data for
Svianed........................... 45
Management's Discussion and Analysis
of Financial Condition and Results
of Operations..................... 47
Business............................ 63
Svianed........................... 76
Management.......................... 86
Principal Shareholders.............. 93
Selling Shareholders................ 95
Material Relationships and Related
Transactions...................... 96
Description of Capital Stock........ 97
Description of American Depositary
Receipts.......................... 101
Description of Material
Indebtedness...................... 108
Shares Eligible for Future Sale..... 112
Tax Considerations.................. 114
Underwriting........................ 123
Legal Matters....................... 129
Experts............................. 129
Where You Can Find More
Information....................... 129
General Listing Information......... 130
Index to Financial Statements --
VersaTel.......................... F-1
Index to Financial Statements --
Svianed........................... F-23
Glossary............................ A-1
</TABLE>
In making a decision about buying these securities, you must rely on your
own examination of the terms of this offering, including the merits and risks
involved, and you should rely only on the information contained in this
prospectus. We have not authorized anyone to provide prospective investors with
information that is different from the information contained in this prospectus.
This prospectus is intended to offer no securities other than the Shares and the
ADSs. This prospectus is not an offer to sell nor is it seeking an offer to buy
any security in any jurisdiction where such an offer or sale would be illegal.
The information in this prospectus is true as of the date on the front cover,
regardless of the time of delivery of this prospectus or any sale of these
securities.
We are responsible for the accuracy and completeness of the information
contained in this prospectus. We confirm that, to the best of our knowledge, the
information contained in this prospectus, in all material respects, is accurate
and not misleading, and that no information has been omitted that would, in the
context of this offering, materially affect the accuracy of the information
contained in this prospectus.
Until September 1, 1999, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
The underwriters expect to deliver the Shares and the ADSs on or about July
28, 1999. The Shares will be accepted for delivery through the facilities of
Nederlands Centraal Instituut voor Giraal Effectenverkeer B.V. ("NECIGEF"),
Morgan Guaranty Trust Company of New York, Brussels office, as operator of the
Euroclear System and Cedel Bank, against payment in immediately available funds.
American Depositary Receipts ("ADRs") representing the ADSs will be accepted for
delivery through the facilities of The Depository Trust Company.
i
<PAGE> 5
You must comply with all applicable laws and regulations in force in any
jurisdiction in which you purchase, offer or sell the Shares or the ADSs or
possess or distribute this prospectus, and must obtain any required consent,
approval or permission for your purchase, offer or sale of the Shares or the
ADSs under the laws and regulations in force in any jurisdiction to which you
are subject or in which you make such purchases, offers or sales.
-------------------------
We publish our financial statements in Dutch guilders. In this prospectus,
references to "U.S. dollars" or "$" are references to the currency of the United
States, references to "Dutch guilders" or "NLG" are references to the currency
of The Netherlands and references to "Belgian francs" or "BEF" are references to
the currency of Belgium. The exchange rate of the Luxembourg franc to the U.S.
dollar is the same as that of the Belgian franc to the U.S. dollar. 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. Both The Netherlands and
Belgium have adopted the euro as of January 1, 1999. On July 19, 1999, the Noon
Buying Rate was $1.02 per E1.00. To obtain a current formulation of the value of
Dutch guilders or Belgian francs in U.S. dollars, investors are required first
to convert such currencies into euro at the fixed conversion rates of NLG
2.20371 per E1.00 and BEF 40.3399 per E1.00 established in connection with the
implementation of the third stage of European Monetary Union, and converting the
resulting euro amounts into U.S. dollars at the Noon Buying Rate for euro.
Unless otherwise indicated, the translations of Dutch guilders into U.S. dollars
have been made at NLG 2.04 per $1.00, based on the noon buying rate in the City
of New York for cable transfers in euro as certified for customs purposes by the
Federal Reserve Bank of New York ("Noon Buying Rate") on March 31, 1999. See
"Exchange Rate Information" for historical information regarding the Noon Buying
Rate. On July 19, 1999, the exchange rate of Dutch guilders to U.S. dollars
(based on the Noon Buying Rate for euro) was NLG 2.16 per $1.00. 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 franc 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 37.32 per $1.00, based on the Noon Buying Rate in the City
of New York for cable transfers in euro as certified for customs purposes by the
Federal Reserve Bank of New York on March 31, 1999. On July 19, 1999 the
exchange rate of Belgian francs to U.S. dollars (based on the Noon Buying Rate
for euro) was BEF 39.54 per $1.00. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for a discussion of the effects
of exchange rate fluctuations on VersaTel. For more information regarding recent
rates of exchange between Dutch guilders, Belgian francs and euros versus U.S.
dollars, see "Exchange Rate Information."
-------------------------
ii
<PAGE> 6
SERVICE OF PROCESS AND
ENFORCEABILITY OF CIVIL LIABILITIES
We are incorporated under the laws of The Netherlands and substantially all
of our assets are located outside the United States. In addition, most of our
management board, supervisory board and executive officers are not residents of
the United States. As a result, it may not be possible for investors to effect
service of process within the United States upon such persons or to enforce
against such persons or VersaTel judgments of U.S. courts based upon civil
liabilities under the U.S. federal securities laws. The United States and The
Netherlands do not have a treaty providing for the reciprocal recognition and
enforcement of judgments, so U.S. judgments are not directly enforceable in The
Netherlands. However, a final judgment for the payment of money obtained in a
U.S. 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 U.S. court, without substantive
re-examination or re-litigation 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, that its content and
possible enforcement are not contrary to public policy or public order of The
Netherlands, and that such judgment does not concern the recognition of punitive
damages which have no bearing on the amount of damages incurred. Notwithstanding
the foregoing, there can be no assurance that U.S. investors will be able to
enforce against VersaTel, 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.
VersaTel 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 VersaTel, or on its executive officers or the members of the
management or supervisory boards, in an original action based solely upon the
federal securities laws of the United States brought in a court of competent
jurisdiction in The Netherlands against VersaTel or such members.
-------------------------
Persons participating in this offering may engage in transactions that
stabilize, maintain or otherwise affect the price of the Shares or ADSs offered
hereby at levels which might not otherwise prevail in the open market. Such
stabilization, if it commences, may be discontinued at any time. You should read
the "Underwriting" section for a description of these activities.
iii
<PAGE> 7
SUMMARY
This summary may not contain all the information that may be important to
you. You should read this entire prospectus, including the financial data and
related notes, before making an investment decision. You should also carefully
consider the information set forth under the heading "Risk Factors." This
prospectus has been prepared assuming the consummation of the reclassification
of our ordinary share capital into a single class of ordinary shares, which is
to occur before the closing of this offering. See "Description of Capital
Stock." Financial and other information contained in this document (i) has been
adjusted to reflect a 2-for-1 stock split of our ordinary shares, which was
effected on April 13, 1999 and (ii) unless otherwise specified, assumes no
exercise of the underwriters' over-allotment option. This prospectus includes
forward-looking statements which are subject to risks and uncertainties. See
"Disclosure Regarding Forward-Looking Statements." Technical terms used in our
business are explained in the "Glossary" at the end of this prospectus. Unless
the context otherwise requires, the terms "we", "us", "our" and similar terms
used in this prospectus refer to VersaTel Telecom International N.V. and its
subsidiaries.
VERSATEL
VersaTel is a rapidly growing, competitive network operator focused
primarily on the Benelux, which consists of The Netherlands, Belgium and
Luxembourg. Our objective is to become the leading fully integrated provider of
local access, facilities-based broadband services, including voice, data and
Internet services to our customers in this region. We currently provide
high-quality, competitively priced, telecommunications, data and Internet
services in The Netherlands and Belgium primarily to 4 targeted market segments:
- business services -- small- and medium-sized businesses located
throughout the Benelux,
- local access services -- high bandwidth users within the Benelux which
are near and directly connected to our network,
- data services -- high bandwidth data customers with multiple sites
throughout the Benelux, and
- carrier services -- telecommunications, data and Internet service
providers.
With over 13,500 business customers and over 375 employees, we are a
leading alternative to KPN Telecom N.V. and Belgacom S.A., the former monopoly
telecommunications carriers in The Netherlands and Belgium, respectively. Our
revenues grew from NLG 18.9 million for the year ended December 31, 1997 to NLG
39.6 million for the year ended December 31, 1998 and our revenues for the 3
months ended March 31, 1999 were NLG 15.5 million.
On June 11, 1999, we acquired Svianed B.V., the third largest provider of
data services in The Netherlands. Svianed complements VersaTel's strategy by
providing data services to approximately 50 customers, primarily in the
financial services and banking industry, including the principal social
insurance organization and the largest financial institution in The Netherlands.
These customers are served on a network which connects to over 600 buildings and
utilizes over 700 leased lines covering approximately 6,000 kilometers. The
Svianed network has 50 regional points of presence and transports traffic at
speeds of up to 150 Mbps. Svianed had revenues of NLG 56.7 million and EBITDA of
NLG 17.9 million for the year ended December 31, 1998. For the 3 months ended
March 31, 1999, Svianed had revenues of NLG 15.6 million and EBITDA of NLG 5.2
million. The revenues for VersaTel and Svianed on a combined basis would have
been NLG 96.2 million for the year ended December 31, 1998 and NLG 31.1 million
for the 3 months ended March 31, 1999.
We are building a fully integrated broadband network to provide end-to-end
connectivity to our customers. Our network has been designed to pass through all
the major population and business centers
1
<PAGE> 8
in the Benelux and to connect city centers, business parks and buildings along
its route. Our network design consists of 3 fully integrated elements:
- Benelux network -- multiple, integrated fiber optic rings connecting all
major population and business centers in the Benelux,
- local access infrastructure -- high bandwidth fiber optic and radio
connectivity to customers along our Benelux network route including city
centers, business parks and buildings, and
- international network -- fiber optic rings initially connecting London,
Dusseldorf, Frankfurt, Paris and the Benelux network.
As of May 31, 1999, we have constructed over 850 kilometers of our network
in the Benelux which we intend to have in service in the third quarter of 1999.
We intend to build an additional 650 kilometers of our network, including local
access infrastructure, by the end of 1999. As of May 31, 1999, our construction
passed 12 city centers, 6 business parks and 5,200 buildings along the route of
our network. We intend to complete our international rings connecting the
Benelux network, London and Paris and connecting the Benelux network, Frankfurt,
Dusseldorf and Paris by December 1999. We have completed our international
connection from the Benelux network to London and to Frankfurt. We intend to
directly connect Svianed's customers to, and transition Svianed's traffic onto,
our network in order to reduce our reliance on leased lines. We believe this
will significantly enhance the quality of our service offering to Svianed's
customers and reduce our costs.
During the past year, we have substantially expanded our product offering
from our initial offering of long distance voice services. We currently offer a
full portfolio of voice, data and Internet services to our business customers
and a broad range of connectivity, termination, co-location and hosting services
to other telecommunications, data and Internet service providers. Through our
acquisition of Svianed we will be able to significantly accelerate the
deployment of our broadband data services product offering by combining our
market presence with Svianed's data and network management expertise.
In addition to Svianed, we have recently extended our product and service
offerings and expanded our customer base through the following strategic
acquisitions:
- VuurWerk Internet B.V. -- a leading provider of web hosting, co-location,
access and e-commerce services in The Netherlands and Belgium. VuurWerk
is one of the largest providers of web hosting services in The
Netherlands, with more than 10,000 domain name registrations and 6,000
customers.
- SpeedPort N.V. -- a provider of Internet co-location and connectivity
solutions for high bandwidth and mission critical Internet and e-commerce
applications. SpeedPort will use VersaTel's international fiber
connectivity to build its IP-based network to serve its customers.
- CS Net B.V. -- enables Internet-based trade communities to conduct
business-to-business transactions in specific industries. It currently
provides these services to 6 trade communities with 10,000 end users.
- ITinera Services N.V. -- a Belgium-based Internet service provider with
over 950 business customers.
Over time, we intend to market most products and services of these
companies under the VersaTel brand. SpeedPort, however, will continue to market
its Internet solutions under its current brands.
2
<PAGE> 9
THE BENELUX MARKET OPPORTUNITY
VersaTel was founded in 1995 to capitalize on the opportunities created by
the liberalization of the telecommunications market in the Benelux. We believe
that the Benelux provides an excellent opportunity for competitive
communications service providers for several reasons, including its:
- HIGH POPULATION DENSITY. With approximately 26.2 million people in a
relatively small geographical area, the Benelux market is characterized
by one of the world's highest population densities, approximately 351
persons per square kilometer, compared to approximately 107 persons per
square kilometer in western Europe as a whole.
- HIGH GROWTH POTENTIAL. Data and telecommunications revenues as a
percentage of gross domestic product of 5.3% in 1997 were still
relatively low compared to 6.3% in the United Kingdom and 7.0% in the
United States, each with a more developed communications market.
- RAPIDLY EXPANDING DATA AND INTERNET MARKETS. The market for data and
Internet services is growing rapidly in the Benelux. According to
International Data Corporation, the estimated annual growth of the market
for Internet access services will be 30.4% and 45.2% in The Netherlands
and Belgium, respectively, from 1997 to 2001.
- HIGH INTENSITY OF COMMUNICATIONS TRAFFIC. The Benelux is a major
transportation and trade gateway which generates a relatively high level
of communications traffic. According to EITO (the European Information
Technology Observatory), the total Benelux telecommunication services
market amounted to $14.2 billion in 1997. If ranked as a single country,
the Benelux would have been the fifth largest telecommunications market
in western Europe behind Germany, France, the United Kingdom and Italy.
- TRADITIONALLY UNDERSERVED MARKET. At present, the Benelux communications
market is dominated by the former monopoly carriers, KPN Telecom,
Belgacom and P&T Luxembourg in The Netherlands, Belgium and Luxembourg,
respectively. We believe these carriers have not traditionally focused on
providing high quality customer service to our targeted customers.
- DEMAND FOR END-TO-END, BROADBAND SERVICES. We believe that business
customers will increasingly demand high bandwidth end-to-end
communications services, as they rapidly adopt Internet-based
applications as essential business and communications tools, such as
electronic commerce.
BUSINESS STRATEGY
VersaTel's objective is to become the leading local access,
facilities-based operator for broadband voice, data and Internet services in the
Benelux. The principal elements of our strategy are:
- DEPLOY OUR BROADBAND NETWORK. We are deploying a fully integrated
broadband network that will use the latest network technologies to
provide voice, data and Internet services and will support all major
protocols.
- FOCUS ON TARGETED CUSTOMER SEGMENTS WITH SPECIALIZED TEAMS. We use our
sales force, customer care and billing systems to meet the specific needs
of broadband local access customers, small- and medium-sized businesses,
broadband data services customers and other telecommunications, data and
Internet service providers.
- PROVIDE INNOVATIVE PRODUCTS AND SERVICES. We intend to continue to use
our network to allow us to become market leaders in providing our
customers with advanced product and service offerings and we plan to
provide customized solutions to fit local market needs.
3
<PAGE> 10
- EXPAND CARRIER SERVICES. We plan to use our network to generate
substantial revenue and additional traffic on our network through sales
to telecommunications, data and Internet service providers lacking a
network infrastructure.
- FOCUS ON SUPERIOR CUSTOMER SERVICE. We strive to maintain a competitive
advantage over competitors in our target markets by providing superior
customer service in terms of responsiveness, accuracy and quality.
- PURSUE SELECTIVE ACQUISITIONS AND STRATEGIC RELATIONSHIPS. We plan to
continue to acquire other competitive telecommunications, data and
Internet service providers in order to accelerate the growth of our
customer base, increase the use of our network and expand our service
portfolio.
REGULATORY AND COMPETITIVE ENVIRONMENT
The European telecommunications market has historically been dominated by
monopoly telecommunications services providers, which are commonly known as
PTTs. With a series of directives, the European Commission has been instrumental
in opening the telecommunications market to competition. As part of the
liberalization of the telecommunications market, PTTs must now offer cost-
oriented interconnection agreements to alternative service providers. In
addition, the European Commission has mandated carrier selection, carrier
pre-selection and number portability. We have and will continue to maintain a
proactive approach to regulatory issues on both a national and European level.
We believe that this approach will help ensure compliance by the PTTs with
European Commission directives, allow us to take advantage of regulatory
opportunities and help us 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. In March 1999, the Netherlands telecommunications
regulatory authority, OPTA, issued a ruling requiring KPN Telecom to offer
unbundled local access at KPN Telecom's central exchange offices to other
service providers. Unbundled local access, combined with new technologies now
available, may enable us to offer a high bandwidth service offering to those
customers that are not directly connected to our network.
CORPORATE STRUCTURE
VersaTel was incorporated under the laws of The Netherlands on October 10,
1995, as a private company with limited liability, referred to as a besloten
vennootschap met beperkte aansprakelijkheid or a B.V. VersaTel converted its
legal structure from a B.V. to a public company with limited liability, referred
to as a naamloze vennootschap or an N.V., on October 15, 1998. On December 31,
1998, VersaTel Telecom International N.V. transferred substantially all of its
assets and liabilities, excluding the notes issued in May 1998 and December
1998, to its subsidiaries. As a result of the transfer, VersaTel Telecom
International N.V. is now a holding company with no material assets, other than
the stock of its subsidiaries: VersaTel Telecom Europe B.V., VersaTel Telecom
Netherlands B.V., VersaTel Telecom Belgium N.V., Bizztel Telematica B.V., CS Net
B.V., CS Engineering B.V., Amstel Alpha B.V. (the parent of SpeedPort N.V.),
7-Klapper Beheer B.V. (the parent of VuurWerk Internet B.V.), ITinera Services
N.V. and Svianed B.V.
Our address is: VersaTel Telecom International N.V.
Paalbergweg 36
1105 BV Amsterdam-Zuidoost
The Netherlands.
Our telephone number is: +31-20-430-4300.
4
<PAGE> 11
RECENT DEVELOPMENTS
On July 20, 1999, we entered into, along with our shareholders and certain
other parties, a Settlement Agreement with one of our major shareholders,
Cromwilld Limited, in order to resolve disputes arising out of our shareholders'
agreement and other matters. The major terms of the Settlement Agreement provide
for:
- the transfer of 146,988 of our ordinary shares held by Telecom Founders
B.V. to Cromwilld;
- the issuance of 200,000 of our shares on July 20, 1999 to Cromwilld at a
price of NLG 7.50 per ordinary share;
- the ability for Cromwilld to include 1,800,000 of its ordinary shares in
this offering;
- certain piggyback registration rights in favor of Cromwilld that will
take effect 180 days from the date hereof;
- the payment by us of $300,000 for Cromwilld's fees and expenses related
to the Settlement Agreement and certain other matters;
- the acknowledgement by all parties to our shareholders' agreement that
the shareholders' agreement will be terminated concurrently with the
closing of this offering;
- the withdrawal by Cromwilld of its pending legal proceedings against us
and our shareholders;
- Cromwilld's full cooperation with this offering; and
- the obligation of our shareholders, including Cromwilld, to procure the
resignation or dismissal of Cromwilld's nominee, Denis O'Brien, from our
Supervisory Board, after the closing of this offering.
Our revenues for the second quarter of 1999 were NLG 21.7 million, which
represents a revenue growth of 40.0% from the first quarter of 1999. These
revenues include revenues from Svianed as a result of its acquisition as of June
11, 1999.
On July 23, 1999, our shareholders are expected to approve the appointment
of an additional Supervisory Board member, Sander van Brummelen. Mr. van
Brummelen is currently a member of the board of directors of Gak Groep N.V. (the
former parent of Svianed). His appointment will be effective July 23, 1999.
5
<PAGE> 12
THE OFFERING
<TABLE>
<S> <C>
Shares offered by VersaTel......................... 18,992,508 Shares(1)
Shares offered by the Selling Shareholders......... 2,257,492 Shares(1)(2)
U.S. offering...................................... Shares
International offering............................. Shares
Shares outstanding after the offering.............. 59,059,810 Shares(3)
</TABLE>
ADSs............................... Each ADS represents one Share.
Public Offering Price.............. per Share and per
ADS.
Use of Proceeds.................... The net proceeds to us from this offering
(after deducting underwriting discounts
and estimated expenses) are estimated to
be approximately $ million. We will use
the net proceeds of this offering to fund
capital expenditures for the expansion of
our network, and for acquisitions,
working capital and other general
corporate purposes, including operating
deficits.
We also expect to receive aggregate net
proceeds of approximately $ million and
E million from our concurrent offering
of Senior Dollar Notes and Senior Euro
Notes, respectively (after deducting
underwriting discounts and estimated
expenses), a portion of which we intend
to use to repay $150.0 million in
aggregate principal amount of interim
loans made by Lehman Commercial Paper
Inc. and ING (U.S.) Capital, LLC,
affiliates of the underwriters, which
loans were incurred in connection with
the acquisition of Svianed. The remaining
net proceeds of the Notes offering will
be used to fund capital expenditures for
the expansion of our network and for
acquisitions, in each case as permitted
by the indentures governing our existing
notes.
VersaTel will not receive any of the
proceeds from the Shares or ADSs being
sold by the selling shareholders. See
"Use of Proceeds."
Closing Condition.................. The closing of this offering is
conditioned on, among other things, the
simultaneous closing of our concurrent
offering of Senior Dollar Notes and
Senior Euro Notes.
NASDAQ Trading Symbol.............. The ADSs will be listed on the Nasdaq
National Market under the symbol "VRSA".
6
<PAGE> 13
Amsterdam Stock Exchange ("AEX")
Trading Symbol................... The Shares will be listed on the AEX
under the symbol "VRSA".
- -------------------------
(1) May be delivered in the form of Shares or ADSs.
(2) Includes (i) 1,800,000 ordinary shares to be sold by Cromwilld pursuant to
the terms of the Settlement Agreement and (ii) 457,492 ordinary shares
("Warrant Shares") to be sold by certain holders of Warrants issued by the
Company. All such Warrant Shares will be issued at the time of the closing
of this offering upon exercise by such selling shareholders on a cashless
basis of outstanding warrants pursuant to certain registration rights
granted to such selling shareholders. None of the Warrant Shares being sold
by the selling shareholders represent ordinary shares issued and outstanding
as of the date of this prospectus. Warrants covering an aggregate of
5,000,100 (as adjusted) ordinary shares were issued by VersaTel on May 27,
1998 and December 3, 1998 as part of an offering on each such date by
VersaTel of units consisting of warrants and 13 1/4% senior notes due 2008.
After consummation of the offering, Warrants covering an aggregate of
4,482,891 ordinary shares will remain outstanding. See "Risk
Factors -- Shares eligible for public sale after this offering could
adversely affect our stock price" and "Shares Eligible for Future Sale."
(3) Based on 39,609,810 ordinary shares deemed outstanding prior to this
offering which includes an aggregate of 755,000 ordinary shares that we are
obligated to issue, and which have been approved for issuance by our
shareholders, in connection with the acquisitions of CS Net, SpeedPort and
ITinera, and which we issued to Cromwilld in connection with the Settlement
Agreement. Excludes (i) options covering an aggregate of 7,231,500 ordinary
shares reserved for issuance to employees upon exercise of options (348,000
of which are non-dilutive in that the shares underlying such options are
currently outstanding and will be provided to us by the holders thereof),
(ii) 4,482,891 ordinary shares reserved for issuance upon exercise of then
outstanding Warrants and (iii) an aggregate of 130,000 ordinary shares
approved for issuance by our shareholders in connection with earn-out
obligations to former shareholders of SpeedPort and ITinera. Shares
outstanding after the offering assumes no exercise of the over-allotment
option by the underwriters. See "Description of Capital Stock -- Warrants"
and "Management -- Stock Option Plans."
7
<PAGE> 14
SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial information of VersaTel has
been prepared in accordance with U.S. GAAP and is derived from, and should be
read in conjunction with, the historical audited financial statements of
VersaTel and Svianed included elsewhere in this prospectus. The unaudited pro
forma statement of operations data for the year ended December 31, 1998 give
effect to the acquisition of Svianed, the incurrence and repayment of the
interim loans incurred in connection with such acquisition, the concurrent
offering of Senior Dollar Notes and Senior Euro Notes, and this offering (the
"Transactions") as if they had occurred on January 1, 1998. The unaudited pro
forma statement of operations data for the 3 months ended March 31, 1999 give
effect to the Transactions as if they had occurred on January 1, 1999. The
unaudited pro forma balance sheet data as of March 31, 1999 give effect to the
Transactions as if they had occurred on such date. The unaudited pro forma
financial information is presented for illustrative purposes only and is not
necessarily an indication of the results that would have been achieved had such
transactions been consummated as of the dates indicated or that may be achieved
in the future. You should read the data below in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Unaudited Pro Forma Consolidated Financial Information" included elsewhere in
this prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1998 MARCH 31, 1999
------------------- ------------------
NLG $(1) NLG $(1)
-------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue............................................. 96,244 47,178 31,080 15,235
Operating expenses:
Cost of revenue excluding depreciation and
amortization................................... 58,699 28,774 19,113 9,369
Selling, general and administrative............... 59,623 29,227 23,913 11,722
Depreciation and amortization..................... 50,343 24,678 14,317 7,018
-------- ------- ------- -------
Total operating expenses.......................... 168,665 82,679 57,343 28,109
-------- ------- ------- -------
Loss from operations................................ (72,421) (35,501) (26,263) (12,874)
Net interest expense................................
Currency loss (gain)................................ (5,146) (2,522) 40,283 19,747
-------- ------- ------- -------
Net result before income taxes...................... () () () ()
Provision for income taxes.......................... 7 3 -- --
-------- ------- ------- -------
Net result.......................................... () () () ()
======== ======= ======= =======
Net result per share (basic and diluted)(2)......... () () () ()
Weighted average number of shares outstanding(2)....
FINANCIAL DATA:
EBITDA(3)........................................... (22,078) (10,823) (11,946) (5,856)
Capital expenditures................................ 90,511 44,368 55,972 27,437
</TABLE>
8
<PAGE> 15
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
----------------------
NLG $(1)
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and restricted cash....................................
Working capital (excluding cash and restricted cash)........ (93,832) (45,996)
Capitalized finance cost.................................... 52,735 25,850
Property, plant and equipment, net.......................... 62,193 30,487
Construction in progress.................................... 92,205 45,199
Goodwill.................................................... 353,100 173,088
Total assets................................................
Total long-term obligations (including current portion).....
Total shareholders' equity (deficit)........................
</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, 1999 of
NLG 2.04 per $1.00.
(2) Includes 130,000 ordinary shares approved for issuance by our shareholders
in connection with the acquisition of CS Net.
(3) 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. Funds
depicted by this measure may not be available for management's discretionary
use (due to covenant restrictions, debt service payments, the expansion of
our network, and other commitments). 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.
9
<PAGE> 16
SUMMARY FINANCIAL DATA OF VersaTel
The following summary financial data of VersaTel as of and for the years
ended December 31, 1996, 1997 and 1998 have been prepared in accordance with
U.S. GAAP and have been derived from the historical financial statements of
VersaTel, which have been audited by Arthur Andersen, independent public
accountants. The summary financial data of VersaTel as of and for the 3 month
periods ended March 31, 1998 and 1999 are unaudited, but in the opinion of the
management contain all adjustments, consisting only of normal recurring
accruals, which are necessary for a fair presentation of results for interim
periods. You should read the information set forth below in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations" and the historical financial statements of
VersaTel included elsewhere in this prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
---------------------------------------- -----------------------------
1996 1997 1998 1998 1999
------- ------- ------------------ ------- ------------------
NLG NLG NLG $(1) NLG NLG $(1)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenue.............. 6,428 18,896 39,561 19,393 6,402 15,501 7,599
Operating expenses:
Cost of revenue,
excluding
depreciation and
amortization.... 4,954 17,405 31,821 15,598 5,460 12,485 6,120
Selling, general
and
administrative... 5,485 17,527 47,733 23,399 5,544 20,179 9,892
Depreciation and
amortization.... 453 3,237 6,473 3,173 1,087 3,084 1,512
------- ------- ------- ------- ------- ------- -------
Total operating
expenses...... 10,892 38,169 86,027 42,170 12,091 35,748 17,524
------- ------- ------- ------- ------- ------- -------
Loss from
operations......... (4,464) (19,273) (46,466) (22,777) (5,689) (20,247) (9,925)
Interest expense
(income), net...... 269 534 25,810 12,652 200 17,852 8,751
Currency loss
(gain)............. -- 53 (5,146) (2,522) 115 40,283 19,747
------- ------- ------- ------- ------- ------- -------
Net loss before
income taxes....... (4,733) (19,860) (67,130) (32,907) (6,004) (78,382) (38,423)
Provision for income
taxes.............. -- -- 7 3 -- -- --
------- ------- ------- ------- ------- ------- -------
Net loss........... (4,733) (19,860) (67,137) (32,910) (6,004) (78,382) (38,423)
======= ======= ======= ======= ======= ======= =======
Net loss per share
(basic and
diluted)(2)........ (0.47) (1.10) (2.06) (1.01) (0.31) (2.01) (0.99)
Weighted average
number of shares
outstanding(2)..... 10,008 18,084 32,622 32,622 19,159 38,985 38,985
FINANCIAL DATA:
EBITDA(3)............ (4,011) (16,036) (39,993) (19,604) (4,602) (17,163) (8,413)
Capital
expenditures....... 2,569 14,516 77,255 37,870 2,424 52,226 25,601
</TABLE>
10
<PAGE> 17
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
--------------------------------------- ------------------------------
1996 1997 1998 1998 1999
------ ------- ------------------ ------- -------------------
NLG NLG NLG $(1) NLG NLG $(1)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and restricted
cash............... 4,443 1,495 583,570 286,064 5,298 559,366 274,199
Working capital
(excluding cash and
restricted cash)... (2,704) (24,774) (46,851) (22,966) (28,792) (89,608) (43,925)
Capitalized finance
cost............... -- -- 28,750 14,093 -- 28,000 13,725
Property, plant and
equipment, net..... 2,340 13,619 38,608 18,925 14,956 41,766 20,474
Construction in
progress........... -- -- 46,019 22,558 -- 92,205 45,199
Goodwill............. -- -- 4,556 2,233 -- 4,354 2,134
Total assets......... 8,160 19,331 723,397 354,606 26,189 757,123 371,139
Total long-term
obligations
(including current
portion)........... 4,185 8,931 688,796 337,645 15,949 748,609 366,965
Total shareholders'
equity (deficit)... 146 (18,214) (34,073) (16,702) (24,218) (112,455) (55,125)
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31,
1997 1997 1997 1998 1998 1998 1998 1999
-------- --------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Number of billable
minutes
(thousands)(4)..... 5,769 6,230 7,127 12,432 26,863 34,021 48,287 69,165
Average revenue per
billable minute
(NLG).............. 0.87 0.85 0.65 0.51 0.35 0.30 0.26 0.21
Business customers
(at period end).... 1,144 1,459 1,828 2,459 3,562 4,434 5,649 7,180
Residential customers
(at period end).... -- -- 230 519 850 1,074 1,234 1,507
Carrier services
customers (at
period end)........ 1 1 1 3 3 3 4 7
</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, 1999 of
NLG 2.04 per $1.00.
(2) Includes 130,000 ordinary shares approved for issuance by our shareholders
in connection with the acquisition of CS Net.
(3) 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. Funds
depicted by this measure may not be available for management's discretionary
use (due to covenant restrictions, debt service payments, the expansion of
our network, and other commitments). 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.
(4) Billable minutes are those minutes during which a call is connected to a
VersaTel switch and for which we bill a customer.
11
<PAGE> 18
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing VersaTel. Additional risks and uncertainties not presently
known to us or that we currently consider not material may also impair our
business operations. If any of the following risks actually occur, our business,
financial condition or results of operations could be materially adversely
affected. In such case, the trading price of our ordinary shares could decline,
and you may lose all or part of your investment.
OUR HISTORY OF SUBSTANTIAL NET LOSSES MAY CONTINUE INDEFINITELY AND MAKE IT
DIFFICULT TO FUND OUR OPERATIONS.
For the 3 months ended March 31, 1999 we had a loss from operating
activities of NLG 20.2 million and negative EBITDA of NLG 17.2 million and for
the 3 months ended March 31, 1998 we had a loss from operating activities of NLG
5.7 million and negative EBITDA of NLG 4.6 million. For the year ended December
31, 1998, we had a loss from operating activities of NLG 46.5 million and
negative EBITDA of NLG 40.0 million. For the year ended December 31, 1997, we
had a loss from operating activities of NLG 19.3 million and negative EBITDA of
NLG 16.0 million. For the year ended December 31, 1996 we had a loss from
operating activities of NLG 4.5 million and negative EBITDA of NLG 4.0 million.
In addition, we had an accumulated deficit of NLG 92.3 million and NLG 25.2
million as of December 31, 1998 and December 31, 1997, respectively, and an
accumulated deficit of NLG 170.7 million and NLG 31.2 million as of March 31,
1999 and March 31, 1998, respectively. We expect to continue to incur
significant further operating losses for the foreseeable future as we incur
additional costs in the build out of our network, the expansion of our marketing
and sales force and the introduction of new communications services and
products. Although we have experienced revenue growth since we commenced
operations in 1995, there can be no assurance our revenues will continue to
grow. You should also be aware that the prices of voice, data and Internet
communications services have fallen significantly in Europe in recent years, and
as competition increases, we expect that prices will continue to decline. As the
cost of providing services decreases, we expect these price reductions to be at
least partially offset, but you should be aware that we cannot be certain that
we will achieve or, if achieved, be able to maintain operating profits in the
future.
OUR SUBSTANTIAL DEBT OBLIGATIONS MAY HINDER OUR GROWTH AND PUT US AT A
COMPETITIVE DISADVANTAGE.
We have substantial indebtedness. In May 1998, we issued and sold units
consisting of $225,000,000 13 1/4% Senior Notes due 2008 and warrants to
purchase 3,000,000 (as adjusted) ordinary shares of the Company (the "First High
Yield Offering"). In December 1998, we issued and sold units consisting of
$150,000,000 13 1/4% Senior Notes due 2008 and warrants to purchase 2,000,100
(as adjusted) ordinary shares of the Company (the "Second High Yield Offering").
On June 11, 1999, we borrowed an aggregate of $150.0 million from Lehman
Commercial Paper Inc. and ING (U.S.) Capital, LLC pursuant to an interim loan
agreement (the "Interim Loans") for the purpose of financing in part our
acquisition of Svianed. Simultaneously with the closing of this offering, we
will issue and sell $150,000,000 in aggregate principal amount of Senior Dollar
Notes due 2009 and E100,000,000 in aggregate principal amount of Senior Euro
Notes due 2009 (the "Third High Yield Offering"), approximately $152.2 million
of which will be used to refinance the Interim Loans. As of March 31, 1999,
after giving effect to the Third High Yield Offering, the incurrence and
repayment of the Interim Loans and the acquisition of Svianed as if each had
occurred on such date, VersaTel's total consolidated indebtedness would have
been approximately $ million. Subject to limits imposed by our debt
obligations, we may continue to incur substantial additional debt because the
indentures governing the notes issued in the First High Yield Offering (the
"First Notes"), the notes issued in the Second High Yield Offering (the "Second
Notes"; together with the First Notes, the "Existing Notes") and the notes
issued in the Third High Yield Offering (the "Third Notes"; together with the
Existing Notes, the
12
<PAGE> 19
"Notes") do not limit the amount of indebtedness that we may incur to finance
the cost of the development of our network. See "Selected Financial Data," the
Financial Statements included elsewhere in this prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
COVENANTS IN OUR DEBT AGREEMENTS RESTRICT OUR ABILITY TO BORROW AND INVEST,
WHICH COULD IMPAIR OUR ABILITY TO EXPAND OR FINANCE OUR FUTURE OPERATIONS.
The indentures governing the Notes contain a number of covenants that
impose significant operating and financial restrictions on us and our
subsidiaries. Significant additional covenants are also contained in our credit
facility with Nortel (the "Nortel Facility"). These restrictions significantly
limit, and in some cases prohibit, among other things, our and certain of our
subsidiaries' ability to incur more debt, create liens on assets, enter into
business combinations or engage in certain activities with our subsidiaries.
These covenants will also likely prohibit us from paying dividends or making
other distributions in respect of the ordinary shares for the foreseeable
future. A failure to comply with these restrictions would constitute a default
under the indentures governing the Notes, and the Notes could become immediately
due and payable, which would seriously adversely affect our business and our
shareholders' equity.
Our high level of indebtedness and the limits imposed by our debt
obligations could have the following effects, among others:
- we may have difficulty in paying the interest on our outstanding debt and
any newly incurred debt,
- we may have difficulty finding sources of financing for working capital,
our capital expenditure requirements and the interest payments on our
outstanding debt,
- we will be unable to use a significant portion of our cash flow in our
business and we may be unable to react to industry or economic changes,
because of the portion of cash flow directed to paying interest and
principal on our debt, and
- we may be unable to react as quickly to changes in our business as our
competitors who have less debt and financial restrictions, which may put
us at a disadvantage and make us more vulnerable to adverse changes in
economic conditions.
DESPITE CURRENT LEVELS OF INDEBTEDNESS, WE MAY STILL BE ABLE TO INCUR
SUBSTANTIALLY MORE DEBT, WHICH COULD INTENSIFY THE RISKS DESCRIBED ABOVE.
The indentures governing the Notes do not limit the amount of indebtedness
that may be incurred to finance the cost of development of our Network, and
permit us to incur a significant amount of additional indebtedness in the
future. Much of that indebtedness will likely be secured. Consequently, in the
event of a bankruptcy, liquidation, dissolution, reorganization or similar
proceedings, 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. In
addition, our failure to comply with the covenants and restrictions contained in
the agreements governing any additional borrowings could trigger defaults under
such agreements. Such defaults could result in a default under the Notes and
could delay or preclude payment of principal of or interest on the Notes. If new
debt is added to our current debt levels, the related risks that we now face
could intensify. We anticipate that we will incur additional indebtedness in the
future.
OUR HOLDING COMPANY STRUCTURE MAY AFFECT OUR ABILITY TO SATISFY OUR OBLIGATIONS
UNDER THE NOTES.
In December 1998, we transferred substantially all of our assets and
liabilities (except the Existing Notes) to our subsidiaries. Since that
transfer, we have been a holding company with no material assets, other than the
stock of our subsidiaries. Our subsidiaries now conduct substantially all of our
operations and directly own substantially all of our assets. You should be aware
that our subsidiaries have no obligation, contingent or otherwise, to pay any
amount pursuant to the Notes or to make any funds
13
<PAGE> 20
available for such payment. Therefore, our operating cash flow and ability to
meet our debt obligations, including the Notes, will depend on the cash flow
provided by our subsidiaries in the form of loans, dividends or other payments
to us as a shareholder. The ability of our subsidiaries to make such payments to
us will depend on their earnings, tax considerations and legal restrictions. In
the event of insolvency, liquidation, dissolution or reorganization of any of
our subsidiaries, the creditors of each subsidiary would be entitled to payment
in full from such subsidiary's assets. After paying their own creditors, our
subsidiaries may not have any remaining assets for distribution to us as a
shareholder and, consequently, there may not be any assets available for payment
to the holders of the Notes or for distributions to holders of our ordinary
shares. Any default under the Notes would have a material adverse effect on our
shareholders' equity. At March 31, 1999, after giving effect to the Third High
Yield Offering, the incurrence and repayment of the Interim Loans and the
acquisition of Svianed as if each had occurred on such date, our subsidiaries
would have had total liabilities of $ million reflected on our
consolidated balance sheet.
POSSIBLE INABILITY TO MEET OUR DEBT SERVICE OBLIGATIONS MAY RESULT IN OUR
OUTSTANDING DEBT BECOMING DUE AND PAYABLE.
The consolidated net interest expense of VersaTel for the year ended
December 31, 1998, and for the 3 months ended March 31, 1999, after giving
effect to the Third High Yield Offering and the incurrence and repayment of the
Interim Loans as if each had occurred on January 1, 1998 and January 1, 1999,
respectively, would have been approximately $ million and $ million,
respectively, using the applicable exchange rates in effect on January 1, 1999.
The net cash flow of VersaTel for the year ended December 31, 1998, and for the
3 months ended March 31, 1999, after giving effect to the Third High Yield
Offering and the incurrence and repayment of the Interim Loans as if each had
occurred on January 1, 1998 and January 1, 1999, respectively, would have been
approximately $ million and $ million, respectively. Unlike the holders of the
Existing Notes, the holders of the Third Notes will not have the benefit of any
securities placed in escrow to fund any interest payments on the Third Notes.
Accordingly, we will have to increase substantially our net cash flow in order
to meet our debt service obligations. In addition, after May 15, 2001, we will
no longer be able to rely on cash that has been set aside in escrow to meet our
debt service obligations on the Existing Notes. There is no certainty that we
will be able to generate sufficient cash flow from operating activities to pay
interest and principal on the Third Notes, the Existing Notes or any other
outstanding debt. Our ability to improve our operating performance and financial
results will depend not only on our ability to successfully implement our
business plan, but also upon economic, financial, competitive, regulatory and
other factors beyond our control, including fluctuations in exchange rates and
general economic conditions in the Benelux. If we are unable to meet the
repayment obligations, we may have to refinance our debt, sell our assets or
obtain new financing. We cannot assure you that any such refinancing would be
possible or that any such sales of assets or additional financing could be
achieved. If we cannot refinance or otherwise satisfy our debt obligations we
will be in default under such obligations, which could in turn result in the
Notes and other debt becoming immediately due and payable. Any default under the
Notes would have a material adverse effect on our shareholders' equity.
WE WILL NEED TO OBTAIN ADDITIONAL CAPITAL TO EXPAND THE NETWORK WHICH MAY NOT BE
AVAILABLE ON ACCEPTABLE TERMS.
We will require significant amounts of capital to further develop and
expand our network, our sales and marketing efforts and our product and service
offerings. We expect that the capital raised from this offering, the First High
Yield Offering, the Second High Yield Offering, the Third High Yield Offering
and the Nortel Facility, together with other available financing and cash flow
from operations, will be sufficient to fund our current capital requirements and
anticipated losses for the next 12 months. However, we continually re-evaluate
our business objectives and are considering further acquisitions,
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expansions of our services and acceleration of parts of our current plans. In
the past, we have raised more capital more quickly than we had originally
anticipated for similar reasons.
If these sources are not sufficient or if our plans or assumptions change
or prove to be incorrect, we may have to delay or abandon some of our
development and expansion plans or we may have to seek additional financing
earlier than anticipated. We may not be able to obtain additional financing or
we may not be able to obtain it on a timely basis or on terms favorable to us.
Our current debt obligations also restrict our ability to raise additional
financing and our subsequent use of any such additional financing. In addition,
any such additional financing is likely to be subject to additional financial
restrictions. A failure to acquire additional capital on acceptable terms may
seriously and adversely affect our business.
WE MAY ENCOUNTER DELAYS IN IMPLEMENTING ELEMENTS OF OUR BUSINESS STRATEGY, WHICH
COULD ADVERSELY AFFECT OUR GROWTH.
Our future success depends upon our ability to build and maintain our own
telecommunications network and to develop successfully our existing and new
products and services. Our success will depend specifically on our ability to
obtain and maintain, among other things, the following:
- experienced and qualified management and staff,
- additional switch sites,
- interconnection with PTTs' and other carriers' networks,
- the necessary licenses,
- additional transmission facilities, and
- the necessary easements and rights-of-way from property owners,
competitors and various levels of government.
We are not certain that our current cost estimates are correct or that we
will meet our current development schedule relating to construction of the
network. In 1998, we experienced a delay in obtaining rights-of-way on
approximately 60 kilometers of public property due to the uncertainty expressed
by some local governments as to the implications of the new telecommunications
act, which was recently adopted by the Netherlands parliament. Although
ultimately we did obtain these rights-of-way, these delays prevented us from
completing part of our network within the time originally anticipated. We and
certain other carriers are currently experiencing difficulties in obtaining a
right-of-way necessary to extend construction into Brussels. In addition, we
experienced additional delays in the planned construction of the network due to
weather-related flooding. Also, the successful implementation of our
construction and expansion strategy will be subject to a variety of other risks,
including operating and technical problems, regulatory uncertainties, delays in
the full implementation of the European Commission directives regarding
telecommunications liberalization, competition, the availability of capital and
the risk of damage to software and hardware resulting from adverse weather
conditions, fire, power loss, natural disasters and other causes. Any
significant increase in costs or any further delay in the schedule could have a
substantial negative effect on our financial condition. Even if our network is
successfully developed, we may not be able to operate it efficiently.
We have entered into agreements for the design and construction of key
components of our network. However, we have not entered into definitive
agreements relating to the development and construction of significant other
portions of our network and we cannot guarantee that we will enter into these
agreements or that any future construction will be completed efficiently. Even
when we do have such agreements, we cannot be certain that the development and
construction will proceed as planned and we have been unsatisfied with some of
such arrangements in the past. Further, our network depends on
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technology and products we obtain from vendors that also supply our competitors.
Such vendors might stop supplying us and we might not be able to find suitable
replacements.
The development of our network is based on projections of the growth in
traffic volumes and routing preferences and the most cost-effective means of
constructing our network. If these projections are incorrect, it could have a
material adverse effect on our business.
ANY INABILITY TO MANAGE OUR RAPID GROWTH COULD ADVERSELY AFFECT OUR FINANCIAL
REPORTING, CUSTOMER SERVICE AND REVENUES.
Our growth strategy has placed and will continue to place a significant
strain on our management resources. In particular, the acquisition and
integration of Svianed, SpeedPort, VuurWerk and ITinera will require a
significant amount of management time and resources. Our ability to manage this
growth will require us to substantially enhance our management, financial and
information systems and to effectively develop and train our employee base. Our
billing system had been identified by our auditors as a potential weakness in
our system of internal controls and is in the process of being replaced by an
advanced system designed by Saville Systems. In this respect, management has,
among other things, revised its financial collection of data and call billing
procedures. Managing our growth will become even more challenging as we increase
our target markets and our product and service offerings. The inability to
achieve or effectively manage our growth could materially and adversely affect
our business.
WE MAY HAVE DIFFICULTY INTEGRATING OUR ACQUIRED BUSINESSES.
We have brought senior managers of many of our acquired businesses into our
management team and we are relying on these individuals to assist us in
integrating these acquired businesses into our business strategy. There can be
no guarantee that we will be able to attract and retain managers from any newly
acquired businesses or be successful in integrating any new managers and
businesses from our recent acquisitions.
We expect to realize operating synergies as a result of our recent
acquisitions. However, there is no assurance that we will be able achieve the
benefits that our management expects to realize or that the expected benefits
will be realized within the time frame we contemplate.
ONE CUSTOMER REPRESENTS A SIGNIFICANT PORTION OF OUR REVENUES.
As a result of our acquisition of Svianed, 35.8% of our revenues for the
year ended December 31, 1998, on a combined basis, would have come from the Gak
group of companies. The Gak group is under contract to use our data services
until May 2001. There can be no assurance that we will be able to retain the Gak
group as a customer after May 2001 or that our revenues from the Gak group would
not thereafter be significantly curtailed. We cannot assure you that any such
lost revenues could be replaced. A loss of the revenues derived from the Gak
group, without significant replacement revenue from other sources, could have an
adverse effect on our business.
WE MAY HAVE DIFFICULTIES IN UPGRADING AND PROTECTING OUR NETWORK, WHICH COULD
ADVERSELY AFFECT OUR GROWTH.
The success of our network will also depend on our continued ability to
provide high-quality telecommunications services through upgrading our systems
and our ability to protect our network from external damage. As we grow, the
timing and implementation of these upgrades will become more important. We
cannot guarantee that the quality and availability of our services will not be
disrupted because of our inability to make timely or error-free upgrades to our
network. Also, our network may be subject to external damage, in particular from
construction work, but also from events, such as floods and other accidents,
that can disrupt service. In fact, the construction of our Benelux network was
delayed due to significant rain and flooding of our ducts in The Netherlands
during the last 3 months of 1998. We
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have established design and management techniques to address any disruptions
that may occur; however, any prolonged difficulty in accessing our network may
threaten our relationship with our customers and have an adverse impact on our
business.
WE MAY NOT BE ABLE TO IMPLEMENT OUR NEW BILLING AND CUSTOMER INFORMATION SYSTEMS
ON SCHEDULE.
Sophisticated billing and information systems are vital to our growth and
our ability to:
- bill and receive payments from customers,
- reduce credit exposure, and
- monitor costs.
We have reviewed our billing system, in anticipation of our continued
growth. We had planned to replace our existing billing system during the second
quarter of 1999 with a billing system designed by Saville Systems. We now
anticipate that the new system will be implemented by the end of the third
quarter of 1999. We have experienced delays in the implementation of our new
system and have been forced to rely in the meantime on upgrades of our current
system. We may experience further delays, particularly in integrating acquired
businesses into our systems. If circumstances cause further delay in the
implementation of the new billing system, our billing process could be delayed
or interrupted, which could materially and adversely affect our business.
OUR LIMITED HISTORY AND EXPERIENCE COULD PLACE US AT A DISADVANTAGE TO
ESTABLISHED COMPETITORS AND MAY NOT BE A RELIABLE BASIS FOR EVALUATING OUR
PROSPECTS.
We were founded in October 1995 and, as a result, we have limited
experience as an operating company and have generated only limited revenues. We
entered the Belgian market in the third quarter of 1998 and intend to enter the
Luxembourg market in 2000. In both of these markets, we have limited or no
operating experience and services had previously been provided primarily by the
national PTTs. Through our acquisitions of CS Net in November 1998, SpeedPort
and VuurWerk in May 1999, and Svianed and ITinera in June 1999, we have entered
several markets for Internet-based services which represents a new and rapidly
developing market for us. Accordingly, our prospects must be considered in light
of the risks, expenses and delays inherent in establishing operations in markets
with long established competitors and other more recent entrants to the market
and our historical results may not be a reliable basis for evaluating our
prospects.
IF WE DO NOT ADAPT TO THE RAPID CHANGES IN THE TELECOMMUNICATIONS INDUSTRY, WE
COULD LOSE CUSTOMERS OR MARKET SHARE.
The European telecommunications industry is changing rapidly due to, among
other factors, liberalization, privatization of PTTs, technological
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 our operations. There can be no assurance that
one or more of these factors will not occur as we expect or will not have
unforeseen effects which could have a material adverse effect on us. There can
also be no assurance, even if these factors turn out as anticipated, that our
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 Internet-based technologies for voice and data transmission. Our
success will depend substantially on our 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 we further expand and develop
our network, we will become increasingly exposed to the risks associated with
the relative effectiveness of our technology and equipment. The cost of
implementation of emerging and
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future technologies could be significant, and there can be no assurances that we
will select appropriate technology and equipment or that we will obtain
appropriate new technology on a timely basis or on satisfactory terms. The
failure to obtain effective technology and equipment may adversely affect our
ability to offer competitive products and services and the viability of our
operations and could have a material adverse effect on our business.
LOSS OF KEY PERSONNEL IN A COMPETITIVE EMPLOYMENT ENVIRONMENT COULD AFFECT OUR
GROWTH AND FUTURE SUCCESS.
Our success depends on the continued employment of Gary Mesch, our managing
director, Greg Mesch, our chief operations officer, Raj Raithatha, our chief
financial officer, Larry Hendrickson, our chief technology officer, Marc van der
Heijden, our chief regulatory counsel, and Jan Niewold, the managing director of
Svianed. You should also be aware that we do not have any "key person"
insurance. There is intense competition for qualified personnel in our industry
in Europe and the limited availability of qualified individuals could become an
issue of increasing concern in the future. Our financial condition depends upon
qualified personnel implementing a successful business plan. The loss of any of
the individuals listed above could adversely affect our business.
WE ARE DEPENDENT ON OUR COMPETITORS TO PROVIDE OUR CUSTOMERS WITH ACCESS TO OUR
NETWORK.
We do not own most of the telecommunications transmission infrastructure
that we presently use. We use extensively the telecommunications transmission
infrastructure of other carriers in the Benelux and we depend on interconnection
agreements with these carriers to connect our customers to our own network. Most
of these carriers are our competitors. Svianed in particular currently depends
heavily upon leased lines procured from KPN Telecom.
Our profitability significantly depends on our ability to achieve access,
on a timely basis and at attractive rates, to the facilities of our competitors,
who may try to limit such access.
Our dependence on third parties to provide our customers with access to our
network makes us susceptible to price fluctuations, service disruptions and
cancellations that are outside of our control. These occurrences historically
have resulted in the loss of some customers and could result in customer losses
in the future. For example, in October 1998, we experienced 2 temporary
disruptions as a result of a malfunction in the software of KPN Telecom, which
led to customers temporarily having to switch off our network. We believe that
we lost a limited number of customers due to those service disruptions. Such
disruptions may occur from time to time in the future.
Svianed's network is comprised of leased lines from KPN Telecom and
Internet uplinks from UUNet. Svianed's profitability depends on its ability to
continue to have access to the facilities of KPN Telecom and UUNet.
WE MAY BE AFFECTED BY THE YEAR 2000 ISSUE WHICH COULD DISRUPT OUR BUSINESS AND
OPERATIONS.
The Year 2000 issue is the result of computer programs using 2 digits
rather than 4 to define the applicable year. Because of this programming
convention, software, hardware or firmware may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in system failures,
miscalculations or errors causing disruptions of operations or other business
problems, including, among others, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
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VersaTel has initiated a formal Year 2000 project and recruited an
experienced Year 2000 project manager. We are undertaking a comprehensive
program to address the Year 2000 issue with respect to the following:
- our information technology systems,
- the telephony switching network (including equipment installed at
customers' premises),
- our non-information technology systems (including buildings, plant,
equipment, and other infrastructure systems that may contain embedded
microcontroller technology),
- the systems of our major vendors (insofar as they relate to our
business), and
- our customers.
This program involves 4 "Steps": (1) a wide ranging assessment of Year 2000
problems that might affect us; (2) the development and implementation of
remedies to address discovered problems; (3) the testing of our systems as
necessary; and (4) an analysis of our most likely worst-case scenario and the
preparation of contingency plans. We expect to complete Steps 1 and 2 of this
program during the second quarter of 1999 and Steps 3 and 4 by the end of the
third quarter of 1999.
We believe that the most likely worst effect of the Year 2000 issue would
be the inability of customers to complete calls. Nortel, the manufacturer of our
switches and transport hardware, has informed us that it believes our equipment
is Year 2000 compliant. We have requested guarantees from Nortel and Cisco
Systems, our supplier of router switches and certain other equipment, with
respect to Year 2000 compliance.
Our new billing system, which we expect to introduce in August 1999, has
been certified to be Year 2000 compliant. Even if it were to fail, we believe
that bills could still be distributed by modifying the time stamp on the call
detail record. The ability of our customer care team to supply quality service
would be seriously affected if our operating support systems failed. We are
asking for certificates of Year 2000 compliance from these manufacturers. Our
ability to collect direct debit payments depends upon financial institutions'
computer systems. We are seeking assurances of Year 2000 compliance from the
financial institutions and the utility suppliers that we use.
We expect to incur specific Year 2000 charges that are estimated to be less
than NLG 1.0 million. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Risks Associated with Year 2000." We can
give no assurance that we will be successful in obtaining valid assurances,
certificates or guarantees, that the Year 2000 issue will not have an adverse
effect on us, that any effects could be resolved or that we will be reimbursed
for any additional expenditure under any of the assurances, certificates or
guarantees that we expect to obtain or otherwise.
Svianed has undertaken a number of measures to ensure that its business
will not be affected as a result of the Year 2000 issue. In 1997, Svianed
appointed a project leader and made an assessment of all systems and equipment
that could potentially be affected by the Year 2000 issue. The initial focus was
to ensure that the services provided by Svianed to its customers would not be
interrupted as a result of the Year 2000 issue. The next phase was to ensure
that Svianed's management control systems would not be affected by the Year 2000
issue. Starting in mid-1997, Svianed has obtained for all its purchases of
hardware and software guarantees as to their Year 2000 compliance. In addition,
the installed base of Cisco routers and Newbridge ATM and Frame Relay switches
have been confirmed by their suppliers to be Year 2000 compliant.
Svianed relies on leased lines from KPN Telecom for the provision of its
services. Svianed understands, based on information it has received from KPN
Telecom, that KPN Telecom has commenced a Year 2000 risk analysis and has
established a remediation plan intended to ensure that KPN Telecom will be Year
2000 compliant. Svianed has received a written confirmation from
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KPN Telecom that it will maximize its effort to be Year 2000 compliant. However,
Svianed has not received any guarantee from KPN Telecom as to its Year 2000
compliance, and we can give no assurance that Svianed's network will not
experience any interruptions as a result of any failure by KPN Telecom to be
Year 2000 compliant.
The most likely worst case scenario for Svianed would be a disruption of
its network management system. Svianed expects to incur costs of approximately
NLG 500,000 in connection with its Year 2000 readiness program, most of which
has already been expensed.
WE EXPECT TO ENCOUNTER INCREASING COMPETITION FROM DOMINANT MARKET PARTICIPANTS
AND NEW ENTRANTS.
The European telecommunications industry is a very competitive market that
is subject to both the continued dominance of PTTs and the arrival of new
entrants.
PTTs have significant competitive advantages over non-PTT market
participants which include:
- cost advantages as a result of economies of scale,
- greater market presence and network coverage,
- greater brand name recognition, customer loyalty and goodwill,
- control over domestic transmission lines and control over the access to
these lines by other participants, and
- close ties to national regulatory authorities that may be reluctant to
adopt policies that would adversely affect their competitive position.
Our policy in this competitive environment has been to price our products
and services at a discount to the PTTs, and to offer high quality customer
service, products and services. However, the prices of long distance calls in
most of our markets have decreased substantially and our larger competitors have
been able to use their greater financial resources to create severe price
competition. We believe that prices will continue to decrease for the
foreseeable future and that PTTs and other providers will continue to improve
their product offerings, which will increase these competitive pressures.
Our competition in the Benelux also comes from newer market entrants
including MCI WorldCom, Telfort, GTS/Esprit Telecom, COLT Telecom and other more
recent Internet-based competitors. Further, we believe that, as a result of the
introduction of the euro, there will be a greater transparency in prices in our
market which may lead to further price competition. Sustained price competition
could have a material adverse effect on our business.
EXCHANGE RATE FLUCTUATIONS MAY ADVERSELY AFFECT OUR BUSINESS.
The proceeds from this offering will be denominated in U.S. dollars and
euros and the proceeds from the Third High Yield Offering will be denominated in
U.S. dollars and euros. The costs and expenses relating to the expansion of our
network and the development of our sales and marketing resources have been and
will continue to be largely denominated in Dutch guilders, Belgian francs and,
increasingly, euros. Therefore, the expansion of our network and the development
of our sales and marketing resources will also be subject to currency exchange
rate fluctuations as we use the remaining proceeds from the First High Yield
Offering and the Second High Yield Offering and the proceeds from the Third High
Yield Offering and this offering to pay our construction and acquisition costs.
The principal and interest due on the Existing Notes and the Dollar Notes
is payable in U.S. dollars. However, our revenues have been and will continue to
be largely denominated in Dutch guilders, Belgian francs and, increasingly, in
euros. Therefore, our ability to pay the interest and principal due on the Notes
will also depend on future exchange rates.
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We denominate our financial reports in Dutch guilders while we maintain
significant U.S. dollar denominated assets and liabilities, so our reported
results of operations may be significantly affected by exchange rate movements.
Furthermore, we will become subject to greater foreign exchange fluctuations as
we expand our operations outside the Benelux and begin to receive revenues
denominated in currencies other than from countries that have adopted the euro
as their currency.
ANY INABILITY TO IDENTIFY FUTURE ACQUISITION OPPORTUNITIES OR ACQUIRE THE
FINANCIAL AND MANAGEMENT RESOURCES TO PURSUE SUCH OPPORTUNITIES MAY HINDER OUR
GROWTH.
As part of our business strategy, we have acquired, entered into strategic
alliances with, and made investments in, companies in business areas that are
complementary to our current operations. Any such future strategic alliances,
acquisitions or investments would involve risks. Our 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 our resources and consume significant
management time. We cannot assure that any desired strategic alliance,
acquisition or investment can be made in a timely manner or on terms and
conditions acceptable to us. We cannot assure that we will be successful in
identifying attractive acquisition candidates, completing and financing
additional acquisitions on favorable terms, or integrating the acquired
businesses or assets into our existing operations. Our ability to make
acquisitions may depend on the availability of additional debt financing on
acceptable terms and will be subject to compliance with the covenants contained
in our debt instruments, including the indentures governing the Notes.
WE MAY ENCOUNTER DELAYS, OPERATIONAL PROBLEMS AND INCREASED COST IF WE ARE
UNABLE TO ACQUIRE KEY EQUIPMENT FROM OUR MAJOR SUPPLIERS.
We are dependent on third party suppliers of hardware and software
components, including Nortel, Cisco, Hewlett Packard, Microsoft and Netscape.
Although we attempt to maintain a number of vendors for each product, a number
of components that we use in providing our network services are currently
available from only one source. For example, routers are currently available
only from Cisco. A failure by a supplier to deliver quality products to us on a
timely basis or our inability to develop alternate sources if and as required
could result in delays which could have a material adverse effect on us.
Our recourse against suppliers who fail to deliver products to us on a
timely basis is restricted by contractual liability limitations in supply
agreements and purchase orders and, in many cases, by practical considerations
relating to our desire to maintain good relationships with suppliers. Moreover,
we cannot be sure that we will be able to obtain such products on the scale we
require at an affordable cost or at all. Neither can we be certain that our
suppliers will not enter into exclusive arrangements with our competitors or
stop selling their products or components to us at commercially reasonable
prices or at all. Any failure of our sole or limited-source suppliers to provide
products or components that comply with our standards could have a material
adverse effect on us.
WE ARE CONTROLLED BY PARTIES WHOSE INTEREST MAY NOT BE ALIGNED WITH YOURS.
You should be aware that 5 shareholders currently own approximately 75.6%
of our shares on a fully diluted basis. Upon completion of this offering, we
expect these shareholders will own approximately 53.6% of our shares on a fully
diluted basis. Collectively, these shareholders have the power to exercise
voting and management control, and their interests may be different from your
interests and the interests of our other shareholders.
In the past, we have had disputes among these 5 shareholders arising out of
the shareholders' agreement and other matters. These disputes have in the past
diverted management time and resources. Pursuant to the Settlement Agreement
entered into by us and our shareholders, prior claims by
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Cromwilld, one of our shareholders, have been released. We can give no assurance
that there will be no disputes in the future and that such disputes will not
have a material adverse effect on our business.
CHANGES IN THE REGULATORY ENVIRONMENT COULD AFFECT OUR ABILITY TO OFFER OUR
PRODUCTS AND SERVICES.
We expect that the implementation of directives and regulations of the
European Union intended to liberalize the telecommunications market will
essentially enable us to gain access to telecommunications networks controlled
by PTTs. A number of directives have been implemented by the EU members, but
several directives still remain to be implemented in the member states,
including the Benelux. A delay in the implementation of these directives and
regulations could have a material adverse effect on our business.
Our operations depend on the licenses, authorizations and registrations
that we have obtained in The Netherlands, Belgium and the United Kingdom and the
success of our applications for additional licenses, authorizations and
registrations in these and other jurisdictions. We have no guarantees that we
will be able to maintain or renew these licenses, authorizations and
registrations. The loss of, or failure to obtain, licenses, authorizations or
registrations or a substantial limitation thereof could have a material adverse
effect on our business.
There are currently few laws and regulations that specifically regulate
communications on the Internet. European and U.S. government authorities and
agencies are considering laws and regulations that address issues such as user
privacy, infringement pricing, on-line content regulation, intellectual property
ownership and taxation of on-line products and services. The EU has adopted 2
directives that impose restrictions on the collection and use of personal data,
guaranteeing citizens of EU Member States the right of access to their data, the
right to know where the data originated and the right to recourse in the event
of unlawful processing. However, to the best of our knowledge, no European court
has ever held a telecommunications services provider liable for content
transmitted over its network, although we can give no assurances that no laws or
regulations will be adopted that will impose such liability, or that any future
court rulings will not impose such liability. Any future regulation of the
Internet that imposes restrictions on the way we conduct our business could
seriously affect adversely our business.
THE NATURE OF OUR BUSINESS MAKES US SUSCEPTIBLE TO FRAUD AND BAD DEBT.
As a provider of telecommunications and Internet services, our operations
are potentially exposed to the risks of fraud and bad debt. Specifically, our
revenues for the 3 months ended December 31, 1997 were negatively impacted by a
case of fraud in October 1997, which we estimate resulted in a loss of
approximately NLG 1.0 million. The fraud involved the unauthorized use of one of
our test codes. As a result, a large number of calls were originated over the
course of 4 days and the associated origination and termination costs were
expensed as miscellaneous operating expenses. In addition, some of our regular
customers were unable to complete calls through our network. We lost revenue
from such customers and offered credits to these customers. While we believe
that changes in the technology we employ will curtail potential fraudulent use
of our facilities, we do not have insurance coverage for potential fraud in
place. Although we did not experience any fraudulent use of our facilities in
1998, any recurrence of such fraud could have a material adverse effect on our
business.
Although we make appropriate provisions for non-payment of monies owed to
us by our customers, our level of bad debt may increase. Any significant
increase in the level of bad debt could have a material adverse effect on our
business.
A CHANGE OF CONTROL MAY CAUSE DEFAULT UNDER THE INDENTURES GOVERNING THE NOTES.
Pursuant to the terms of the Notes, each holder can require us to
repurchase its Notes at a price equal to 101% of the principal amount thereof in
the event a change of control of VersaTel occurs.
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However, our existing contractual obligations or an inability to obtain adequate
resources may prevent us from consummating any offering to repurchase the Notes.
Our failure to complete an offer to repurchase the Notes would be an event of
default under the indentures governing the Notes and would, therefore, seriously
adversely affect our business.
WE MAY BE CONSIDERED A PASSIVE FOREIGN INVESTMENT COMPANY.
For the year 1998, we were a "passive foreign investment company" (a
"PFIC") for U.S. federal income tax purposes. Although, based on our
projections, we do not expect to be a PFIC for 1999 or any subsequent year,
because our projections may prove to be inaccurate and, in particular, because
we have substantial passive assets in the form of cash from the First High Yield
Offering and the Second High Yield Offering, and will raise additional capital
in this offering and the Third High Yield Offering, we can provide no assurance
in that regard. U.S. Holders (as defined in "Taxation -- U.S. Tax
Considerations") that own Shares or ADSs at any time during a taxable year for
which we are a PFIC will be subject to a complex set of rules under the Internal
Revenue Code and, generally, could in effect be subject to additional tax upon
certain distributions by us or upon a sale or other disposition of such Shares
or ADSs. See "Tax Considerations -- U.S. Federal Income Tax Considerations." We
urge investors to consult their own tax advisors regarding the application of
the PFIC rules to their particular circumstances.
INVESTORS WILL INCUR IMMEDIATE DILUTION AND MAY EXPERIENCE FURTHER DILUTION.
The initial offering price of our Shares and ADSs will be substantially
higher than the pro forma net tangible book value per share of the outstanding
ordinary shares, including ordinary shares represented by the ADSs, immediately
after the offering. If you purchase Shares or ADSs in this offering, you will
incur an immediate and substantial dilution in the pro forma net tangible book
value per Share or ADS from the price you will have paid for the Shares or ADSs.
We also have a large number of outstanding options to purchase, and warrants
exercisable into, ordinary shares with exercise prices significantly below the
estimated initial public offering price. To the extent such options and warrants
are exercised, you will experience further dilution. We expect that warrants
covering approximately 457,492 ordinary shares will be exercised concurrently
with this offering, each at an exercise price of NLG 2.55 per share, which is
substantially less than the estimated initial public offering price range listed
on the cover page of this prospectus.
SHARES ELIGIBLE FOR PUBLIC SALE AFTER THIS OFFERING COULD ADVERSELY AFFECT OUR
STOCK PRICE.
After this offering and based on certain assumptions, there will be
59,059,810 outstanding ordinary shares, including ordinary shares represented by
the ADSs. There will be 62,247,310 shares, including ordinary shares represented
by the ADSs, outstanding if the underwriters exercise their over-allotment
option in full. Of these shares, the shares sold in this offering will be freely
tradeable except for any shares purchased by our "affiliates" as defined in Rule
144 under the Securities Act. Currently outstanding shares not sold in this
offering will not be registered under the Securities Act and may only be resold
in compliance with the registration requirements under the Securities Act or in
transactions not subject to, or pursuant to an exemption from, such act.
Our directors, executive officers, and shareholders have agreed, subject to
certain limited exceptions, for a period of 180 days after the date of this
prospectus, that they will not, without the prior written consent of Lehman
Brothers Inc., directly or indirectly, offer to sell, sell or otherwise dispose
of any ordinary shares. See "Underwriting." As of the date of this prospectus,
there are outstanding 375,000 warrants to purchase 5,000,100 ordinary shares at
an exercise price of NLG 2.55 per share, which warrants were issued in
connection with the First High Yield Offering and the Second High Yield
Offering. All such warrants become exercisable upon completion of this offering.
Concurrently with the closing of this offering, the holders of 38,800 warrants
will exercise their warrants (on a cashless basis) and, immediately thereafter,
sell 457,492 ordinary shares (in the form of Shares or ADSs) issued upon
23
<PAGE> 30
exercise of such warrants. We expect that there will be 336,200 unexercised
warrants outstanding after the closing of this offering, which, when exercised,
would result in the issuance of approximately 4,482,891 ordinary shares that
could only be resold in compliance with the registration requirements of the
Securities Act or in transactions not subject to, or pursuant to an exemption
from, such act. The warrant agreements governing the warrants provide that we
must, for those warrant holders who elect not to participate in this offering,
file a shelf registration statement with the Securities and Exchange Commission
pursuant to Rule 415 of the Securities Act with respect to any ordinary shares
issued upon exercise of warrants within 180 days after the closing of this
offering. Pursuant to the terms of the warrant agreements governing the
warrants, we are obliged to file a shelf registration statement immediately upon
closing of this offering in respect of any warrant holders who elect to sell
shares issued upon the exercise of warrants in this offering but are prevented
from selling any such shares by the underwriters. No such electing warrant
holders have been prevented from selling warrant shares in connection with the
offering.
In addition, as of the date of this prospectus, there were outstanding
options to purchase 7,231,500 depositary receipts issued for ordinary shares
(348,000 of which are not dilutive in that the shares underlying such options
are currently outstanding and will be provided to us by the holders thereof),
none of which were fully vested and exercisable. An additional 591,500 shares
have been reserved for issuance under our 1999 Stock Option Plan. All of our
stock option plans provide that the option holder is not entitled to retain any
depositary receipts received by it as a result of the exercise of its option,
nor is the option holder entitled to exchange any depositary receipts for
ordinary shares. Upon exercise of its option by the option holder, the option
holder is required to offer the depositary receipts received by it to us or to
another party designated by us at the fair market value of the underlying
shares.
In connection with the Settlement Agreement, we have issued an additional
200,000 ordinary shares to Cromwilld. In connection with the acquisitions of CS
Net, SpeedPort and ITinera, we are obligated to issue up to an aggregate of
555,000 additional ordinary shares. We also have earn-out obligations to former
shareholders of SpeedPort and ITinera covering an aggregate of 130,000 ordinary
shares. Upon issuance, any such shares could only be resold in compliance with
the registration requirements of the Securities Act or in transactions not
subject to, or pursuant to an exemption from, such act.
We cannot predict if future sales of our ordinary shares, or the
availability of our ordinary shares for sale, will materially adversely affect
the market price for our ordinary shares or our ability to raise additional
capital by offering equity securities.
NO PUBLIC MARKET FOR THE SHARES AND ADSS AND THE PRICE OF THE SHARES AND ADSS
MAY BE VOLATILE.
Prior to this offering there was no public market for the Shares or the
ADSs. We cannot predict the extent to which investor interest in us will lead to
the development of a trading market in the Shares and ADSs or how liquid that
market might become. The initial public offering price for the Shares and ADSs
will be determined by negotiations between us and the representatives of the
underwriters and may not be indicative of prices that will prevail in the
trading market.
Recently, stock markets in the United States and Europe have experienced
significant price and volume fluctuations and the market prices of securities of
telecommunications services providers and technology companies, particularly
Internet-related companies, have been highly volatile. Investors may not be able
to resell their Shares or ADSs at or above the initial public offering price
listed on the front cover page of this prospectus. In the past, following
periods of volatility in the market price of a company's securities, securities
class action litigation in the United States has often been instituted against
such a company. The institution of such litigation against us could result in
substantial costs and a diversion of our management's attention and resources,
which could materially adversely affect our business, results of operations and
financial condition.
24
<PAGE> 31
WE HAVE ANTITAKEOVER PROVISIONS THAT COULD DELAY OR PREVENT A CHANGE IN CONTROL,
EVEN IF IT WOULD BENEFIT SHAREHOLDERS.
Our articles of association provide for the possible issuance of preference
shares A, preference shares B and one priority share. Such shares may be issued
pursuant to a resolution of the general meeting of shareholders. However, our
management board is expected to seek, from the shareholders at a general
meeting, the authority to issue preference shares and the priority share subject
only to the prior approval of the supervisory board. The issuance of preference
shares or the priority share may deter or prevent a takeover attempt, including
an attempt that might result in a premium over the market place for our Shares
or ADSs:
- Preference shares A and preference shares B. Upon obtaining authority
from the general meeting of shareholders to issue preference shares, our
management board is expected to grant a call option on preference shares,
which in the case of preference shares B will not exceed 100% of all our
other outstanding shares, to an independent foundation (stichting) to be
established under Netherlands law. In the event of a threatened hostile
take-over bid, the foundation may exercise this option. The issuance of
such preference shares could therefore inhibit a change of control.
- Priority share. Upon obtaining authority from the general meeting of
shareholders to issue the priority share, our management board is
expected to grant a call option on the priority share to an independent
foundation (stichting) to be established under Netherlands law. In the
event of a threatened hostile take-over bid, the foundation may exercise
this option. The priority share carries special voting rights. The
issuance of this priority share could therefore inhibit a change of
control.
WE DO NOT EXPECT TO PAY DIVIDENDS FOR THE FORESEEABLE FUTURE.
We have never declared or paid any cash dividends on our ordinary shares.
We currently intend to retain any future earnings to finance operations, expand
our network, repay outstanding obligations and finance future acquisitions.
Therefore, we do not expect to pay any dividends in the foreseeable future. In
addition, the indentures governing the Notes severely limit and for the
foreseeable future, effectively prohibit, our ability to pay cash dividends on
our capital stock.
27
<PAGE> 32
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. Such statements can be
identified by the use of terminology such as "believes", "expects", "may",
"will", "should", "anticipate", "estimate", "continue" or other similar words.
We have based these forward-looking statements on our current expectations and
projections about future events. These forward-looking statements are subject to
risks, uncertainties, and assumptions about us, including, among other things:
- our anticipated expansion plans for our network and growth strategies,
- our expectation of the impact of this expansion on our revenue potential,
cost basis and margins,
- our expectation of the competitiveness of our services,
- our intention to introduce new products and services,
- anticipated trends and conditions in our industry, including regulatory
reform and the liberalization of telecommunications services across
Europe, and
- our ability to compete, both nationally and internationally.
In light of these risks, uncertainties, and assumptions, the
forward-looking events discussed in this prospectus might not occur. We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
Given these considerations, readers are cautioned not to place undue reliance on
such forward-looking statements.
28
<PAGE> 33
USE OF PROCEEDS
We estimate that the net proceeds to us from (i) the sale by us of
ordinary shares offered hereby will be approximately $ million (NLG
million) ($ million (NLG million) if the underwriters' over-allotment
option is exercised in full), after deducting underwriting discounts and
commissions and estimated offering expenses payable by us, and assuming that our
employees and certain other persons will purchase 5% of the Shares being offered
by us at a 10% discount to the initial public offering price, and (ii) the sale
of the Dollar Notes and Euro Notes in the Third High Yield Offering will be
approximately $ million (NLG million) and E million (NLG
million), respectively, after deducting underwriting discounts and estimated
offering expenses.
Of the aggregate net proceeds of approximately $ million (NLG
million) (assuming no exercise by the underwriters of their over-allotment
option) from this offering and the Third High Yield Offering, we expect to use:
- approximately $152.2 million (NLG 310.5 million) to repay $131.25
million and $18.75 million in aggregate principal amount of, plus
accrued interest owing under, the Interim Loans made by Lehman
Commercial Paper Inc. and ING (U.S.) Capital, LLC, respectively,
affiliates of Lehman Brothers Inc., Lehman Brothers International
(Europe), ING Barings Limited and ING Barings LLC, each an
underwriter or an affiliate of an underwriter in this offering or
the Third High Yield Offering;
- approximately $150.0 million (NLG 306.0 million) to fund capital
expenditures for expansion of our network, including approximately
$70.0 million (NLG 142.8 million) for the fiber construction for the
Benelux network and the local access network, approximately $50.0
million (NLG 102.0 million) for points of presence, switches and
related equipment, and approximately $30.0 million (NLG 61.2
million) for other capital expenditures; and
- the remaining amount of approximately $ million (NLG
million) for acquisitions, working capital and other general
corporate purposes, including the funding of operating deficits.
The proceeds from the Third High Yield Offering will be used only to repay
the Interim Loans and for acquisitions and the expansion of our network in a
manner consistent with the terms of the indentures governing the Existing Notes.
Although we have no commitments or agreements with respect to any specific
future acquisition, we expect to use a portion of the net proceeds of this
offering for the acquisition of businesses which are complementary to our own.
Pending the foregoing uses, we intend to invest the net proceeds from this
offering and the Third High Yield Offering in short-term, investment grade,
interest-bearing instruments.
Notwithstanding the above, we cannot specify with certainty the particular
uses for the net proceeds of this offering. Accordingly, our management will
have broad discretion in the application of such net proceeds.
We will not receive any of the proceeds from the Shares or ADSs being sold
by the selling shareholders.
29
<PAGE> 34
DIVIDEND POLICY
We have never declared or paid any dividends on our ordinary shares and we
do not anticipate paying any cash dividends in the foreseeable future. We
currently intend to retain future earnings to finance operations, expand our
network, repay outstanding obligations and finance future acquisitions. Any
future determination to pay cash dividends will be at the discretion of the
shareholders, to be determined at a general meeting of shareholders. Our ability
to declare or pay cash dividends, if any, will be dependent upon the ability of
our subsidiaries to declare and pay dividends or otherwise transfer funds to
VersaTel, because VersaTel conducts its operations entirely through
subsidiaries. The indentures governing the Notes provide that, in general, we
may not declare or pay any dividend or make any other cash distribution to our
shareholders, unless we have generated sufficient cash flows from prior years.
These indentures limit and, for the foreseeable future, effectively prohibit,
our ability to declare or pay cash dividends. See "Description of Material
Indebtedness."
30
<PAGE> 35
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 1999. Our
capitalization is presented on an actual basis and on an "as adjusted" basis to
reflect our receipt of the estimated net proceeds, after deducting underwriting
discounts, commissions and estimated offering expenses, from the sale of (i)
18,992,508 ordinary shares (all of which we have assumed are sold in the form of
Shares), (ii) the Third Notes offered in the Third High Yield Offering and (iii)
the acquisition of Svianed. You should read this capitalization table together
with "Selected Financial Data for VersaTel," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Unaudited Pro Forma
Consolidated Financial Information" and the historical financial statements
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
------------------------------------------------
ACTUAL AS ADJUSTED
---------------------- ----------------------
NLG $(1) NLG $(1)
--------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash and restricted cash(2).............. 559,366 274,199
========= ========= ========= =========
Current maturities of long-term
debt(3)................................ 71 35 2,571 1,260
Long-term debt (less current portion):
13 1/4% Senior Notes due 2008(4)(5).... 455,773 223,418 455,773 223,418
13 1/4% Senior Notes due 2008(4)(6).... 292,072 143,172 292,072 143,172
% Senior Dollar Notes due
2009(4)............................. -- --
% Senior Euro Notes due 2009(7)... -- --
Other debt(3).......................... 693 340 3,193 1,565
--------- --------- --------- ---------
Total debt.......................... 748,609 366,965
--------- --------- --------- ---------
Shareholders' equity:
Ordinary shares, par value NLG 0.05 per
share -- 150,000,000 shares
authorized, and 38,984,810 shares
issued and outstanding; 80,000,000
shares authorized and 59,059,810
shares issued and outstanding, as
adjusted(8)(9)...................... 1,949 955
Additional paid-in capital(9).......... 51,112 25,055
Warrants(5)(6)(9)...................... 5,212 2,555
Accumulated deficit.................... (170,728) (83,690)
--------- --------- --------- ---------
Total shareholders' equity
(deficit)......................... (112,455) (55,125)
--------- --------- --------- ---------
Total capitalization................ 636,154 311,840
========= ========= ========= =========
</TABLE>
- -------------------------
(1) Solely for the convenience of the reader and except as provided in
footnotes 4 and 7 below, Dutch guilder amounts have been translated into
U.S. dollars at the Noon Buying Rate on March 31, 1999 of NLG 2.04 per
$1.00.
(2) The adjustment to cash and restricted cash reflects (i) the receipt of the
estimated net cash proceeds from this offering of $ million (NLG
million) (assuming that 900,000 ordinary shares offered hereby are sold to
employees of VersaTel at a 10% discount to the initial public offering
price), (ii) the receipt of the U.S. dollar equivalent, of the estimated
net cash proceeds from the Third High Yield Offering of $ million (NLG
million) and (iii) the maintenance of $ million (NLG million)
(reflecting the total proceeds of $ million (NLG million) from this
offering and the Third High Yield Offering less approximately $177.7
million (NLG 362.5 million) used to acquire Svianed) as cash pending
application as provided in "Use of Proceeds." Amounts paid in dollars have
been translated into Dutch guilders at the rate of $1.00 = NLG 2.04.
(3) The adjustment reflects assumed debt of NLG 5.0 million from the Svianed
acquisition.
29
<PAGE> 36
(4) The U.S. dollar indebtedness of the Senior Notes and of the Senior Dollar
Notes has been translated into Dutch guilders at the Noon Buying Rate on
March 31, 1999 of $1.00 per NLG 2.04.
(5) NLG 3.3 million of the aggregate principal amount of the First Notes was
allocated to the warrants issued in connection with the First High Yield
Offering.
(6) NLG 1.9 million of the aggregate principal amount of the Second Notes was
allocated to the warrants issued in connection with the Second High Yield
Offering.
(7) The euro indebtedness of the Senior Euro Notes has been translated into
Dutch guilders at E1.00 per NLG 2.20371.
(8) Actual shares issued and outstanding includes 130,000 ordinary shares that
we are obligated to issue, and which have been approved for issuance by our
shareholders, in connection with the acquisition of CS Net. See footnote
(3) to "Summary -- The Offering" for the calculation of the as adjusted
issued and outstanding share number.
(9) Gives effect to the sale of 457,492 Shares or ADSs by certain holders of
warrants in this offering, upon cashless exercise of 38,800 warrants,
consisting of approximately 10% of the warrants issued in connection with
the First High Yield Offering and the Second High Yield Offering.
30
<PAGE> 37
DILUTION
As of March 31, 1999, our net tangible book value was NLG (112.5) million
($(55.1) million), or NLG (2.88) ($(1.41)) per ordinary share. "Net tangible
book value" per share represents the amount of our total tangible assets reduced
by the amount of our total liabilities, divided by the number of ordinary shares
outstanding. As of March 31, 1999, our net tangible book value, after giving
effect to the sale of ordinary shares in the form of Shares offered in
this offering and the application of the net proceeds from such sale of NLG
million ($ million) after deducting the underwriting discounts and
commissions and other estimated offering expenses), would have been
approximately NLG million ($ million), or NLG ($ ) per
ordinary share. This represents an immediate increase of NLG ($ ) per
ordinary share to existing shareholders and an immediate dilution of NLG
($ ) per ordinary share to new investors.
The following table illustrates this per share dilution:
<TABLE>
<CAPTION>
PER SHARE PER ADS(1)
--------------------- ---------------------
<S> <C> <C> <C> <C>
Initial public offering price(2)........ NLG $
Consolidated net tangible book value as
of March 31, 1999(3).................. NLG (2.88) $(1.41)
Increase in net tangible book value
attributable to new investors.........
--------- -------
Pro forma net tangible book value after
this offering(4)......................
--------- -----
Dilution to new investors purchasing
Shares or ADSs(5)..................... NLG $
--------- -----
--------- -----
</TABLE>
Assuming this offering had occurred on March 31, 1999, the following table
summarizes the differences between the total consideration paid and the average
price per share paid by the existing shareholders and the new investors with
respect to the number of Shares purchased from us:
<TABLE>
<CAPTION>
AVERAGE
PRICE
SHARES PURCHASED TOTAL CONSIDERATION(6) PER SHARE
-------------------- ---------------------------------- AND PER
NUMBER PERCENT AMOUNT PERCENT ADS(1)(2)
---------- ------- ----------------------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Existing
shareholders....... 39,642,302 % NLG(7) $ (7) % NLG $
New investors........ % %
---------- ----- ----------- -------- ----- -------- -----
Total........... 100% NLG $ 100%
========== ===== =========== ======== =====
</TABLE>
31
<PAGE> 38
- -------------------------
(1) Proceeds from the sale of Shares received in euro have been converted into
NLG at the rate of NLG 2.20371 = E1.00, which resulting amount has been
converted into U.S. dollars at the rate of NLG 2.04 per $1.00.
(2) Because of changes in the U.S. dollar-Dutch guilder exchange rate since
March 31, 1999, per ADS amounts do not reflect the per ADS price on the
front cover page of this prospectus, which has been converted from euro at
the July 19, 1999 Noon Buying Rate of NLG 2.16=$1.00.
(3) Consolidated net tangible book value per Share before this offering is
determined by dividing VersaTel's consolidated net tangible book value at
March 31, 1999 by 38,984,810, the number of ordinary shares then outstanding
after giving effect to the assumed issuance of 130,000 shares in connection
with the acquisition of CS Net. This calculation excludes the impact of (i)
an aggregate of 625,000 ordinary shares reserved for issuance to former
shareholders of SpeedPort and ITinera and issued to Cromwilld pursuant to
the Settlement Agreement, (ii) options covering 7,231,500 ordinary shares
that have been granted to employees (348,000 of which non-dilutive in that
the shares underlying such options are currently outstanding and will be
provided to us by the holders thereof), (iii) 5,000,100 ordinary shares
reserved for issuance in connection with the exercise of then outstanding
warrants and (iv) an aggregate of 130,000 ordinary shares approved for
issuance in connection with earn-out obligations to former shareholders of
SpeedPort and ITinera.
(4) The total number of outstanding ordinary shares for the purposes of
calculating consolidated net tangible book value after this offering is
59,059,810, assuming no exercise of the over-allotment option by the
underwriters. This calculation excludes the impact of (i) options covering
7,231,500 ordinary shares that have been issued to employees (348,000 of
which non-dilutive in that the shares underlying such options are currently
outstanding and will be provided to us by the holders thereof), (ii)
4,482,891 ordinary shares that will be reserved for issuance in connection
with warrants outstanding after this offering and (iii) an aggregate of
130,000 ordinary shares approved for issuance in connection with earn-out
obligations to former shareholders of SpeedPort and ITinera.
(5) Dilution, for this purpose, represents the difference between the assumed
initial public offering price per Share in this offering and the
consolidated net tangible book value per Share at March 31, 1999 after
giving effect to this offering and the assumptions contained in footnote
(4), above.
(6) Does not include (i) estimated expenses of approximately NLG 32.1 million
($15.7 million) to be incurred in connection with this offering and (ii) any
ordinary shares offered at a discount to the public offering price.
(7) Includes the cost of NLG 5,212 in connection with warrants issued in the
First High Yield Offering and Second High Yield Offering.
32
<PAGE> 39
EXCHANGE RATE INFORMATION
DUTCH GUILDERS TO U.S. DOLLARS
The table below sets forth, for the periods and dates indicated, certain
information concerning the Noon Buying Rates for Dutch guilders expressed in
Dutch guilders per U.S. dollar through December 31, 1998 and, for periods
thereafter, the exchange rate of Dutch guilders per U.S. dollar (calculated
based on the Noon Buying Rate for euro). On March 31, 1999, the exchange rate
for Dutch guilders per U.S. dollar (calculated based on the Noon Buying Rate of
euro per U.S. dollar on such date) was NLG 2.04 per $1.00.
<TABLE>
<CAPTION>
PERIOD
PERIOD HIGH LOW AVERAGE(1) PERIOD END
------ ---- ---- ---------- ----------
<S> <C> <C> <C> <C>
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.............................................. 2.09 1.81 1.98 1.88
1999 (through July 19)............................ 2.17 1.87 2.05 2.16
</TABLE>
- -------------------------
(1) The average of the Noon Buying Rates on the last day of each full month
during the period.
Netherlands law does not impose restrictions that would affect the
remittance of dividend or other payments to nonresident holders of the ordinary
shares or any other foreign exchange controls. Fluctuations in the exchange rate
between the Dutch guilder and the U.S. dollar in the past are not necessarily
indicative of fluctuations that may occur in the future.
BELGIAN FRANCS TO U.S. DOLLARS
The table below sets forth, for the periods and dates indicated, certain
information concerning the Noon Buying Rates for Belgian francs expressed in
Belgian francs per U.S. dollar through December 31, 1998 and, for periods
thereafter, the exchange rate of Belgian francs per U.S. dollar (calculated
based on the Noon Buying Rate for euro). On March 31, 1999, the exchange rate
for Belgian francs per U.S. dollar (calculated based on the Noon Buying Rate of
euro per U.S. dollar on such date) was BEF 37.32 per $1.00. The exchange rate of
the Luxembourg franc to the U.S. dollar is the same as that of the Belgian franc
to the U.S. dollar.
<TABLE>
<CAPTION>
PERIOD
PERIOD HIGH LOW AVERAGE(1) PERIOD END
------ ----- ----- ---------- ----------
<S> <C> <C> <C> <C>
1994............................................ 36.53 30.73 33.43 31.85
1995............................................ 32.14 27.94 29.47 29.43
1996............................................ 32.27 29.50 30.97 31.71
1997............................................ 38.82 31.76 35.81 37.08
1998............................................ 38.50 33.19 36.31 34.36
1999 (through July 19).......................... 39.79 34.15 37.58 39.54
</TABLE>
- -------------------------
(1) The average of the Noon Buying Rates on the last day of each full month
during the period.
Fluctuations in the exchange rate between the Belgian franc and the U.S.
dollar in the past are not necessarily indicative of fluctuations that may occur
in the future.
35
<PAGE> 40
U.S. DOLLARS TO EURO
Each of The Netherlands, Belgium and Luxembourg has adopted the euro as of
January 1, 1999. The table below sets forth, for the periods and dates
indicated, certain information concerning the Noon Buying Rates for euros
expressed in U.S. dollars per euro.
<TABLE>
<CAPTION>
PERIOD
PERIOD HIGH LOW AVERAGE(1) PERIOD END
------ ---- ---- ---------- ----------
<S> <C> <C> <C> <C>
First Quarter 1999................................ 1.18 1.07 1.11 1.08
Second Quarter 1999............................... 1.08 1.02 1.04 1.03
Third Quarter 1999 (through July 19).............. 1.02 1.01 -- 1.02
</TABLE>
- -------------------------
(1) The average of the Noon Buying Rates on the last day of each full month
during the period.
Fluctuations in the exchange rate between the euro and the U.S. dollar in
the past are not necessarily indicative of fluctuations that may occur in the
future.
EUROPEAN MONETARY UNION
Pursuant to the Treaty on European Union, signed at Maastricht on February
7, 1992, the third stage of the European Monetary Union commenced on January 1,
1999. On that date, the euro was introduced and became legal tender in the
member states of the EU which are participating in the third stage of the
European Monetary Union, and those participating member states transferred
authority for conducting monetary policy to the European Central Bank. The
following 11 member states are participating on the third stage of the European
Monetary Union: Austria, Belgium, Finland, France, Germany, Ireland, Italy,
Luxembourg, The Netherlands, Portugal and Spain. From the start of the third
stage of the European Monetary Union, the value of the euro against the
currencies of each of the participating member states was irrevocably fixed.
Participating national currencies will be removed from circulation between
January 1, 2002 and June 30, 2002 and replaced by euro banknotes and coins.
During the transition period from January 1, 1999 through December 31, 2001, the
euro will be available only in "paperless form," pending the production and
release of euro banknotes and coins, while the participating countries' national
currencies will be maintained as non-decimal subdivisions of the euro. The
denomination of "legal instruments" (legislative and statutory provisions, acts
of administration, judicial decisions, contracts, unilateral legal acts,
payments instructions other than banknotes and coins, and other instruments with
legal effect) is not modified by the introduction of the euro itself and
payments originally designated in Dutch guilders, for instance, will continue to
be made in Dutch guilders, unless otherwise agreed by the parties. Under the
so-called "no compulsion -- no prohibition" principle, since January 1, 1999
private and public entities as well as individuals may agree on the use of
either euro (for non-cash payments only) or the participating countries'
national currencies for existing and new transactions. During the transition
period certain legal instruments (mainly government bonds and other debt
instruments) may be unilaterally redenominated in euro. As of January 1, 2002,
all references to the participating countries' national currencies contained in
legal instruments (not redenominated during the transitional period) are to be
understood as references to the euro.
Also, since January 1, 1999 the value of the national currency of a
participating country in the national currency of another country (whether a
participating members state or not) may be determined only through the bilateral
conversion method (by converting the first currency into euro and then
converting this euro equivalent amount into the second currency). The conversion
rates between the euro and the participating member states' national currencies
were irrevocably fixed on December 31, 1998. The conversion rate between the
euro and the Dutch guilder was fixed at NLG 2.20371 per E1.00 and the conversion
rate between the euro and the Belgian franc was fixed at BEF 40.3399 per E1.00.
36
<PAGE> 41
OUR RESPONSE TO THE INTRODUCTION OF THE EURO
We have published our historical financial statements, including our
audited financial statements, in Dutch guilders. We expect to begin preparing
our financial statements in euros commencing with the financial statements for
the fiscal year 2000, but not to restate our historical financial statements in
euros. Our financial statements for 2000 will contain a column converting euro
amounts to Dutch guilders for comparison purposes. We expect to keep our
accounting records in euros starting in 2000. We expect that our share capital
will be redenominated in euros in 2000.
Payment for Shares purchased in this offering may be made in Dutch guilders
or in euros (for non-cash payments only), but the price of ordinary shares
listed and traded on the Amsterdam Stock Exchange will be quoted exclusively in
euros.
37
<PAGE> 42
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma financial information of VersaTel has
been prepared in accordance with U.S. GAAP and is derived from, and should be
read in conjunction with, the historical audited financial statements of
VersaTel and Svianed included elsewhere in this prospectus. The unaudited pro
forma statement of operations data for the year ended December 31, 1998 give
effect to the Transactions as if they had occurred on January 1, 1998. The
unaudited pro forma statement of operations data for the 3 months ended March
31, 1999 give effect to the Transactions as if they had occurred on January 1,
1999. The unaudited pro forma balance sheet data as of March 31, 1999 give
effect to the Transactions as if they had occurred on such date.
The unaudited pro forma financial information set forth below reflects pro
forma adjustments that are based upon available information and certain
assumptions that VersaTel believes are reasonable. The acquisition of Svianed
will be accounted for under the acquisition method of accounting and,
accordingly, this method of accounting has been applied in the unaudited pro
forma financial information. Under the acquisition method of accounting, the
purchase price is allocated to the assets acquired and liabilities assumed based
on their estimated fair values at the time of the acquisition of Svianed.
Estimates of the fair values of the Svianed assets and liabilities have been
combined with the recorded values of the assets and liabilities of VersaTel in
the unaudited pro forma financial information. The estimates of fair value of
assets and liabilities are based on a number of assumptions which management
believe to be reasonable but which are subject to change. Such changes could
include, among other things, changes in the classification and useful lives of
intangible assets and the related amortization expense from amounts presented in
the pro forma financial information.
The unaudited pro forma financial information is presented for illustrative
purposes only and is not necessarily an indication of the results that would
have been achieved had such transactions been consummated as of the dates
indicated or that may be achieved in the future. The unaudited pro forma
financial information and accompanying notes should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
38
<PAGE> 43
VERSATEL TELECOM INTERNATIONAL N.V.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------- -----------------------------------------
VERSATEL SVIANED ADJUSTMENTS COMBINED
----------- ----------- ----------- -------------------------
NLG NLG NLG NLG $(1)
<S> <C> <C> <C> <C> <C>
REVENUES..................... 39,561 56,683 96,244 47,178
OPERATING EXPENSES:
Cost of revenues, excluding
depreciation and
amortization............ 31,821 26,878 58,699 28,774
Selling, general and
administrative.......... 47,733 11,890 59,623 29,227
Depreciation and
amortization............ 6,473 8,751 35,119(2) 50,343 24,678
----------- ----------- ----------- -----------
Total operating
expenses.............. 86,027 47,519 168,665 82,679
----------- ----------- ----------- -----------
Operating result............. (46,466) 9,164 (72,421) (35,501)
OTHER INCOME (EXPENSES):
Foreign currency exchange
gains (losses), net..... 5,146 -- 5,146 2,522
Interest income............ 11,857 85 11,942 5,854
Interest expense -- third
parties................. (37,522) (435) ( )(3) ( ) ( )
Interest expense -- related
parties................. (145) -- (145) (71)
----------- ----------- ----------- -----------
Total other income
(expense)............. (20,664) (350) ( ) ( )
----------- ----------- ----------- -----------
Net result before income
taxes...................... (67,130) 8,814 ( ) ( )
PROVISION FOR INCOME TAXES... 7 3,085 ( )(4) 7 3
----------- ----------- ----------- -----------
Net result................... (67,137) 5,729 ( ) ( )
=========== =========== =========== ===========
NET RESULT PER SHARE (Basic
and Diluted)(5)(6)......... (2.06) ( ) ( )
Weighted average number of
shares outstanding(5)(6)... 32,622,194
FINANCIAL DATA:
EBITDA(7).................. (39,993) 17,915 (22,078) (10,823)
Capital expenditures....... 77,255 13,256 90,511 44,368
</TABLE>
37
<PAGE> 44
- -------------------------
(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, 1999 of
NLG 2.04 per $1.00.
(2) Reflects the amortization, over the current period, of goodwill. Goodwill
reflects the excess of the acquisition price of Svianed over the fair value
of assets and liabilities of Svianed. The book value of tangible assets
acquired and liabilities assumed are assumed to approximate fair value. The
excess of the purchase price over the fair value of tangible assets acquired
and liabilities assumed was allocated to assets acquired based on
management's best estimate, based on discussion with VersaTel's advisers and
preliminary analysis of available financial and non-financial data, of the
fair values of such assets.
<TABLE>
<CAPTION>
NLG
--------------
(IN THOUSANDS)
<S> <C>
Total purchase price (including NLG 4,475 of acquisition
costs).................................................... (362,475)
Fair value of tangible assets acquired and liabilities
assumed................................................... 11,288
--------
Goodwill recorded on acquisition............................ (351,187)
========
</TABLE>
The above goodwill calculation is based on the fair value of assets and
liabilities as if they had been acquired at January 1, 1998. Goodwill is
amortized over a period of 10 years.
(3) Interest expense reflects (i) NLG million of interest expense relating
to the Third High Yield Offering (calculated using an assumed interest rate
of % per annum) and (ii) NLG 2.5 million of amortization expenses
relating to the amortization of deferred financing costs incurred in
connection with the acquisition of Svianed and the Third High Yield
Offering.
(4) Reflects the assumption that VersaTel and Svianed would have filed a
consolidated tax return for the year ended December 31, 1998.
(5) Historical share numbers are adjusted to give effect to a 2-for-1 stock
split on April 13, 1999 and include 130,000 ordinary shares approved for
issuance by our shareholders in connection with the acquisition of CS Net.
Does not include (i) an aggregate of 425,000 shares that we are obligated to
issue in connection with the acquisitions of SpeedPort and ITinera and (ii)
200,000 shares which we issued to Cromwilld in connection with the
Settlement Agreement.
(6) Includes 130,000 ordinary shares approved for issuance by our shareholders
in connection with the acquisition of CS Net.
(7) 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 a company's results of operations or liquidity. Funds depicted
by this measure may not be available for management's discretionary use (due
to covenant restrictions, debt service payments, the expansion of our
network, and other commitments). 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.
38
<PAGE> 45
VERSATEL TELECOM INTERNATIONAL N.V.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------------- -------------------------------------
VERSATEL SVIANED ADJUSTMENTS COMBINED
---------- ---------- ----------- -----------------------
NLG NLG NLG NLG $(1)
<S> <C> <C> <C> <C> <C>
REVENUES..................... 15,501 15,579 31,080 15,235
OPERATING EXPENSES:
Cost of revenues, excluding
depreciation and
amortization............ 12,485 6,628 19,113 9,369
Selling, general and
administrative.......... 20,179 3,734 23,913 11,722
Depreciation and
amortization............ 3,084 2,472 8,761(2) 14,317 7,018
---------- ---------- ---------- ----------
Total operating
expenses.............. 35,748 12,834 57,343 28,109
---------- ---------- ---------- ----------
Operating result........ (20,247) 2,745 (26,263) (12,874)
OTHER INCOME (EXPENSES):
Foreign currency exchange
gains (losses), net..... (40,283) -- (40,283) (19,747)
Interest income............ 6,043 26 6,069 2,975
Interest expense -- third
parties................. (23,895) (70) ( )(3) ( ) ( )
Interest expense -- related
parties................. -- (68) (68) (33)
---------- ---------- ---------- ----------
Total other income
(expenses)............ (58,135) (112) ( ) ( )
---------- ---------- ---------- ----------
Net result before income
taxes...................... (78,382) 2,633 ( ) ( )
PROVISION FOR INCOME TAXES... -- 921 (921)(4) -- --
---------- ---------- ---------- ----------
Net result................... (78,382) 1,712 ( ) ( )
========== ========== ========== ==========
NET LOSS PER SHARE (Basic and
Diluted)(5)(6)............. (2.01) ( ) ( )
Weighted average number of
shares outstanding(5)(6)... 38,984,810
FINANCIAL DATA:
EBITDA(7).................. (17,163) 5,217 (11,946) (5,856)
Capital expenditures....... 52,226 3,746 55,972 27,437
</TABLE>
39
<PAGE> 46
- -------------------------
(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, 1999 of
NLG 2.04 per $1.00.
(2) Reflects the amortization, over the current period, of goodwill. Goodwill
reflects the excess of the acquisition price of Svianed over the fair value
of assets and liabilities of Svianed. The book value of tangible assets
acquired and liabilities assumed are assumed to approximate fair value. The
excess of the purchase price over the fair value of tangible assets acquired
and liabilities assumed was allocated to assets acquired based on
management's best estimate, based on discussion with VersaTel's advisers and
preliminary analysis of available financial and non-financial data, of the
fair values of such assets.
<TABLE>
<CAPTION>
NLG
(IN
THOUSANDS)
--------------
<S> <C>
Total purchase price (including NLG 4,475 of acquisition (362,475)
costs)....................................................
Fair value of tangible assets acquired and liabilities 12,017
assumed...................................................
--------
Goodwill recorded on acquisition............................ (350,458)
========
</TABLE>
The above goodwill calculation is based on the fair value of assets and
liabilities as if they had been acquired at January 1, 1999. Goodwill is
amortized over a period of 10 years.
(3) Interest expense reflects (i) NLG million of interest expense
relating to the Third High Yield Offering (calculated using an assumed
interest rate of % per annum) and (ii) NLG 0.6 million of amortization
expense relating to the amortization of deferred financing costs incurred in
connection with the acquisition of Svianed and the Third High Yield
Offering.
(4) Reflects the assumption that VersaTel and Svianed would have filed a
consolidated tax return for the year ended December 31, 1999.
(5) Historical share numbers are adjusted to give effect to a 2-for-1 stock
split on April 13, 1999 and include 130,000 ordinary shares approved for
issuance by our shareholders in connection with the acquisition of CS Net.
Does not include (i) an aggregate of 425,000 shares that we are obligated to
issue in connection with the acquisitions of SpeedPort and ITinera and (ii)
200,000 shares which we issued to Cromwilld in connection with the
Settlement Agreement.
(6) Includes 130,000 ordinary shares approved for issuance by our shareholders
in connection with the acquisition of CS Net.
(7) 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 a company's results of operations or liquidity. Funds depicted
by this measure may not be available for management's discretionary use (due
to covenant restrictions, debt service payments, the expansion of our
network, and other commitments). 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.
40
<PAGE> 47
VERSATEL TELECOM INTERNATIONAL N.V.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------- -----------------------------------
VERSATEL SVIANED ADJUSTMENTS COMBINED
-------- -------- ----------- --------------------
NLG NLG NLG NLG $(1)
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents......................... 329,551 5,318 (2)
Restricted cash, current portion.................. 94,201 -- 94,201 46,177
Accounts receivable less allowance for doubtful
accounts....................................... 11,001 12,218 23,219 11,382
Inventory......................................... 2,992 397 3,389 1,661
Other current assets.............................. 17,439 2,976 20,415 10,007
-------- ------ --------- --------
Total current assets........................... 455,184 20,909
Fixed Assets:
Property and Equipment, net....................... 41,766 20,427 62,193 30,487
Construction in Progress.......................... 92,205 -- 92,205 45,199
-------- ------ --------- --------
Total fixed assets............................. 133,971 20,427 154,398 75,686
Restricted cash, net of current portion............. 135,614 -- 135,614 66,477
Capitalized finance costs, net...................... 28,000 -- 24,735(3) 52,735 25,850
Goodwill............................................ 4,354 -- 348,746(4) 353,100 173,089
Deferred tax assets................................. -- 158 158 77
-------- ------ --------- --------
Total assets................................... 757,123 41,494 1,612,974 790,673
======== ====== ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.................................. 50,556 4,390 54,946 26,935
Due to related parties............................ -- 4,759 4,759 2,333
Accrued liabilities............................... 70,413 6,630 77,043 37,766
Deferred income................................... -- 1,536 1,536 753
Current portion of long term debt................. -- 2,500 2,500 1,225
Current portion of capital lease obligations...... 71 -- 71 35
-------- ------ --------- --------
Total current liabilities...................... 121,040 19,815 140,855 69,047
Deferred Income, net of current portion.............
Capital Lease Obligations, net of current portion... 23 -- 23 11
Long Term Liabilities............................... 670 -- 670 328
Third Notes offered in the Third High Yield
Offering.......................................... (5)
Long Term Debt (13 1/4% Senior Notes)............... 747,845 -- 747,845 366,591
Long Term Debt less of current portion.............. -- 7,500 (5,000)(6) 2,500 1,225
Pension obligation.................................. -- 450 450 221
-------- ------ --------- --------
Total liabilities.............................. 869,578 27,765
Shareholders' Equity:
Share capital....................................... 1,949 5,000 (7)(8)
Additional paid-in capital.......................... 51,112 -- (8)
Warrants............................................ 5,212 -- (9)
Retained earnings (accumulated deficit)............. (170,728) 8,729 (8,729)(7) (170,728) (83,690)
-------- ------ --------- --------
Total shareholders' equity..................... (112,455) 13,729
-------- ------ --------- --------
Total liabilities and shareholders' equity... 757,123 41,494
======== ====== ========= ========
</TABLE>
43
<PAGE> 48
- -------------------------
(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, 1999 of
NLG 2.04 per $1.00.
(2) Reflects (i) the net proceeds received by VersaTel from this offering of
$ million (NLG million), (ii) the proceeds of the Third High Yield
Offering of $ million (NLG million) net of capitalized finance costs
of $12.1 million (NLG 24.7 million) and (iii) the acquisition cost of
Svianed of NLG 362.5 million and the early repayment of NLG 5.0 million of
long-term debt of Svianed related thereto. Amounts paid in dollars have been
translated into Dutch guilders at the rate of $1.00 = NLG 2.04. Assumes all
ordinary shares offered in this offering are issued in the form of Shares.
(3) Reflects financing costs associated with the incurrence of the Interim Loans
and the issuance of the Third Notes in the Third High Yield Offering.
(4) Goodwill reflects the excess of the acquisition price of Svianed over the
fair value of assets and liabilities of Svianed. The book value of tangible
assets acquired and liabilities assumed are assumed to approximate fair
value. The excess of the purchase price over the fair value of tangible
assets acquired and liabilities assumed was allocated to assets acquired
based on management's best estimate, based on discussion with VersaTel's
advisers and preliminary analysis of available financial and non-financial
data, of the fair values of such assets.
<TABLE>
<CAPTION>
NLG
(IN THOUSANDS)
--------------
<S> <C>
Total purchase price (including NLG 4,475 of acquisition (362,475)
costs)....................................................
Fair value of tangible assets acquired and liabilities 13,729
assumed...................................................
--------
Goodwill recorded on acquisition............................ (348,746)
========
</TABLE>
The above goodwill calculation is based on the fair value of assets and
liabilities as if they had been acquired at March 31, 1999.
(5) Reflects $ million aggregate principal amount of Senior Dollar Notes and
Senior Euro Notes to be issued in the Third High Yield Offering.
(6) Reflects the early repayment of long-term debt as a result of the
acquisition of Svianed.
(7) Reflects the elimination of the shareholders' equity of Svianed.
(8) Reflects the issuance of 18,992,508 shares by VersaTel and 457,492 Warrant
Shares in connection with the offering, and the issuance of 130,000 ordinary
shares that we are obligated to issue and which have been approved for
issuance by our shareholders, in connection with our acquisition of CS Net.
Assumes no exercise of the over-allotment option by the underwriters.
(9) Reflects cashless exercise of warrants representing 457,492 Warrant Shares
in connection with the offering (or approximately 10% of the warrants issued
in connection with each of the First High Yield Offering and the Second High
Yield Offering).
42
<PAGE> 49
SELECTED FINANCIAL DATA FOR VERSATEL
The following selected financial data of VersaTel as of and for the years
ended December 31, 1996, 1997 and 1998 have been prepared in accordance with
U.S. GAAP and have been derived from the historical financial statements of
VersaTel, which have been audited by Arthur Andersen, independent public
accountants. The selected financial data for VersaTel as of and for the 3 month
periods ended March 31, 1998 and 1999 are unaudited, but in the opinion of the
management contain all adjustments, consisting only of normal recurring
accruals, which are necessary for a fair presentation of results for interim
periods. You should read the information set forth below in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations" and the historical audited financial
statements of VersaTel included elsewhere in this prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
-------------------------------------------------- ----------------------------
1995(1) 1996 1997 1998 1998 1999
------- ------ ------- ------------------ ------ ------------------
NLG NLG NLG NLG $(2) NLG NLG $(2)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue............................ 52 6,428 18,896 39,561 19,393 6,402 15,501 7,599
Operating expenses:
Cost of revenue, excluding
depreciation and
amortization................... 117 4,954 17,405 31,821 15,598 5,460 12,485 6,120
Selling, general and
administrative................. 538 5,485 17,527 47,733 23,399 5,544 20,179 9,892
Depreciation and amortization.... 11 453 3,237 6,473 3,173 1,087 3,084 1,512
------ ------ ------- ------- ------- ------ ------- -------
Total operating expenses....... 666 10,892 38,169 86,027 42,170 12,091 35,748 17,524
------ ------ ------- ------- ------- ------ ------- -------
Loss from operations............... (614) (4,464) (19,273) (46,466) (22,777) (5,689) (20,247) (9,925)
Interest expense (income), net..... 1 269 534 25,810 12,652 200 17,852 8,751
Currency loss (gain)............... -- -- 53 (5,146) (2,522) 115 40,283 19,747
------ ------ ------- ------- ------- ------ ------- -------
Net loss before income taxes....... (615) (4,733) (19,860) (67,130) (32,907) (6,004) (78,382) (38,423)
Provision for income taxes......... -- -- -- 7 3 -- -- --
------ ------ ------- ------- ------- ------ ------- -------
Net loss......................... (615) (4,733) (19,860) (67,137) (32,910) (6,004) (78,382) (38,423)
====== ====== ======= ======= ======= ====== ======= =======
Net loss per share (Basic and
Diluted)(3)...................... (0.09) (0.47) (1.10) (2.06) (1.01) (0.31) (2.01) (0.99)
Weighted average number of shares
outstanding(3)................... 6,654 10,008 18,084 32,622 32,622 19,159 38,985 38,985
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
-------------------------------------------------- ------------------------------
1995(1) 1996 1997 1998 1998 1999
------- ------ ------- ------------------ ------- -------------------
NLG NLG NLG NLG $(2) NLG NLG $(2)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and restricted cash......... 160 4,443 1,495 583,570 286,064 5,298 559,366 274,199
Working capital (excluding cash
and restricted cash)........... 436 (2,704) (24,774) (46,851) (22,966) (28,792) (89,608) (43,925)
Capitalized finance cost......... -- -- -- 28,750 14,093 -- 28,000 13,725
Property, plant and equipment,
net............................ 224 2,340 13,619 38,608 18,925 14,956 41,766 20,474
Construction in progress......... -- -- -- 46,019 22,558 -- 92,205 45,199
Goodwill......................... -- -- -- 4,556 2,233 -- 4,354 2,134
Total assets..................... 820 8,160 19,331 723,397 354,606 26,189 757,123 371,139
Total long-term obligations
(including current portion).... 614 4,185 8,931 688,796 337,645 15,949 748,609 366,965
Total shareholders' equity
(deficit)...................... (120) 146 (18,214) (34,073) (16,702) (24,218) (112,455) (55,125)
</TABLE>
43
<PAGE> 50
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------------------------------------- -------------------------------
1995(1) 1996 1997 1998 1998 1999
-------- ------- -------- -------------------- ------- --------------------
NLG NLG NLG NLG $(2) NLG NLG $(2)
(IN THOUSANDS, EXCEPT PERCENTAGE, TOTAL CUSTOMERS AND AVERAGE REVENUE PER BILLABLE MINUTE)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL DATA:
SG&A as a percentage of revenue.... 1194.2% 85.3% 92.8% 120.7% 120.7% 86.6% 130.2% 130.2%
EBITDA(4).......................... (603) (4,011) (16,036) (39,993) (19,604) (4,602) (17,163) (8,413)
Capital expenditures............... 213 2,569 14,516 77,255 37,870 2,424 52,226 25,601
CASH FLOW DATA:
Net cash provided by (used in)
operating activities............. (715) (1,718) 5,765 (37,322) (18,295) (905) 9,777 4,793
Net cash used in investing
activities....................... (234) (2,569) (14,516) (82,036) (40,214) (2,424) (52,226) (25,601)
Net cash provided by financing
activities....................... 1,109 8,571 5,807 490,026 240,209 7,132 (14) (7)
OPERATIONS DATA:
Total customers (at period end).... 35 670 2,059 6,887 6,887 2,981 8,694 8,694
Number of billable minutes (in
thousands)(5).................... 51 6,487 23,361 121,603 121,603 12,432 69,165 69,165
Average revenue per billable
minute........................... 1.03 0.99 0.81 0.32 0.16 0.51 0.21 0.11
</TABLE>
- -------------------------
(1) The summary financial data for fiscal year 1995 reflects the financial
results of VersaTel for the period from October 10, 1995, the date of
incorporation, through December 31, 1995.
(2) 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, 1999 of
NLG 2.04 per $1.00.
(3) As adjusted to give effect to a 2-for-1 stock split on April 13, 1999.
Includes 130,000 shares approved for issuance in November 1998 by the
general meeting of shareholders in connection with the acquisition of CS
Net.
(4) 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 a company's results of operations or liquidity. Funds depicted
by this measure may not be available for management's discretionary use (due
to covenant restrictions, debt service payments, the expansion of our
network, and other commitments). 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.
(5) Billable minutes are those minutes during which a call is connected to the
VersaTel Network and for which we bill a customer.
44
<PAGE> 51
SELECTED FINANCIAL DATA FOR SVIANED
The following selected financial data of Svianed as of and for the years
ended December 31, 1997 and 1998 have been prepared in accordance with U.S. GAAP
and have been derived from the historical financial statements of Svianed, which
have been audited by KPMG Accountants N.V., independent public accountants. The
selected financial data for Svianed as of and for the 3 month periods ended
March 31, 1998 and 1999 are unaudited, but in the opinion of management contain
all adjustments, consisting only of normal recurring accruals, which are
necessary for a fair presentation of results for interim periods. You should
read the information set forth below in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Results of Operations -- Svianed" and the historical audited financial
statements of Svianed included elsewhere in this prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
-------------------------------- -----------------------------
1997 1998 1998 1999
-------- -------------------- ------- ------------------
NLG NLG $(1) NLG NLG $(1)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.............................................. 45,111 56,683 27,786 11,842 15,579 7,637
Operating expenses:
Cost of revenue, excluding depreciation and
amortization..................................... 23,550 26,878 13,176 6,342 6,628 3,249
Selling, general and administrative................ 8,331 11,890 5,828 2,448 3,734 1,830
Depreciation and amortization...................... 6,754 8,751 4,290 1,882 2,472 1,212
------- ------- ------- ------- ------- -------
Total operating expenses......................... 38,635 47,519 23,294 10,672 12,834 6,291
------- ------- ------- ------- ------- -------
Profit from operations............................... 6,476 9,164 4,492 1,170 2,745 1,346
Interest expense (income), net....................... 431 350 172 88 112 55
------- ------- ------- ------- ------- -------
Net profit before income taxes....................... 6,045 8,814 4,320 1,082 2,633 1,291
Provision for income taxes........................... (2,120) (3,085) (1,512) (379) (921) (452)
------- ------- ------- ------- ------- -------
Net profit......................................... 3,925 5,729 2,808 703 1,712 839
======= ======= ======= ======= ======= =======
Net profit per share (Basic and Diluted)............. 785.0 1,145.8 561.6 140.6 342.4 167.8
Weighted average number of shares outstanding........ 5,000 5,000 5,000 5,000 5,000 5,000
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
----------------------------- -----------------------------
1997 1998 1998 1999
------- ------------------ ------- ------------------
NLG NLG $(1) NLG NLG $(1)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................ 2,578 1,468 720 1,009 5,318 2,607
Working capital (excluding cash and restricted
cash).............................................. (808) (5,909) (2,897) (1,314) (4,224) (2,071)
Property, plant and equipment, net................... 14,648 19,153 9,389 17,442 20,427 10,013
Total assets......................................... 28,870 33,655 16,498 28,826 41,494 20,340
Total long-term obligations (including current
portion)........................................... 7,700 5,300 2,598 7,725 10,450 5,123
Total shareholders' equity (deficit)................. 11,288 12,017 5,891 11,991 13,729 6,730
</TABLE>
45
<PAGE> 52
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------ --------------------------
1997 1998 1998 1999
------- ------------------- ------ ----------------
NLG NLG $(1) NLG NLG $(1)
(IN THOUSANDS, EXCEPT PERCENTAGE)
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL DATA:
SG&A as a percentage of revenue........................... 18.5% 21.0% 21.0% 20.7% 24.0% 24.0%
EBITDA(2)................................................. 13,230 17,915 8,782 3,052 5,217 2,558
Capital expenditures...................................... 8,454 13,256 6,498 4,676 3,746 1,836
CASH FLOW DATA:
Net cash provided by (used in) operating activities....... 6,622 19,646 9,630 3,107 2,596 1,273
Net cash used in investing activities..................... (8,454) (13,256) (6,498) (4,676) (3,746) (1,836)
Net cash provided by financing activities................. (2,500) (7,500) (3,676) -- 5,000 2,451
</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, 1999 of
NLG 2.04 per $1.00.
(2) EBITDA consists of earnings (loss) before interest income, 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 a company's results of operations or liquidity.
Funds depicted by this measure may not be available for management's
discretionary use (due to covenant restrictions, debt service payments, the
expansion of our network, and other commitments). 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.
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<PAGE> 53
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis in conjunction with
the Financial Statements contained elsewhere in this prospectus. See "Selected
Financial Data." Information contained below and elsewhere in this prospectus,
including information with respect to VersaTel's plans and strategy for its
business, may include forward-looking statements. See "Disclosure Regarding
Forward-Looking Statements."
OVERVIEW
We are a rapidly growing, competitive network operator focused primarily on
the Benelux, which consists of The Netherlands, Belgium and Luxembourg. Our
objective is to become the leading fully integrated provider of local access,
facilities-based broadband services, including voice, data and Internet services
to our customers in this region. During the past year, we have substantially
expanded our product offering from our initial offering of long distance voice
services. We currently offer a broad portfolio of voice, data and Internet
services to our business customers and a broad range of connectivity,
termination, co-location and hosting services to other telecommunications, data
and Internet service providers.
We are building a high bandwidth network throughout the Benelux to directly
connect to our customers and we are extending our network to connect to certain
key international destinations. As of May 31, 1999, our construction passed 12
city centers, 6 business parks and 5,200 buildings. We intend to complete our
international rings connecting the Benelux network, London and Paris and
connecting the Benelux network, Frankfurt, Dusseldorf and Paris by December
1999. We have completed our international connection from the Benelux network to
London and to Frankfurt. We currently have both a Nortel DMS 100 digital circuit
switch and a Cisco data switch in both Amsterdam and Antwerp. We expect to have
an additional Nortel DMS switch and an additional Cisco data switch installed in
each of Rotterdam, in the third quarter of 1999, and Brussels, in 2000. The
Nortel DMS switches enable us to deliver voice and ISDN telecommunications
services and the Cisco data switches allow us to support multiple data
communications protocols including ATM, IP (Internet Protocol), IPX (Novell),
Frame Relay and others.
On June 11, 1999, we acquired Svianed, the third largest provider of data
services in The Netherlands in terms of revenues. Svianed complements VersaTel's
strategy by providing data services to approximately 50 customers, primarily in
the financial services and banking industry, including the principal social
insurance organization and the largest financial institution in The Netherlands.
Through our acquisition of Svianed, we will be able to significantly accelerate
the deployment of our broadband data services product offerings by combining our
market presence with Svianed's data network management expertise. We intend to
directly connect Svianed's customers to, and transition Svianed's traffic onto,
our network in order to reduce our reliance on leased lines. We believe this
will significantly enhance the quality of our service offering to Svianed's
customers and reduce our costs. Since our financial results do not yet reflect
any of Svianed's operations, we have set forth below a separate discussion of
Svianed's historical results of operations. See "-- Svianed."
In May 1999, we acquired SpeedPort and VuurWerk and, in June 1999, we
acquired ITinera, each of which provides co-location, hosting and international
Internet services to business customers and other Internet service providers.
Also, in November 1998, we acquired CS Net, which provides Internet-based,
business-to-business transaction services for trade groups in specific
industries.
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<PAGE> 54
REVENUES
Historically, our revenues were derived primarily from the provision of
long distance telecommunications services in The Netherlands and more recently
in Belgium. VersaTel's customer base predominately consists of small- and
medium-sized businesses and to a lesser extent residential customers. With the
acquisition of Svianed, a significant portion of our revenues in future periods
will be derived from the provision of data and Internet services to larger
customers. We also provide carrier services to other telecommunications, data
and Internet service providers.
Our revenues to date have been derived primarily from minutes of
telecommunications traffic billed. The percentage of our revenues that consist
of fixed monthly fees will increase substantially as a result of our acquisition
of Svianed. We expect this percentage to further increase as we continue to
deploy our network. The following table sets forth the total revenues and
billable minutes of use attributable to our operations for the years ended
December 31, 1997 and December 31, 1998, and for the 3 months ended March 31,
1998 and March 31, 1999, as well as our total number of customers, based on the
number of invoices issued, as of December 31, 1997 and December 31, 1998 and as
of March 31, 1998 and March 31, 1999.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------- ------------------
1997 1998 1998 1999
------- -------- ------- -------
(AT PERIOD END)
<S> <C> <C> <C> <C>
CUSTOMERS
Business customers............................ 1,828 5,649 2,459 7,180
Residential customers......................... 230 1,234 519 1,507
Carrier services customers.................... 1 4 3 7
------ ------- ------- -------
Total...................................... 2,059 6,887 2,981 8,694
REVENUES (NLG IN THOUSANDS)
Business customers
Telephony.................................. 16,948 34,472 5,620 13,294
Internet/data.............................. -- 897 -- 828
Residential customers......................... 11 386 33 232
Carrier services customers.................... 1,937 3,806 749 1,147
------ ------- ------- -------
Total...................................... 18,896 39,561 6,402 15,501
(IN THOUSANDS)
BILLABLE MINUTES OF USE
Business customers............................ 21,469 102,980 10,355 54,218
Residential customers......................... 42 1,817 105 1,298
Carrier services customers.................... 1,850 16,806 1,972 13,649
------ ------- ------- -------
Total...................................... 23,361 121,603 12,432 69,165
</TABLE>
In 1997, all our revenues were generated in The Netherlands. In October
1998, we started generating revenues in Belgium. The geographical composition of
our revenues for the fiscal years ended
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<PAGE> 55
December 31, 1997 and December 31, 1998 and for the 3 months ended March 31,
1998 and March 31, 1999 was as follows:
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEARS ENDED ENDED
DECEMBER 31, MARCH 31,
------------------ ---------------
1997 1998 1998 1999
------- ------- ----- ------
(NLG IN THOUSANDS)
<S> <C> <C> <C> <C>
The Netherlands..................................... 18,896 39,324 6,402 14,644
Belgium............................................. -- 237 -- 857
------ ------ ----- ------
Total.......................................... 18,896 39,561 6,402 15,501
</TABLE>
Currently, small- to medium-sized businesses generate the majority of
VersaTel's revenues. We have also derived increasing amounts of revenue from
providing services, including switched voice and co-location services, to other
telecommunications, data and Internet service providers. As a result of our
acquisition of Svianed a substantial portion of our revenues will be derived
from providing data- and Internet services to larger customers. We have recently
changed our approach to reaching residential customers by offering carrier
select hosting services to switchless resellers, who themselves target the
residential market. We believe that this approach is a more cost-effective way
of reaching residential customers. As our network expands and as we have
available capacity, we intend to increase our marketing efforts in the carrier
services segment to increase the use of our network and to capture revenues and
margins from markets we do not target directly.
Our revenues, which are derived both from minutes of telecommunications
traffic billed and fixed fees, are allocated to the period in which the traffic
or fees have occurred. We expect that the percentage of our revenues
attributable to fixed fees will increase in future periods principally as a
result of the Svianed acquisition. We generally price our telecommunications
services at a discount to the local PTTs and expect to continue this pricing
strategy as we expand our operations. In general, PTTs have been reducing their
rates over the last several years. As a result, we have experienced and expect
to continue to experience declining revenues per minute. KPN Telecom reduced its
prices per minute of telecommunications traffic billed in May and July 1998 and
most recently in January 1999 and May 1999 with reductions of approximately
10.0%, 15.0%, 10.0% and 20.0%, respectively, which are expected to have an
adverse impact on margins in the near term. Additionally, we expect to increase
our 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 we build out our network, we expect
costs per minute to decline as well. Management believes that the decline of per
minute prices will out-pace the decline in per minute costs in 1999, resulting
in downward pressure on operating margins. Management believes that over the
long term, this trend will reverse and operating margins will thereby improve;
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 other
services, would have a material adverse effect on our business and financial
results. In addition, the introduction of the euro may lead to a greater
transparency for prices in the European telecommunications market, which may
lead to further competition and price decreases.
COST OF REVENUES
Our cost of revenues derived from telecommunications services is comprised
of origination costs, certain network costs and termination costs and is both
fixed and variable. Origination costs represent the
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<PAGE> 56
cost of carrying traffic from the customer to our network. Origination charges
for calls transported to our 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 PTTs to VersaTel.
We have experienced a significant decrease in origination costs and expect
that these will continue to decrease significantly over time due to competition
and regulatory orders. In July 1998, the Netherlands regulatory authority
Onafhankelijke Post en Telecommunicatie Autoriteit ("OPTA"), ruled that
origination and termination charges be reduced by 55% and 30%, respectively. In
addition, as we continue to build out our network, we intend to connect directly
as many business customers as economically feasible to the network, thereby
eliminating origination charges for these customers. These decreases would be
offset to some extent by amortization and depreciation charges associated with
the construction of our 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
us to experience a decline in gross margins per billable minute which would have
a material adverse effect on our business and financial performance.
Network costs represent the cost of transporting traffic between our
switches and points of interconnection and consist of depreciation and
amortization costs and the cost of leased lines. To date, our network costs and
Svianed's network costs have primarily consisted of the cost of leased lines as
well as, in the case of Svianed, Internet uplink costs. In the near term, we
expect that Svianed's network costs will increase our fixed costs as a
percentage of cost of revenues. However, as we continue to build out our
network, we expect depreciation and amortization costs to increase. We expect
this increase to be off-set, at least partially, by a reduction in the cost of
leased lines. In addition, as we provision Svianed's traffic onto our network,
we will experience a significant reduction in the cost of leased lines currently
attributable to Svianed. Depreciation and amortization costs are not included in
cost of revenues. As a result, network costs as a percentage of cost of revenues
will decline. See "-- Depreciation and Amortization."
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, our switches direct calls to the most cost-efficient
carrier for the required destination. As we build out our network to new points
of interconnection, we expect to be able to reduce average termination costs per
minute. For example, once VersaTel establishes a direct link from Amsterdam to
Rotterdam, VersaTel will no longer pay for national termination costs on that
route and will only pay local and regional termination costs from the point of
interconnection in Rotterdam to the final destination in that city. We also
believe that per minute termination costs will continue to decrease due to
several additional factors, including: (i) the incremental build out of our
network, which will increase the number of carriers with which we interconnect;
(ii) the increase of minutes originated by VersaTel, which should lead to higher
volume discounts available to VersaTel; (iii) more rigorous implementation of
the European Commission directives requiring cost-based termination rates and
leased line rates; and (iv) the emergence of new telecommunication service
providers and the construction of new transmission facilities, which should
result in increased competition. There can be no assurance, however, that the
trend of 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 we
have developed and expanded our workforce, and they are expected to continue to
increase as we expand and establish new operations. 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. Although we believe that all options issued to employees were issued at
their
50
<PAGE> 57
then current fair market value we may nonetheless incur additional compensation
expenses during the current and future fiscal periods attributable to (i) the
issuance of options to employees to the extent that the exercise prices thereof
are deemed to be below the fair market value thereof and (ii) the issuance of
ordinary shares to employees at a discounted price in connection with this
offering.
We have grown substantially since our inception and we intend to continue
to grow by adding more sales, marketing and customer support staff and by
establishing additional sales offices. This growth involves substantial training
and start-up costs, a large portion of which will be reflected as fixed costs
and will be recorded as selling, general and administrative charges.
Accordingly, our results of operations will vary depending on the timing and
speed of our 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."
We expect that we will incur a one-time charge during the second and or
third quarters of the current fiscal year in connection with the Settlement
Agreement which will be comprised of (i) the difference between the NLG 7.50
price of the 200,000 shares issued to Cromwilld pursuant to the Settlement
Agreement and the fair market value of those shares, and (ii) legal and other
expenses incurred in connection therewith.
DEPRECIATION AND AMORTIZATION
VersaTel capitalizes and depreciates its fixed assets, including switching
equipment and fiber optic cable, over periods ranging from 3 to 25 years. In
addition, VersaTel capitalizes and amortizes the cost of installing dialers at
customer sites. The development of our network will require large capital
expenditures and larger depreciation charges in the future. Increased capital
expenditures will adversely affect our future operating results due to increased
depreciation charges and interest expense. See "Business -- Strategy" and
"Business -- Network."
FOREIGN EXCHANGE
VersaTel has substantial U.S. dollar denominated assets and liabilities and
its revenues are generated and costs incurred in certain other currencies,
primarily the Dutch guilder. VersaTel is therefore exposed to fluctuations in
the U.S. dollar and other currencies, which may result in foreign exchange gains
and/or losses. As both The Netherlands and Belgium have adopted the euro,
VersaTel will no longer be exposed to any fluctuations between the Dutch guilder
and the Belgian franc. At this moment only a limited number of equipment
purchases and consultancy activities are billed to VersaTel in currencies other
than Dutch guilders. VersaTel from time to time hedges a portion of its foreign
currency risk in order to lock into a rate for a given time.
RESULTS OF OPERATIONS
FOR THE 3 MONTHS ENDED MARCH 31, 1999 COMPARED TO THE 3 MONTHS ENDED MARCH 31,
1998
REVENUES increased by NLG 9.1 million to NLG 15.5 million for the 3 months
ended March 31, 1999 from NLG 6.4 million for the 3 months ended March 31, 1998,
representing an increase of 142.1%. The growth in revenues resulted primarily
from the addition of new customers, the introduction of national long distance
services in The Netherlands, the acquisition of CS Net, the introduction of
services in Belgium and an increase in wholesale traffic. Revenues for the 3
months ended March 31, 1999 as compared to the same period in 1998 were
negatively impacted by general price reductions initiated by KPN Telecom in May
1998, July 1998 and, most recently, January 1999 of approximately 10.0%, 15.0%
and 10%, respectively. VersaTel responded to these price reductions by reducing
its own prices, and VersaTel's revenues would have been higher without such
price reductions.
Billable minutes of use increased by 56.8 million to 69.2 million for the 3
months ended March 31, 1999 from 12.4 million for the 3 months ended March 31,
1998, representing an increase of 456.3%. The
51
<PAGE> 58
number of customers increased by 5,713 to 8,694 for the 3 months ended March 31,
1999 from 2,981 as of March 31, 1998.
COST OF REVENUES increased by NLG 7.0 million to NLG 12.5 million for the 3
months ended March 31, 1999 from NLG 5.5 million for the 3 months ended March
31, 1998, primarily reflecting an increase in billable minutes, increasing
interconnect capacity and short-term network capacity requirements (leased
lines) in Belgium. 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.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES increased by NLG 14.7 million
to NLG 20.2 million for the 3 months ended March 31, 1999 from NLG 5.5 million
for the 3 months ended March 31, 1998, representing an 264.0% 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, accounting personnel, additional
facilities cost, expenses related to the expansion of our Belgium operations and
additional expenses as a result of the acquisition of CS Net.
DEPRECIATION AND AMORTIZATION EXPENSES increased by NLG 2.0 million to NLG
3.1 million for the 3 months ended March 31, 1999 from NLG 1.1 million for the 3
months ended March 31, 1998. This increase was primarily related to capital
expenditures incurred in connection with the deployment of an additional Nortel
DMS 100 switch in Antwerp, the expansion and deployment of the network and an
increase in the number of dialers installed due to customer growth and the
purchase of computer equipment and office furniture for new employees.
CURRENCY EXCHANGE LOSSES, NET, increased by NLG 40.2 million to NLG 40.3
million for the 3 months ended March 31, 1999 from NLG 0.1 million for the 3
months ended March 31, 1998 as a result of a net loss of VersaTel's U.S. dollar
denominated assets and liabilities on the balance sheet.
INTEREST INCOME increased by approximately NLG 6.0 million to NLG 6.0
million for the 3 months ended March 31, 1999 from NLG 14.0 thousand for the 3
months ended March 31, 1998. This increase was primarily related to VersaTel's
positive cash balance as a result of the First High Yield Offering and the
Second High Yield Offering.
INTEREST EXPENSE increased by NLG 23.7 million to NLG 23.9 million for the
3 months ended March 31, 1999 from NLG 0.2 million for the 3 months ended March
31, 1998. This increase is primarily related to the accrual of interest expense
on the Existing Notes.
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE FISCAL YEAR ENDED
DECEMBER 31, 1997
REVENUES increased by NLG 20.7 million to NLG 39.6 million for the fiscal
year ended December 31, 1998 from NLG 18.9 million for the fiscal year ended
December 31, 1997, representing an increase of 109.4%. The growth in revenues
resulted primarily from the addition of new customers, the introduction of
national long distance services in The Netherlands, the acquisition of CS Net,
the introduction of services in Belgium and an increase in wholesale traffic.
Revenues for the fiscal year ended December 31, 1998 as compared to the same
period in 1997 were negatively impacted by general price reductions initiated by
KPN Telecom in May 1998 and July 1998 of approximately 10.0% and approximately
15.0%, respectively. VersaTel responded to these price reductions by reducing
its own prices and VersaTel's revenues would have been higher without such price
reductions.
Billable minutes of use increased by 98.2 million to 121.6 million for the
fiscal year ended December 31, 1998 from 23.4 million for the fiscal year ended
December 31, 1997, representing an increase of 420.5%. The number of customers
increased by 4,828 to 6,887 as of December 31, 1998 from 2,059 as of December
31, 1997.
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<PAGE> 59
COST OF REVENUES increased by NLG 14.4 million to NLG 31.8 million for the
fiscal year ended December 31, 1998 from NLG 17.4 million for the fiscal year
ended December 31, 1997, primarily reflecting an increase in billable minutes,
increasing interconnect capacity and short-term network capacity requirements
(leased lines) in Belgium. 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.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE increased by NLG 30.2 million
to NLG 47.7 million for the fiscal year ended December 31, 1998 from NLG 17.5
million for the fiscal year ended December 31, 1997, representing an 172.3%
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,
accounting personnel, a major brand advertising campaign and one time related
start-up expenses for Belgium operations network expenses.
DEPRECIATION AND AMORTIZATION EXPENSES increased by NLG 3.3 million to NLG
6.5 million for the fiscal year ended December 31, 1998 from NLG 3.2 million for
the fiscal year ended December 31, 1997. This increase was primarily related to
capital expenditures incurred in connection with the deployment of the Nortel
DMS 100 switches in Amsterdam and Antwerp, the expansion and deployment of the
network and an increase in the number of dialers installed due to customer
growth and the purchase of computer equipment and office furniture for new
employees.
CURRENCY EXCHANGE GAINS, NET, increased to NLG 5.1 million for the fiscal
year ended December 31, 1998 from a loss of NLG 53,000 for the fiscal year ended
December 31, 1997 as a result of the net gains of VersaTel's U.S. dollar
denominated assets and liabilities on the balance sheet.
INTEREST INCOME increased by approximately NLG 11.9 million to NLG 11.9
million for the fiscal year ended December 31, 1998 from NLG 21,000 for the
fiscal year ended December 31, 1997. This increase was primarily related to
VersaTel's positive cash balance as a result of the First High Yield Offering
and the Second High Yield Offering.
INTEREST EXPENSE increased by NLG 37.1 million to NLG 37.7 million for the
fiscal year ended December 31, 1998 from NLG 0.6 million for the fiscal year
ended December 31, 1997. This increase is primarily related to the accrual of
interest expense on the Existing Notes.
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 revenues
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 1,389 to 2,059 as of December 31, 1997, from 670 as of December 31,
1996.
VersaTel's revenues in 1997 were negatively impacted by KPN Telecom's in
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 KPN Telecom's prices, VersaTel also introduced a discount
plan in June 1997 and again reduced its 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. VersaTel expects
KPN Telecom to continue to lower its
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<PAGE> 60
prices and create new discount plans on a regular basis and VersaTel 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 VersaTel to respond to those implemented by KPN
Telecom which exceeded reductions in origination and termination costs.
VersaTel's revenues for the 3 months ended December 31, 1997 were
negatively impacted by a case of fraud in October 1997, which VersaTel estimates
affected approximately 4 days of customer traffic. The fraud involved the
unauthorized use of one of VersaTel's test codes. As a result, a large number of
calls were originated, primarily through ethnic calling shops, over the course
of 4 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 our network and reverted to KPN Telecom for service. VersaTel lost
revenues from such customers and offered credits to these customers to cover the
price differential between KPN Telecom and VersaTel retroactively. As a result,
VersaTel estimates the total losses from the incident to be approximately NLG
1.0 million. VersaTel has filed the case with the local police authorities.
VersaTel believes that the risk of future fraud has been reduced with the
introduction of the "1611" access code (which prevents the type of fraud that
occurred from the unauthorized use of a test code from occurring) and by
tracking multiple calls with the same access code.
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
VersaTel'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 VersaTel'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 our
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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SVIANED
OVERVIEW
Svianed is the third largest provider of data services in The Netherlands
in terms of revenues. Svianed provides its data services to 50 customers,
primarily in the financial services and banking industry, including the
principal social insurance organization and the largest financial institution in
The Netherlands. These customers are served on a network which connects to over
600 buildings and utilizes over 700 leased lines covering approximately 6,000
kilometers. The Svianed network has 50 regional points of presence and
transports traffic at speeds of up to 150 Mbps.
Svianed has evolved from an internal unit responsible for network
management within the Gak Group into a company that provides data, voice and
value added network services to both the Gak Group as well as other customers.
Svianed was incorporated as a separate company in July 1995. The Gak Group is
responsible for the execution of and payments under a number of social insurance
laws in The Netherlands, such as the Unemployment Act and the Disability Act. In
addition, the Gak Group offers insurance services on a commercial basis to a
wide variety of clients.
REVENUES
Svianed's revenues are currently derived primarily from the provision of
data services in The Netherlands. Svianed's revenues to date have been derived
mostly from fixed monthly fees under long term contracts. In addition, Svianed
derives a portion of its revenues from minutes of telecommunications traffic
billed. Svianed's revenues are derived from data, voice and value added network
services and are generated primarily from large-sized customers.
Prior to 1996, all of Svianed's revenues were derived from the Gak Group.
In 1996, Svianed started generating revenues from other customers. In 1998,
39.2% of Svianed's revenues were derived from other customers, compared to 29.0%
in 1997 and 16.0% in 1996. The following table sets forth the total revenues
attributable to Svianed's operations for the year ended December 31, 1997 and
December 31, 1998 and for the 3 months ended March 31, 1998 and March 31, 1999,
as well as a break down of revenues from the Gak Group versus other customers
for such periods.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------- ------------------
1997 1998 1998 1999
------- -------- ------- -------
(NLG IN THOUSANDS)
<S> <C> <C> <C> <C>
REVENUES BY SERVICE
Data.......................................... 29,213 36,016 6,757 10,305
Voice......................................... 14,300 18,439 4,625 4,395
Value Added Network Services.................. 1,598 2,228 460 879
------ ------- ------- -------
Total...................................... 45,111 56,683 11,842 15,579
REVENUES BY CUSTOMER
Gak Group..................................... 32,037 34,460 8,467 9,429
Others........................................ 13,074 22,223 3,375 6,150
------ ------- ------- -------
Total...................................... 45,111 56,683 11,842 15,579
</TABLE>
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In 1997 and 1998, almost all of Svianed's revenues were generated in The
Netherlands. The geographical composition of Svianed's revenues for the fiscal
years ended December 31, 1997 and December 31, 1998 and for the 3 months ended
March 31, 1998 and March 31, 1999 was as follows:
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEARS ENDED ENDED
DECEMBER 31, MARCH 31,
------------------ ----------------
1997 1998 1998 1999
------- ------- ------ ------
(NLG IN THOUSANDS)
<S> <C> <C> <C> <C>
The Netherlands.................................... 45,071 56,022 11,746 15,414
Belgium............................................ 40 661 96 165
------ ------ ------ ------
Total......................................... 45,111 56,683 11,842 15,579
</TABLE>
COST OF REVENUES
Svianed's cost of revenues is primarily fixed and consists of the cost of
leased lines and internet uplink costs. Currently, almost all of Svianed's
leased lines are leased from KPN Telecom. The prices for such leased lines are
set by OPTA. As a reseller of voice traffic, a portion of Svianed's cost of
revenues is also variable on a per minute basis.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses are comprised primarily of
salaries, employee benefits, office and administrative expenses and overhead
charges from the Gak Group as well as other charges for services and facilities
provided by the Gak Group. These expenses have increased as Svianed has
developed and expanded its workforce. Selling, general and administrative
expenses as a percentage of revenue have remained stable over the last years.
DEPRECIATION AND AMORTIZATION
Svianed capitalizes and depreciates its fixed assets, including its Cisco
routers and Newbridge Frame Relay and ATM switches, over periods ranging from 2
to 5 years.
FOREIGN EXCHANGE
Almost all of Svianed's revenues are generated in Dutch guilders and all of
its assets and liabilities are denominated in Dutch guilders. However, a
majority of equipment purchases are billed to Svianed in currencies other than
Dutch guilders.
RESULTS OF OPERATIONS
FOR THE 3 MONTHS ENDED MARCH 31, 1999 COMPARED TO THE 3 MONTHS ENDED MARCH 31,
1998
REVENUES increased by NLG 3.8 million to NLG 15.6 million for the 3 months
ended March 31, 1999 from NLG 11.8 million for the 3 months ended March 31,
1998, representing an increase of 31.6%. The growth in revenues resulted
primarily from the addition of new customers and additional revenues from
existing customers.
Revenues generated from services provided to the Gak Group increased by NLG
0.9 million to NLG 9.4 million for the 3 months ended March 31, 1999 from NLG
8.5 million for the 3 months ended March 31, 1998, representing an increase of
11.4%. Revenues generated from services provided to other customers increased by
NLG 2.8 million to NLG 6.2 million for the 3 months ended March 31, 1999 from
NLG 3.4 million for the 3 months ended March 31, 1998, representing an increase
of 82.2%.
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COST OF REVENUES increased by NLG 0.3 million to NLG 6.6 million for the 3
months ended March 31, 1999 from NLG 6.3 million for the 3 months ended March
31, 1998, primarily reflecting an increase in the number of leased lines. This
increase was partially offset by declines in prices per leased line. In
addition, Internet uplink costs increased as a result of increased capacity
requirements, which was partially off-set by a decrease in the cost per Mb for
this capacity.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE increased by NLG 1.3 million to
NLG 3.7 million for the 3 months ended March 31, 1999 from NLG 2.4 million for
the 3 months ended March 31, 1998, representing a 52.5% increase. This increase
primarily resulted from an increase in the cost of staff.
DEPRECIATION AND AMORTIZATION EXPENSES increased by NLG 0.6 million to NLG
2.5 million for the 3 months ended March 31, 1999 from NLG 1.9 million for the 3
months ended March 31, 1998. This increase was primarily related to capital
expenditures incurred in connection with the investments in customer-related
equipment and investments in the expansion of the network.
INTEREST INCOME increased by NLG 10,000 to NLG 26,000 for the 3 months
ended March 31, 1999 from NLG 16,000 for the 3 months ended March 31, 1998. This
increase was primarily due to an increase in Svianed's positive cash balance.
INTEREST EXPENSE increased by NLG 34,000 to NLG 138,000 for the 3 months
ended March 31, 1999 from NLG 104,000 for the 3 months ended March 31, 1998.
This increase was primarily due to a loan of Gak Holding B.V.
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE FISCAL YEAR ENDED
DECEMBER 31, 1997
REVENUES increased by NLG 11.6 million to NLG 56.7 million for the fiscal
year ended December 31, 1998 from NLG 45.1 million for the fiscal year ended
December 31, 1997, representing an increase of 25.7%. The growth in revenues
resulted primarily from the addition of new customers and additional revenues
from existing customers.
Revenues generated from services provided to the Gak Group increased by NLG
2.5 million to NLG 34.5 million for the fiscal year ended December 31, 1998 from
NLG 32.0 million for the fiscal year ended December 31, 1997, representing an
increase of 7.6%. Revenues generated from services provided to other customers
increased by NLG 9.1 million to NLG 22.2 million for the fiscal year ended
December 31, 1998 from NLG 13.1 million for the fiscal year ended December 31,
1997, representing an increase of 70.0%.
COST OF REVENUES increased by NLG 3.3 million to NLG 26.9 million for the
fiscal year ended December 31, 1998 from NLG 23.6 million for the fiscal year
ended December 31, 1997, primarily reflecting an increase in the number of
leased lines. This increase was partially offset by declines in prices per
leased line. In addition, Internet uplink costs increased as a result of
increased capacity requirements, which was partially off-set by a decrease in
the cost per Mb for this capacity.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE increased by NLG 3.6 million to
NLG 11.9 million for the fiscal year ended December 31, 1998 from NLG 8.3
million for the fiscal year ended December 31, 1997, representing an 42.7%
increase. This increase primarily resulted from an increase in the cost of
staff.
DEPRECIATION AND AMORTIZATION EXPENSES increased by NLG 2.0 million to NLG
8.8 million for the fiscal year ended December 31, 1998 from NLG 6.8 million for
the fiscal year ended December 31, 1997. This increase was primarily related to
capital expenditures incurred in connection with the investments in
customer-related equipment and investments in the expansion of the network.
INTEREST INCOME decreased by NLG 26,000 to NLG 85,000 for the fiscal year
ended December 31, 1998 from NLG 111,000 for the fiscal year ended December 31,
1997. This decrease was primarily due to a decrease in Svianed's positive cash
balance.
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INTEREST EXPENSE decreased by NLG 107,000 to NLG 435,000 for the fiscal
year ended December 31, 1998 from NLG 542,000 for the fiscal year ended December
31, 1997. This decrease is primarily due to the repayment of an outstanding
loan.
LIQUIDITY AND CAPITAL RESOURCES
We have incurred significant operating losses and negative cash flows as a
result of the development of our business and network. Prior to the First High
Yield Offering, VersaTel had financed its growth primarily through equity and
subordinated loans from its shareholders. In May 1998, VersaTel issued notes and
warrants in the First High Yield Offering and raised net proceeds, after
transaction expenses, of $216.2 million, $80.6 million of which was invested in
U.S. government securities placed in escrow to fund the first 6 interest
payments on the notes issued in the First High Yield Offering. In December 1998,
VersaTel issued notes and warrants in the Second High Yield Offering and raised
net proceeds, after transaction expenses, of $139.5 million, $45.7 million of
which was invested in U.S. government securities placed in escrow to fund the
first 5 interest payments on the notes issued in the Second High Yield Offering.
VersaTel has since used a significant amount of the remaining net proceeds of
the First High Yield Offering and the Second High Yield Offering to make capital
expenditures related to the expansion and development its network, to fund
operating losses and for other general corporate purposes. On June 11, 1999,
VersaTel borrowed $131.25 million in Interim Loans from Lehman Commercial Paper
Inc., an affiliate of Lehman Brothers Inc. and Lehman Brothers International
(Europe), and $18.75 million in Interim Loans from ING (U.S.) Capital, LLC, an
affiliate of each of ING Barings Limited and ING Barings LLC. The proceeds of
the Interim Loans, together with remaining proceeds from the Existing Notes,
were used to fund the purchase price of Svianed of approximately NLG 362.5
million. The Interim Loans bear interest at a minimum rate of 10.5% per annum
and mature on June 10, 2000. The proceeds of the Third High Yield Offering will
be used in part to repay the Interim Loans in full.
The general rate of inflation has been low in the Benelux in recent years.
We do not expect that inflationary pressures in the future, if any, will have a
material effect on our results of operations or financial condition.
Although we currently maintain significant cash balances, we will require
substantial additional capital to continue funding the expansion and development
of our network, including the expansion of local access infrastructure. Also, we
are continually re-evaluating our business objectives and are considering
further expansions of our services and the acceleration of our network
construction. We expect that the net proceeds of this offering and the Third
High Yield Offering, combined with the Nortel Facility and the remaining
proceeds from the First High Yield Offering and the Second High Yield Offering
and together with other available financings and cash flows from operations,
will provide us with sufficient capital to fund planned capital expenditures and
anticipated losses for the next 12 months. We expect to raise additional funds
through public or private financings or from financial institutions.
We will be required to meet our debt service obligations on the Third Notes
out of cash reserves and net cash flow beginning in February 2000. In addition,
starting November 15, 2001, our funds that have been placed in escrow to cover
interest payments on the Existing Notes will have been exhausted. As a result,
we will need to increase substantially our net cash flow in order to meet our
debt service obligations.
To date, VersaTel has made limited use of bank facilities and capital lease
financing. In May 1999, VersaTel has reached an agreement with Nortel, pursuant
to which Nortel will extend vendor financing to VersaTel of up to E45.4 million
(approximately NLG 100.0 million) to be used to finance the purchase of
equipment from Nortel. To date, no amounts have been drawn under this facility.
VersaTel
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may seek to raise senior secured debt financing in the future to fund the
expansion of its network and for general corporate purposes.
Net cash provided by operating activities was NLG 9.8 million for the 3
months ended March 31, 1999 compared to NLG 0.9 million for the 3 months ended
March 31, 1998. This increase was primarily the result of an increase in current
liabilities which exceeded the operating loss incurred during the first quarter
of 1999. Net cash provided by operating activities was NLG 37.3 million for the
fiscal year ended December 31, 1998 compared to NLG 5.8 million for the fiscal
year ended December 31, 1997. This increase was primarily the result of
operating losses incurred during 1998.
Net cash used in investing activities was NLG 52.2 million in the 3 months
ended March 31, 1999 and NLG 2.4 million in the 3 months ended March 31, 1998.
Net cash used in investing activities was NLG 82.0 million in the fiscal year
ended December 31, 1998 and NLG 14.5 million in the fiscal year ended December
31, 1997. Substantially all the cash utilized by investing activities in both
fiscal years resulted from an increase in capital expenditures to expand our
network. We do 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 used in financing activities was NLG 14.0 thousand in the 3 months
ended March 31, 1999 and NLG 7.1 million in the 3 months ended March 31, 1998.
Net cash provided by financing activities in the 3 months ended March 31, 1998
resulted mainly from NLG 7.2 million of prepaid capital contributions from 2 of
our shareholders. Net cash provided by financing activities was NLG 490.0
million in the fiscal year ended December 31, 1998 and NLG 5.8 million in the
fiscal year ended December 31, 1997. Net cash provided by financing activities
in the fiscal year ended December 31, 1998, resulted mainly from NLG 419.6
million raised in the First High Yield Offering and NLG 268.5 million raised in
the Second High Yield Offering. Net cash provided by financing activities for
the year ended December 31, 1998, does not include the NLG 211.6 million of the
proceeds of the First High Yield Offering and the Second High Yield Offering
which is still invested in U.S. government securities and placed in escrow to
fund the remaining interest payments on the Existing Notes until and including
May 15, 2001. 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 our shareholders.
In February 1998, as part of a recapitalization, 2 of the 3 shareholders of
VersaTel, Telecom Founders B.V. and NeSBIC Venture Fund C.V., a subsidiary of
Fortis, invested an additional NLG 7.2 million in equity capital in VersaTel.
Although this contribution was received in February 1998, the formal
shareholders meeting approving the amount to be labeled as capital was not
executed until April 17, 1998. In addition, NeSBIC and Cromwilld converted their
subordinated convertible shareholder loans totaling NLG 3.6 million into
ordinary shares of VersaTel, and NeSBIC converted its NLG 4.5 million bridge
loan into ordinary shares of VersaTel. The third component of this
recapitalization was comprised of a new equity investment by Paribas
Deelnemingen N.V. of NLG 12.8 million. Lastly, VersaTel received from Telecom
Founders, NeSBIC, Paribas Deelnemingen N.V. and Nederlandse Participatie
Maatschappij an additional NLG 15.0 million in equity capital immediately prior
to the closing of the First High Yield Offering. As a result of this
recapitalization, VersaTel's share capital increased from NLG 7.0 million to NLG
50.1 million. See "Principal Shareholders."
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our financial department manages our funding, liquidity and exposure to
foreign exchange rate risks. It is our policy not to enter into any transactions
of a speculative nature.
Our debt obligations that are denominated in U.S. dollars expose us to
risks associated with changes in the exchange rates between the U.S. dollar and
the Dutch guilder and Belgian franc (which currencies
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are now both pegged to the euro) in which our revenues are denominated. However,
in conjunction with the First High Yield Offering and the Second High Yield
Offering, we have placed in escrow and pledged for the benefit of the holders of
the Existing Notes U.S. government securities sufficient to pay interest due on
the Existing Notes until and including the scheduled interest payment on May 15,
2001. The Existing Notes will mature on May 15, 2008 and VersaTel is not
required to make any mandatory redemptions (other than an offer to repurchase
the Notes upon a change in control of VersaTel) prior to maturity of the
Existing Notes. Since the interest rates on each of the First Notes and the
Second Notes is fixed, we have limited our exposure to risks due to fluctuations
of interest rates. At March 31, 1999 the fair value of the Existing Notes
outstanding was approximately $390.0 million.
The costs and expenses relating to the construction of our Network and the
development of our sales and marketing resources will largely be in Dutch
guilders, Belgian francs and, increasingly, euros. Therefore, the construction
of our network and the development of our sales and marketing resources will
also be subject to currency exchange rate fluctuations as we exchange the
proceeds from the First High Yield Offering and the Second High Yield Offering
to pay our construction costs. However, as of March 31, 1999 we had exchanged
all but $11.2 million of the proceeds from the First High Yield Offering and the
Second High Yield Offering into Dutch guilders. Prior to the application of the
net proceeds from the First High Yield Offering and the Second High Yield
Offering, such funds have been invested in short-term investment grade
securities. VersaTel from time to time hedges a portion of its foreign currency
risk in order to lock into a rate for a given time. In addition, we will become
subject to greater foreign exchange fluctuations as we expand our operations
outside The Netherlands and receive more revenues denominated in currencies
other than Dutch guilders, although the introduction of the euro has largely
eliminated these risks as all 3 Benelux countries have adopted the euro as their
legal currency. See "Exchange Rate Information -- European Monetary Union."
RISKS ASSOCIATED WITH THE YEAR 2000
The Year 2000 issue is the result of computer programs using 2 digits
rather than 4 to define the applicable year. Because of this programming
convention, software, hardware or firmware may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in system failures,
miscalculations or errors causing disruptions of operations or other business
problems, including, among others, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
THE YEAR 2000 AND VERSATEL'S READINESS
We have initiated a formal Year 2000 project and recruited an experienced
Year 2000 project manager. We are undertaking a comprehensive program to address
the Year 2000 issue with respect to the following:
- our information technology systems,
- the telephony switching network (including equipment installed at
customers' premises),
- our non-information technology systems (including buildings, plant,
equipment, and other infrastructure systems that may contain embedded
microcontroller technology),
- the systems of our major vendors (insofar as they relate to our
business), and
- our customers.
This program involves 4 "Steps": (1) a wide ranging assessment of Year 2000
problems that might affect VersaTel; (2) the development and implementation of
remedies to address discovered problems; (3) the testing of our systems where
necessary; and (4) an analysis of the most likely worst case scenario and the
preparation of contingency plans. We expect to complete Steps 1 and 2 of this
program during the second quarter of 1999 and Steps 3 and 4 during the third
quarter of 1999.
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STEPS 1-2: ASSESSMENT OF YEAR 2000 ISSUES, DEVELOPMENT AND IMPLEMENTATION OF
REMEDIES
THE INFORMATION TECHNOLOGY SYSTEMS. VersaTel is currently undergoing a
major program to replace all of its existing operating support systems for
billing, customer care and mediation and expects to have completed the
replacement program by the end of the third quarter of 1999. In selecting the
new operating support systems, VersaTel asks for guarantees of Year 2000
compliance from its manufacturers. VersaTel is also checking all its custom
designed software for Year 2000 compliance.
VersaTel uses Windows 95 and Windows NT 4.0 as its operating systems.
VersaTel expects to upgrade all of its Windows 95 operating systems to Windows
98, which is Year 2000 compliant, during the second quarter of 1999. VersaTel
expects to install the latest service pack for its NT 4.0 operating system,
which is Year 2000 compliant, during the second quarter of 1999. VersaTel does
not presently use any other desktop or server operating systems.
THE TELEPHONY SWITCHING NETWORK. VersaTel has consulted with Nortel, the
manufacturer of its DMS 100 telephony switches and transport layer, and believes
that Nortel's equipment is Year 2000 compliant. VersaTel has requested a
guarantee from Nortel regarding this compliance. We have requested a similar
guarantee from Cisco Systems, our supplier of router switches and certain other
equipment.
THE NON-INFORMATION TECHNOLOGY SYSTEMS. VersaTel's office buildings have
the following embedded systems: monitor alarms (intrusion and sensors),
personnel registration plus floor access, fire alarm, climate control and
electrical power maintenance (generators). VersaTel's facilities management team
is currently investigating if the embedded systems are Year 2000 compliant and
intends to ensure that they will be by the end of the second quarter of 1999.
MAJOR VENDORS' SYSTEMS. VersaTel is asking all of its major vendors to
demonstrate their approach to the Year 2000 problem and to give guarantees that
the millennium will not interrupt their services to VersaTel. VersaTel is
informing its vendors that Year 2000 compliance in their services and products
is an essential element of the existing business relationship. The managers
responsible for each vendor relationship are asking for these guarantees and the
response to date has been positive. VersaTel is now formalizing these requests,
sending letters, and compiling a list of vendors' responses.
CUSTOMERS' SYSTEMS. VersaTel's customer services department intends to
discuss with customers the Year 2000 issue, including whether or not such
customer is Year 2000 compliant and to suggest to customers that, where this
issue has not been resolved, the customer seek advice. We can give no assurances
that VersaTel's customers will either take such advice or be Year 2000 compliant
on a timely basis.
STEP 3: TESTING OF VERSATEL'S SYSTEMS
As VersaTel has tested its various systems and processes and believes them
to be Year 2000 compliant, it no longer plans to conduct a full operational test
of its entire business. VersaTel may, however, continue to test various systems
and processes through the remainder of the year, both on its own and together
with certain customers.
STEP 4: MOST LIKELY WORST CASE SCENARIO
VersaTel believes that the most likely worst effect of the Year 2000 issue
would be the inability of customers to complete calls. Nortel, the manufacturer
of VersaTel's switches, has conducted extensive Year 2000 tests with the EURO-8
software and has informed VersaTel that it believes VersaTel's switches are Year
2000 compliant. VersaTel has requested a guarantee from Nortel regarding this
compliance. We have requested a similar guarantee from Cisco Systems, our
supplier of router switches and certain other equipment.
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If VersaTel's Year 2000 compliant billing system fails to function
correctly, VersaTel believes that bills could still be distributed by modifying
the call detail record's timestamp to reflect a pre-Year 2000 date.
The ability of VersaTel's customer care team to supply quality service
would be significantly affected if the operating support systems were not
available. Service provisioning, additional services and the development of new
customers could not continue effectively if the automated provisioning systems
were to fail. VersaTel is asking for certificates from the manufacturers of
these systems stating that they are Year 2000 compliant.
VersaTel's ability to collect revenues depends upon certain financial
institutions' computer systems, because approximately 50.0% of its retail
customers pay by way of direct debit facilities. VersaTel is seeking assurances
from these financial institutions that they are Year 2000 compliant.
VersaTel believes that it is unlikely that any of the above situations will
occur due to the assurances of Year 2000 compliance that it expects to receive
from its vendors, software and systems programmers, customers and financial
institutions. In the event that one or more of the situations should occur,
VersaTel would attempt to rectify the problem with the appropriate entities.
However, we can give no assurance that VersaTel will be successful in obtaining
valid assurances or guarantees, that the Year 2000 issue will not have a
material adverse effect on VersaTel, that any Year 2000 effects will be resolved
or that VersaTel will be reimbursed for any additional expenditure under any of
the assurances or guarantees that it expects to obtain or otherwise.
COSTS RELATED TO THE YEAR 2000 ISSUE
To date, VersaTel has incurred approximately NLG 300,000 in costs for its
Year 2000 readiness program. A substantial portion of costs for the Year 2000
issue will be included in the replacement of the current generation of operating
support systems. VersaTel is replacing these systems to support its business
growth and not specifically to remedy the Year 2000 problem. VersaTel expects to
incur additional specific Year 2000 readiness charges that are estimated to be
less than NLG 1.0 million.
THE YEAR 2000 AND SVIANED'S READINESS
Svianed has undertaken a number of measures to ensure that its business
will not be affected as a result of the Year 2000 issue. In 1997, Svianed
appointed a project leader and made an assessment of all systems and equipment
that could potentially be affected by the Year 2000 issue. The initial focus was
to ensure that the services provided by Svianed to its customers would not be
interrupted as a result of the Year 2000 issue. The next phase was to ensure
that Svianed's management control systems would not be affected by the Year 2000
issue. Starting in mid-1997, Svianed has obtained for all its purchases of
hardware and software guarantees as to their Year 2000 compliance. In addition,
the installed base of Cisco routers and Newbridge ATM and Frame Relay switches
have been confirmed by their suppliers to be Year 2000 compliant.
Svianed relies on leased lines from KPN Telecom for the provision of its
services. Svianed understands, based on information it has received from KPN
Telecom, that KPN Telecom has commenced a Year 2000 risk analysis and has
established a remediation plan intended to ensure that KPN Telecom will be Year
2000 compliant. Svianed has received a written confirmation from KPN Telecom
that it will maximize its effort to be Year 2000 compliant. However, Svianed has
not received any guarantee from KPN Telecom as to its Year 2000 compliance, and
we can give no assurance that Svianed's network will not experience any
interruptions as a result of any failure by KPN Telecom to be Year 2000
compliant.
The most likely worst case scenario for Svianed would be a disruption of
its network management system. Svianed expects to incur costs of approximately
NLG 500,000 in connection with its Year 2000 readiness program, most of which
has already been expensed.
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BUSINESS
OVERVIEW
VersaTel is a rapidly growing, competitive network operator focused
primarily on the Benelux. Our objective is to become the leading fully
integrated provider of local access, facilities-based broadband services,
including voice, data and Internet services to our customers in this region. We
currently provide high-quality, competitively priced, telecommunications, data
and Internet services in The Netherlands and Belgium primarily to 4 targeted
market segments:
- business services -- small- and medium-sized businesses located
throughout the Benelux,
- local access services -- high bandwidth users within the Benelux which
are near and directly connected to our network,
- data services -- high bandwidth data customers with multiple sites
throughout the Benelux, and
- carrier services -- telecommunications, data and Internet service
providers.
With over 13,500 business customers and over 375 employees, we are a
leading alternative to KPN Telecom and Belgacom, the former monopoly
telecommunications carriers in The Netherlands and Belgium, respectively. Our
revenues grew from NLG 18.9 million for the year ended December 31, 1997 to NLG
39.6 million for the year ended December 31, 1998 and our revenues for the 3
months ended March 31, 1999 were NLG 15.5 million.
On June 11, 1999, we acquired Svianed, the third largest provider of data
services in The Netherlands. Svianed complements VersaTel's strategy by
providing data services to approximately 50 customers, primarily in the
financial services and banking industry, including the principal social
insurance organization and the largest financial institution in The Netherlands.
These customers are served on a network which connects to over 600 buildings and
utilizes over 700 leased lines covering approximately 6,000 kilometers. The
Svianed network has 50 regional points of presence and transports traffic at
speeds of up to 150 Mbps. Svianed had revenues of NLG 56.7 million and EBITDA of
NLG 17.9 million for the year ended December 31, 1998. For the 3 months ended
March 31, 1999, Svianed had revenues of NLG 15.6 million and EBITDA of NLG 5.2
million. The revenues for VersaTel and Svianed on a combined basis would have
been NLG 96.2 million for the year ended December 31, 1998 and NLG 31.1 million
for the 3 months ended March 31, 1999.
We are building a fully integrated broadband network to provide end-to-end
connectivity to our customers. Our network has been designed to pass through all
the major population and business centers in the Benelux and to connect city
centers, business parks and buildings along its route. Our network design
consists of 3 fully integrated elements:
- Benelux network -- multiple, integrated fiber optic rings connecting all
major population and business centers in the Benelux,
- local access infrastructure -- high bandwidth fiber optic and radio
connectivity to customers along our Benelux network route including city
centers, business parks and buildings, and
- international network -- fiber optic rings initially connecting London,
Dusseldorf, Frankfurt, Paris and the Benelux network.
As of May 31, 1999, we have constructed over 850 kilometers of our network
in the Benelux which we intend to have in service in the third quarter of 1999.
We intend to build an additional 650 kilometers of our network, including local
access infrastructure, by the end of 1999. As of May 31, 1999, our construction
passed 12 city centers, 6 business parks and 5,200 buildings along the route of
our network. We intend to complete our international rings connecting the
Benelux network, London and Paris and
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connecting the Benelux network, Frankfurt, Dusseldorf and Paris by December
1999. We have completed our international connection from the Benelux network to
London and to Frankfurt. We intend to directly connect Svianed's customers to,
and transition Svianed's traffic onto, our network in order to reduce our
reliance on leased lines. We believe this will significantly enhance the quality
of our service offering to Svianed's customers and reduce our costs.
During the past year, we have substantially expanded our product offering
from our initial offering of long distance voice services. We currently offer a
full portfolio of voice, data and Internet services to our business customers
and a broad range of connectivity, termination, co-location and hosting services
to other telecommunications, data and Internet service providers. Through our
acquisition of Svianed we will be able to significantly accelerate the
deployment of our broadband data services product offering by combining our
market presence with Svianed's data and network management expertise.
In addition to Svianed, we have recently extended our product and service
offerings and expanded our customer base through the following strategic
acquisitions:
- VuurWerk -- a leading provider of web hosting, co-location, access and
e-commerce services in The Netherlands and Belgium. VuurWerk is one of
the largest providers of web hosting services in The Netherlands, with
more than 10,000 domain name registrations and approximately 6,000
customers.
- SpeedPort -- a provider of Internet co-location and connectivity
solutions for high bandwidth and mission critical Internet and e-commerce
applications. SpeedPort will use VersaTel's international fiber
connectivity to build its IP-based network to serve its customers.
- CS Net -- enables Internet-based trade communities to conduct
business-to-business transactions in specific industries. It currently
provides these services to 6 trade communities with 10,000 end users.
- ITinera -- a Belgium-based Internet service provider with over 950
business customers.
Over time, we intend to market most products and services of these
companies under the VersaTel brand. SpeedPort, however, will continue to market
its interest solutions under its current brands.
THE BENELUX MARKET OPPORTUNITY
VersaTel was founded in 1995 to capitalize on the opportunities created by
the liberalization of the telecommunications market in the Benelux. We believe
that the Benelux provides an excellent opportunity for competitive
communications service providers for several reasons, including:
- HIGH POPULATION DENSITY. With approximately 26.2 million people in a
relatively small geographical area, the Benelux market is characterized
by one of the world's highest population densities, approximately 351
persons per square kilometer, compared to approximately 107 persons per
square kilometer in western Europe as a whole.
- HIGH GROWTH POTENTIAL. Data and telecommunications revenues as a
percentage of gross domestic product ("GDP") of 5.3% in 1997 were still
relatively low compared to 6.3% in the United Kingdom and 7.0% in the
United States, each with a more developed communications market.
- RAPIDLY EXPANDING DATA AND INTERNET MARKETS. The market for data and
Internet services is growing rapidly in the Benelux. According to
International Data Corporation, the estimated annual growth of the market
for Internet access services will be 30.4% and 45.2% in The Netherlands
and Belgium, respectively, from 1997 to 2001.
- HIGH INTENSITY OF COMMUNICATIONS TRAFFIC. The Benelux is a major
transportation and trade gateway which generates a relatively high level
of communications traffic. According to EITO
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(the European Information Technology Observatory), the total Benelux
telecommunication services market amounted to $14.2 billion in 1997. If ranked
as a single country, the Benelux would have been the fifth largest
telecommunications market in western Europe behind Germany, France, the
United Kingdom and Italy.
- TRADITIONALLY UNDERSERVED MARKET. At present, the Benelux communications
market is dominated by the former monopoly carriers, KPN Telecom,
Belgacom and P&T Luxembourg in The Netherlands, Belgium and Luxembourg,
respectively. We believe these carriers have not traditionally focused on
providing high quality customer service to our targeted customers.
- DEMAND FOR END-TO-END, BROADBAND SERVICES. We believe that business
customers will increasingly demand high bandwidth end-to-end
communications services, as they rapidly adopt Internet-based
applications as essential business and communications tools, such as
electronic commerce.
The following chart illustrates the relative importance of the Benelux
telecommunications market:
[TOP 10 INTERNATIONAL TRAFFIC MARKETS BAR CHART]
<TABLE>
<CAPTION>
- ------------- -----
<S> <C>
United States 22700
United Kingdom 6600
Germany 5333
Canada 4286
France 3545
BENELUX (2) 2395
Italy 2352
Switzerland 2164
Japan 1792
Hong Kong 1718
</TABLE>
------------------------------
(1) Source: Telegeography 1999. All outgoing MiTT market data is 1997
information.
(2) The Benelux market figure is the aggregate figure of all outgoing MiTTs
of The Netherlands, Belgium and Luxembourg, net of intra-Benelux
outgoing international MiTTs.
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VersaTel currently operates in The Netherlands and in Belgium and plans to
extend its operations to Luxembourg in the future. The following table provides
a brief overview of the Benelux market:
<TABLE>
<S> <C>
Population(1)............................................... 26.2 million
Population Density(2)....................................... 351
persons/km(2)
Per capita GDP in 1997(1)................................... $24,033
Total telecom expenditures in 1997(3)....................... $14.2 billion
Telecom expenditures as % of GDP in 1997(3)................. 2.6%
Benelux telecom expenditures as % of western Europe's
telecom expenditures in 1997(3)........................... 8.2%
Number of Internet devices in 1997(4)....................... 1,831,000
Expected annual growth Internet devices 1997-2001(4)........ 35.9%
Total Internet access revenues in 1997(4)................... $24.1 million
Expected annual growth Internet access revenues
1997-2001(4).............................................. 34.7%
</TABLE>
- -------------------------
(1) Source: The Economist Intelligence Unit and Quest Economics Database
(2) Source: International Telecommunications Union, 1998
(3) Source: The European Information Technology Observatory (EITO), 1997
(4) Source: International Data Corporation, 1998
BUSINESS STRATEGY
Our objective is to become the leading local access, facilities-based
operator for broadband voice, data and Internet services in the Benelux. The
principal elements of our strategy are:
- DEPLOY OUR BROADBAND NETWORK. We are deploying our fully integrated
broadband network to allow us to provide voice, data and Internet
services, as well as to support all major protocols. We believe that our
high capacity network will allow us to grow our customer base rapidly,
increase our margins and expand our service offerings. We have designed
our network to pass the major points of interconnection of other service
providers and to connect to major Internet exchanges. We believe we will
be one of the highest quality ISPs in the Benelux. In addition, we have
already started constructing our local access infrastructure in areas
where we have completed the Benelux network. We intend to complete 2 of
our international rings in December 1999. Also, we are deploying the
latest network technologies, such as IP over DWDM (dense wave division
multiplexing), and intend to add services to this platform as it proves
reliable. We intend to continue to actively participate in the
development of new network technologies in order to maximize the capacity
of our network and to expand our service offerings.
- FOCUS ON TARGETED CUSTOMER SEGMENTS WITH SPECIALIZED TEAMS. We have
identified 4 groups -- broadband local access customers, small- and
medium-sized businesses, broadband data services customers and other
telecommunications, data and Internet service providers -- as our
targeted customer segments. We have tailored our sales force, customer
care and billing system to meet the specific needs of each of our target
customer segments. We plan to continue to leverage our network, team
approach and operations to deliver services to meet our targeted
customers' needs.
- PROVIDE INNOVATIVE PRODUCTS AND SERVICES. We seek to continue to be
market leaders in providing our customers with advanced products and
services and plan to provide customized solutions to fit local market
needs. We intend to leverage our high bandwidth Network to offer
integrated services to our customers. By providing broadband services to
our customers we will be able to meet their demand for a single source
provider, competitive prices, high quality of service and guaranteed
access to bandwidth. By directly connecting our customers to our network
and by
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providing multiple services, we believe customers will be less likely to
switch to other service providers and that these customers will provide
relatively higher revenues and margins. Through our acquisition of
Svianed we will be able to significantly accelerate the deployment of our
broadband data services product offerings by combining our market
presence with Svianed's data and network management expertise.
- EXPAND CARRIER SERVICES. We plan to generate substantial revenue and
additional traffic on our network through sales to telecommunications,
data and Internet service providers lacking network infrastructure. Our
fully integrated broadband network, high quality systems and peering
arrangements are intended to allow us to offer a broad portfolio of
carrier services, high bandwidth connectivity, co-location, call
termination and hosting. In addition, we are able to provide our carrier
service customers with support systems, such as customer care and billing
solutions. This approach enables us to use our high capacity network to
obtain revenues and margins from market segments, such as residential
customers, that we do not currently target.
- FOCUS ON SUPERIOR CUSTOMER SERVICE. VersaTel strives to maintain a
competitive advantage over competitors in its target markets by providing
superior customer service in terms of responsiveness, accuracy and
quality. We believe that the Benelux market 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. We were the first provider in the market of detailed
monthly billing statements and monthly call management reports which
identify savings to customers and enable them to manage their
telecommunications expenditures more effectively. We have invested in a
leading operational support system software and hardware to insure that
our back-office systems enable us to maintain a competitive advantage in
the market.
- PURSUE SELECTIVE ACQUISITIONS AND STRATEGIC RELATIONSHIPS. We plan to
continue to acquire other competitive telecommunications, data and
Internet service providers in order to accelerate the growth of our
customer base, our network and our service portfolio. As part of our
strategy, our acquisition of Svianed will accelerate our time to market
with our data services product offering, enhance our sales force and
expand our market presence in the Benelux. Through our acquisitions of CS
Net in November 1998, SpeedPort and VuurWerk in May 1999 and Svianed and
ITinera in June 1999, we have significantly expanded our Internet
services product offerings and expertise. In addition, we are actively
pursuing additional strategic relationships with alternative carriers in
Germany, France and the United Kingdom in order to establish
interconnection agreements, to partner in infrastructure projects and to
expand our geographic reach.
THE VERSATEL NETWORK
We are building a high bandwidth network designed to provide flexible,
broadband local access to business customers with connectivity to all major
business and population centers in the Benelux and to key international
destinations (the "VersaTel Network" or the "Network"). Our Network will have
the ability to carry voice, data and Internet traffic and will support all major
protocols, including Frame Relay, ATM and IP. We connect with the major Internet
exchanges in Amsterdam, Brussels, London, Paris, Dusseldorf and Frankfurt and
through our acquisition of SpeedPort we will be increasing the number and
quality of peering arrangements with leading carriers of IP traffic to enhance
our presence in the rapidly expanding European Internet services market.
NETWORK DESIGN PRINCIPLES
Our Network is designed to be scaleable, flexible, reliable and efficient:
- SCALEABILITY. We are constructing our Network to offer very high
capacity in all Network components, including ducts, fibers, DWDM, SDH
and operating support system platforms. We
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are placing 8 ducts, each capable of carrying over 300 fibers, on most
routes. We believe this will be enough to provide excess capacity for
future growth and will allow us to trade and sell a portion of our excess
capacity to other operators. We have installed DWDM equipment on our
initial fibers, which allows us to transmit multiple frequencies of light
on the same fiber strand. As a result, the capacity of a single fiber can
be increased by 16 times. Our SDH equipment will be capable of
transmitting at the rate of 10 Gbps (STM-64), with the ability to make 20
Gbps available, if necessary. Our design will enable us to deliver high
bandwidth to our customers while providing substantial potential for
future expansion.
- FLEXIBILITY. We believe our Network design will enable us to respond to
changes in service offerings, Network standards and protocols. We
currently have a Nortel DMS 100 digital circuit switch and a Cisco data
switch in both Amsterdam and Antwerp. We expect to have an additional
Nortel DMS switch and an additional Cisco data switch installed in
Rotterdam in the third quarter of 1999 and Brussels in 2000. The Nortel
DMS switches enable us to deliver voice and ISDN telecommunications
services and the Cisco data switches allow us to support multiple data
communications protocols including IP, IPX (Novell), ATM, Frame Relay and
others.
- RELIABILITY. The Network provides redundancy at multiple levels by using
a self-healing, shared protection ring structure to provide dual
direction routing capability in the event of cable damage or equipment
failure. SDH equipment automates most of the functions of routing and
connecting service bandwidth and reroutes these functions in the event of
failure. Our data and voice/ISDN networks also have alternate routing
capability to assure high availability of the services they deliver. We
have selected very reliable equipment from world class vendors, such as
Nortel and Cisco.
- EFFICIENCY. We believe we are constructing our Network in the most
efficient manner by routing the Network to target all the major business
parks and city centers in the Benelux and by installing high capacity
Network elements which will provide us with excess capacity to allow for
future growth. Also, this efficiency is maintained in our Network
operations by our use of the highest quality components and equipment and
by ensuring we continue to properly manage our Network.
NETWORK ELEMENTS
The VersaTel Network will consist of the following integrated elements:
- BENELUX NETWORK. We are constructing a high capacity, broadband network
that will offer local access connectivity to thousands of business
customers with flexible bandwidth fiber facilities. The Benelux network
will extend to all major commercial and population centers in the
Benelux, including most interconnection points with PTTs, other
telecommunications network operators and major Internet exchanges. We
have designed the Network route to pass through as many businesses as
possible by going through business communities and past major bandwidth
users. Approximately 90,000 businesses are located within one kilometer
of the network and approximately 270,000 businesses are located within 5
kilometers of the route. Physical access points will be provided near
each group of potential customers, at average intervals of 1.5
kilometers. While these features have increased the initial cost of our
network and the time to construct it, we expect that the total cost of
connecting to buildings will be lower and the time required for
connections will be reduced. A small portion of our network is being
constructed jointly with other carriers and some rural sections are being
completed by purchases of dark fiber and pending the completion of
construction, through leased lines. The initial phase of the Benelux
network consisting of 315 kilometers that connects our switches in
Amsterdam and Antwerp was placed in service in May 1999. An additional
200 kilometers of dark fiber and 535 kilometers of fiber-ready duct have
been constructed. By the end of 1999, we intend to have in service
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4 self-healing rings consisting of 1,200 kilometers. By the middle of
2000, the Benelux network is expected to consist of approximately 2,200
kilometers of fiber optic rings.
- LOCAL ACCESS INFRASTRUCTURE. We are extending the Benelux network into
city centers, business parks and buildings with fiber optic rings and
radio systems to directly connect to customers. We started constructing
fiber optic infrastructure in business parks in January 1999. We intend
to connect our first customers shortly after the initial rings of the
Benelux network become operational, which we expect to occur by the third
quarter of 1999. We plan to construct over 300 kilometers of local access
infrastructure in 1999. Also, we began testing point-to-multipoint radio
systems technology at 2 sites in The Netherlands in the third quarter of
1998 and we plan to begin testing in Belgium by the third quarter of
1999. In addition, we are considering using unbundled local loop access
to reach customers when it becomes available.
- INTERNATIONAL NETWORK. We are establishing an international network that
will extend the Benelux network to several major interconnection and
Internet exchange points in Western Europe. Initially, these points will
be London, which we connected in March 1999, Frankfurt, which we
connected in May 1999, and Dusseldorf and Paris, which we expect to
connect by the end of 1999. The international network will consist of one
or more fiber pairs in fully redundant ring structures. We are also
considering acquiring fiber optic capacity to the United States to
improve our Network's Internet connectivity for SpeedPort's utilization.
Most of the international network will consist of fiber or SDH capacity
obtained from other operators, but we plan to own and operate the
transmission equipment.
As of May 31, 1999, our network passed the following city centers and
business parks in The Netherlands and Belgium:
<TABLE>
<CAPTION>
CITY CENTERS BUSINESS PARKS
- ---------------------------------------------- ----------------------------------
<S> <C> <C>
- - Amersfoort - Leiden - Amsterdam -- Bullewijk
- - Amsterdam - Rotterdam - Amsterdam -- Sloterdijk
- - Delft - Utrecht - Haarlem -- Waarderpolder
- - Haarlem - Antwerp - The Hague -- Plaspoelpolder
- - The Hague - Gent - Rotterdam -- Spaansepolder
- - Hilversum - Mechelen - Utrecht -- Lage Weide
</TABLE>
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[NETWORK DESIGN GRAPH]
SERVICE PLATFORMS
Our Network incorporates service platforms to deliver each of the major
service categories we offer or plan to offer. An SDH transmission platform
provides highly reliable transmission capacity for our other services and for
capacity leased to other operators, service providers and customers. A digital
circuit switching platform delivers voice and ISDN services. A data
communications platform based on ATM supports all major data protocols with high
quality service. An Internet services platform will support the Internet
services we provide to end users and our offering of outsourced services to ISPs
and content providers. In parallel, we are implementing an additional new
platform of IP equipment connected directly to DWDM/fiber which is intended to
support all types of services. By integrating the
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functions of SDH, ATM and circuit switching, this platform should provide a
lower cost and a more flexible design than traditional equipment. We plan to
carry services, including voice, data and Internet services, on this platform as
the quality of service management becomes proven.
DATA CENTERS
We intend to establish large scale data centers in Amsterdam, Antwerp,
Rotterdam and Brussels. We are designing these data centers to house our
transmission, IP routing and switching facilities. At these data centers, we
also expect to offer hosting, co-location and interconnection services to high-
volume customers, such as ISPs, in a secure, controlled site with direct access
to our Network. Through the acquisition of SpeedPort, we have acquired a data
center with 150 square meters of raised floor space for equipment housing and
fiber connectivity to both the SARA and NIKHEF parts of the Amsterdam Internet
Exchange. We are presently constructing a new Amsterdam data center which will
provide 1,000 square meters of raised floor space for equipment housing and will
also have direct fiber connectivity to both parts of the Amsterdam Internet
Exchange. In addition, SpeedPort will be constructing Internet co-location
facilities in London, Paris and Frankfurt.
PEERING AND TRANSIT ARRANGEMENTS
Our peering arrangements allow us to exchange traffic with these ISPs
without these ISPs, or us, having to pay transit costs. We will establish
peering arrangements with ISPs when equal traffic volumes are expected to be
exchanged. We currently have peering arrangements with 32 ISPs, including
Belgacom, Euronet, PSINet Europe, Demon Internet, @Home Benelux, World Online,
A2000 and other major ISPs in the Internet market in western Europe. We expect
to enter into additional peering arrangements with network-based ISPs in order
to support SpeedPort and our other Internet services. In addition we expect to
sell approximately 60 transit connections to ISPs and content providers.
NETWORK MANAGEMENT
We monitor our Network 24 hours a day and 7 days a week at our Network
operations center. Our Network operations center is able to identify Network
interruptions as soon as they occur and allows us to reroute traffic to ensure
termination. Our Network operations center has an uninterrupted power supply and
redundant communications access and computer processors. We own and control our
own points of presence in the Benelux which allows us immediate access for rapid
restoration when necessary. We have provided for a back-up Network operations
center in the event our primary Network operations center is forced off-line.
NETWORK IMPLEMENTATION
VersaTel has entered into a framework agreement with Nortel to supply most
initial transmission equipment, including SDH, radio, voice/ISDN switching and
the SDH network management system. This agreement includes vendor financing for
all Nortel products and services. A similar agreement with Cisco is providing
the data communications platform and Cisco's support services. We have
agreements with 4 leading construction companies in The Netherlands for Network
construction. Although Meijsen Ondergrondse Infrastructuren B.V. had originally
been contracted to oversee the construction of our Network, we have now
allocated construction responsibility to 3 additional contractors. We are now
adding another construction contractor in Belgium as well. These construction
companies are responsible for obtaining rights of way, civil engineering,
physical construction and testing of our Network. We have retained experienced
agents in both The Netherlands and Belgium to assist the construction companies
in obtaining rights of way.
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PRODUCTS AND SERVICES
VersaTel currently offers a wide range of business and carrier products and
services and continually evaluates potential product and service offerings,
including competitors' offerings, in order to retain and expand its customer
base and to increase revenue per customer.
BUSINESS PRODUCTS AND SERVICES OFFERINGS
We currently offer the following products and services to business
customers:
LONG DISTANCE TELEPHONY. VersaTel offers international and national long
distance telephony services to over 8,000 business and residential customers in
The Netherlands and over 600 business customers in Belgium. Our telephony
service is offered through our "1611" carrier select code and dial-around and
least-cost routing software installed in our customer PBXs.
ISDN SERVICES. We offer ISDN primary rate services to our customers in the
Benelux. This service primarily targets the business market with digital PBX's
and high volumes of outgoing and incoming traffic. Currently, ISDN is the
fastest growing service for business telephony in the western European market.
LAN TO LAN INTERCONNECT SERVICES. We offer high speed LAN (local area
network) to LAN interconnect services for multi-site business customers. This
service targets business customers that need to interconnect their multiple LANs
to share centralized computer data and applications efficiently. We will provide
end-to-end management of the wide area network, including the routers, at
customers' premises.
DEDICATED INTERNET CONNECTIVITY. We also offer dedicated high speed
Internet access services to business customers. This service provides high
bandwidth access to the Internet, e-mail facilities, news feed from news groups
and web space for hosting web-sites.
REMOTE ACCESS SERVICES. We offer efficient remote access services to
business customers enabling employees to access the corporate LAN from home.
These home offices will have secured access to the corporate network, data and
applications. This service will also be applied to tele-banking and tele-
shopping applications.
IP-BASED ELECTRONIC TRANSACTION SERVICES. CS Net provides Internet-based
business-to-business transaction services to vertical trade communities that act
as comprehensive sources of information, interaction and electronic commerce for
their users.
DIAL-IN INTERNET ACCESS SERVICES. We offer dial-in Internet access
services for the small- and medium-sized businesses. Our plan is to package our
long distance telephony service with an attractive Internet access service.
WEB HOSTING SERVICES. VuurWerk provides web hosting services targeting the
business market. This service consists of an integrated package of a domain
name, e-mail accounts, web space for hosting corporate web-sites and on-line
web-site statistics.
For a description of Svianed's current products and services see
"-- Svianed -- Products and Services".
We also expect to introduce the following retail products and services to
business customers within the next 12 months:
- virtual private network,
- toll/toll-free services,
- dial-in LAN interconnect services,
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- data VPN and Voice Over IP services,
- carrier pre-select (equal access) telephony, and
- Internet and telecommunications services over MDF access and xDSL
technology.
CARRIER PRODUCTS AND SERVICES
We currently offer the following products and services:
CALL TERMINATION SERVICES. We offer switched services to other
telecommunications service providers, including international and national call
termination services in the Benelux. As we complete our international network,
we will be able to offer call termination services in Germany, France and the
United Kingdom.
CO-LOCATION AND FACILITIES MANAGEMENT. We provide co-location services for
carriers wishing to extend and expand their networks by housing their own
computing and telecommunications equipment inside our secured premises within
the Benelux and selected international locations.
NETWORK CAPACITY FACILITIES. We sell and trade rights of way, ducts, dark
fiber, wave length and STM-16 capacity to other carriers.
VIRTUAL POINT-OF-PRESENCE DIAL-IN SERVICES. We offer virtual
point-of-presence services for telecommunications, data and Internet service
providers in order to allow cost-efficient dial-in capability and effective
remote access capabilities for their customers.
INTERNET TRANSIT SERVICES. We offer Internet transit services to
telecommunications and Internet service providers seeking transit services
between major Internet exchanges.
We expect to introduce the following carrier products and services in the
future:
- leased circuits (E1, E3, T3 and STM-1),
- switching, billing and customer care services for resellers,
- ISP hosting services, and
- Voice Over IP gateway and clearing house services.
SALES AND MARKETING
VersaTel seeks to capitalize on its position as a competitive
communications services provider that offers comprehensive customer service and
competitively priced communications services in the Benelux with a focus on
small and medium-sized businesses. We believe that we have created a prominent
brandname in our target market that we expect to successfully apply throughout
the Benelux. Over time we intend to market the products and services of our
acquired businesses under a common VersaTel brandname. We market our products
and services through several marketing channels, including database marketing,
targeted telemarketing, brand and promotional advertising, direct mail and our
direct sales force.
Our sales force is composed of direct sales personnel, telemarketers and
independent sales agents. Marketing is currently conducted by 40 direct sales
personnel in Amsterdam and Rotterdam and 16 in Antwerp. In the future, we expect
to significantly expand our direct sales force and open an additional sales
office in Brussels. With our recent acquisitions of Vuurwerk Internet B.V.,
SpeedPort N.V., ITinera Services N.V. and Svianed B.V., we have added
approximately 25 additional direct sales personnel. Our sales personnel make
direct calls to prospective and existing business customers, analyze business
customers' usage and service needs, and demonstrate how VersaTel's service
package will improve a customer's communications capabilities and costs. Each
member of our sales force is required to
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complete our intensive training program. In addition, we have a telemarketing
group that screens prospective customers and verifies call volumes.
We have also established a sales agent program under which sales agents
receive commissions, but are not employed by us. Agents are provided with an
advertising and sales promotion budget based on the volume of their sales. We
currently have approximately 100 such sales agents in The Netherlands and
approximately 50 in Belgium and intend to continue to increase the size of this
program. Sales agents primarily sell our business services offerings.
Our sales force is organized in the following 4 groups to target the
primary customer segments with a focused product portfolio that matches the
needs of these customer segments:
BUSINESS SERVICES. Our business services sales force targets our core
target market of small- and medium-sized businesses throughout The Netherlands
and Belgium. The customers targeted by this group currently access the Network
indirectly by manually dialing, using an auto-dialer, or through pre-programmed
PBX's, our "1611" carrier select code. As a result of OPTA's recent ruling, we
will be able to reach these customers through carrier pre-select (equal access)
and unbundled local loop access. The services offered to these customers also
include ISDN, Internet and LAN to LAN interconnection services.
LOCAL ACCESS SERVICES. Our local access services sales force targets
potential customers along the Benelux network with a high bandwidth service
package consisting of voice, data and Internet products. Unlike most other
competitive alternative communications services providers who focus primarily on
the main international cities, we will be able to offer high bandwidth services
to our customers at any point along the Benelux network. The customers targeted
by this team will access the Network directly through leased lines or, upon its
deployment, through our own local access infrastructure.
DATA SERVICES. Through our acquisition of Svianed, our data services sales
force targets potential customers with multiple locations throughout the Benelux
with high bandwidth requirements. These potential customers include medium- to
large-sized organizations that are located more than 5 kilometers from the
Network or do not seek a direct connection to the Network.
CARRIER SERVICES. Our carrier services sales force markets our product
portfolio to other telecommunications and Internet services providers, including
switchless resellers, in the Benelux and the countries reached by our
international network. Our focus is on developing a broad range of services that
addresses the specific needs of carrier customers targeting the Benelux.
CUSTOMERS
We market our services on a retail basis to business customers and on a
wholesale basis to other carriers and service providers.
SMALL- AND MEDIUM-SIZED BUSINESSES. Our target customers are small- and
medium-sized businesses (businesses with fewer than 500 employees). However,
with the acquisition of Svianed, we will now be able to offer high bandwidth
data services to large-sized customers. We focus particularly on those business
and industry segments which have historically generated significant volumes of
national and international traffic, such as financial services, information
technology services, transportation and import and export. We believe 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. Through our acquisition
of CS Net, we are able to offer business-to-business transaction services to
vertical trade communities.
CARRIER CUSTOMERS. Our carrier customers are global and regional network
operators, Internet service providers and switchless resellers serving specific
market segments in the Benelux. We focus
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primarily on high capacity and high volume customers. We believe that new
entrants to the telecommunications services market that provide voice, data or
Internet services in the Benelux region will require quality carrier services
and high bandwidth services to develop their market position.
RESIDENTIAL CUSTOMERS. Our initial focus with respect to residential
customers had been to market our services to employees of our business customers
and to residential customers in certain niche markets characterized by
high-volume calling patterns. Recently, we have refocused our efforts and we now
intend to target the residential market by offering carrier hosting services to
switchless resellers who target the residential market. We believe that this
approach is a more cost-effective way of reaching the residential market
segment.
CUSTOMER SERVICE
Our goal is to maintain an advantage over our competitors in our target
markets by providing superior customer service. We believe that providing a high
level of customer service is a key element to establishing customer loyalty and
attracting new customers. We have dedicated customer service representatives who
initiate contact with our customers on a routine basis to ensure customer
satisfaction and market new products. Customer service representatives are
available 24 hours a day, 365 days a year. In addition, we provide detailed
monthly billing statements and monthly call management reports which identify
savings to customers and enable them to manage their telecommunications
expenditures more effectively.
We also believe that technology plays an important role in customer
satisfaction. Advanced technological equipment is crucial to enabling the
provision of a high quality of service to our customers. It is our policy to
reduce technical risks as much as possible by buying proven products from world
leaders in the applicable technology. We have installed sophisticated
status-monitoring and diagnostic equipment at our Network operations center and
plan to install similar units on our SDH equipment. This equipment allows us to
identify and remedy network problems before they are detected by customers. By
providing superior customer service and through the effective use of technology,
we expect to maintain a competitive advantage in our target markets.
We use the Internet and Internet technology in our communications with our
customers. The information technology industry is demonstrating that providing
customer access to their own information records, through Internet-based
technologies, can result in increased customer satisfaction and loyalty while
reducing costs. We intend to begin to provide this type of Internet-based system
for sales, service ordering, customer inquiries, fault management and billing
with usage information in the third quarter of 1999.
BILLING AND INFORMATION SYSTEMS
We are in the process of replacing our current billing, customer care and
sales support system with advanced systems designed by Saville Systems and
Clarify. Our new billing system and customer care and sales support system will
be introduced in stages and we expect the first stage to be completed by the end
of the second quarter of 1999. We do not expect any material disruption in our
billing or information systems as a result of the Year 2000. In addition, we
have planned and budgeted replacements and enhancements to our information
systems to handle our growth in the size and complexity of our business, our
customer base and our product portfolio in areas such as work flow, fixed asset
management, sales support and service provisioning.
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SVIANED
Svianed, the third largest provider of data services in The Netherlands,
provides data services to approximately 50 customers, primarily in the financial
services and banking industries, including the principal social insurance
organization and the largest financial institution in The Netherlands. These
customers are served on a network which connects to over 600 buildings and
utilizes over 700 leased lines covering approximately 6,000 kilometers. The
Svianed network has 50 regional points of presence and transports traffic at
speeds of up to 150 Mbps. Prior to VersaTel's acquisition of Svianed, Svianed
was owned by Gak Holdings B.V., a government-controlled organization partially
responsible for the implementation of social security laws within The
Netherlands.
NETWORK
Svianed has an extensive network in The Netherlands comprised of leased
lines, regionally dispersed points of presence, data and Internet switches and
routers which serve 50 customers and over 100,000 end users. The following chart
describes the Svianed network:
[MAP OF THE NETHERLANDS WITH SVIANED'S NETWORK]
<TABLE>
<S> <C>
- - 50 regional points of presence - approximately 750 Cisco routers
- - over 700 leased lines covering 6,000 - 300 ISDN primary rate interface (PRI)
kilometers
- speeds of up to 150 Mbps
- - over 600 directly connected customer
buildings
- - 83 ATM and Frame Relay switches
</TABLE>
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PRODUCTS AND SERVICES
Many of Svianed's products and services are complementary to VersaTel's
products and services, any duplication will be rationalized over the next 18
months.
Svianed provides the following products and services to its customers:
LAN TO LAN INTERCONNECT. Connecting LANs at geographically dispersed
locations both within and outside The Netherlands.
LAN AND WAN MANAGEMENT. Svianed supplies and manages all active components
of a customer's LAN including ethernet switches.
REMOTE DIAL-IN. Regional dial-in connections to customers to their own
business networks for remote access.
TELEPHONY SERVICES. Svianed offers traditional voice communications,
particularly telephone exchanges and network facilities including management.
INTERNET ACCESS. Svianed provides access to the Internet, including mail,
web hosting and news services, in addition to security services, integration of
speech and data communications and computer telephony integration.
CO-LOCATION. Svianed offers customers the opportunity to co-locate their
network equipment at Svianed points of presence.
CUSTOMERS
Svianed currently has approximately 50 customers, the largest of which is
the Gak Group, who composed approximately 60.8% of Svianed's 1998 revenue. In
addition to the Gak Group, Svianed's other major clients include: ING Groep
(financial services), Achmea Groep (financial services and insurance), Belgacom
(telecommunications), Kluwer (publishing), Assurantie Data Network (insurance)
and Sociale Zekerheid (insurance). Additionally, Svianed provides dial-in
services and LAN/WAN management to a large Netherlands-based pension fund, as
well as one of the largest insurance companies in The Netherlands.
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COMPETITION
Until recently, the telecommunications market in each EU Member State has
been dominated by its respective PTT. Since the implementation of a series of
European Commission directives beginning in 1990, the EU Member States have
started to liberalize their respective telecommunications markets, 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, we compete or will compete
primarily with the national PTTs. As the former monopoly 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 ours. In addition, the national PTTs own and operate
virtually all of the infrastructure which we must currently access to provide
our services. We estimate 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 Telfort, a company formed by
British Telecom and Nederlandse Spoorwegen N.V., the Netherlands railroad
company, as well as Global One Communications, MCI Worldcom, GTS/Esprit Telecom
and EnerTel, compete with KPN Telecom for contracts with large multinational
companies in The Netherlands. MCI Worldcom, British Telecom, AT&T, TeleNet,
France Telecom, COLT Telecom, Unisource, a subsidiary of KPN Telecom, and
GTS/Esprit Telecom compete with Belgacom for contracts with large multinational
companies in Belgium.
The following table sets forth some of our most important competitors in
the areas of voice, data, Internet and carrier services:
<TABLE>
<CAPTION>
MARKET THE NETHERLANDS BELGIUM
- ------ -------------------- --------------------
<S> <C> <C>
Voice............................. KPN Telecom Belgacom
Telfort MCI Worldcom
MCI Worldcom GTS/Esprit Telecom
GTS/Esprit Telecom
COLT Telecom
Data.............................. KPN Telecom Belgacom
Global One MCI Worldcom
Telfort
Internet.......................... KPN Telecom Belgacom
MCI Worldcom/UUNet TeleNet
Wirehub
EuroNet
Carrier Services.................. KPN Telecom Belgacom
MCI Worldcom MCI Worldcom
EnerTel/WorldPort GTS/Esprit Telecom
GTS/Esprit Telecom
</TABLE>
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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 VersaTel's product
and service offerings.
The current regulatory framework in the EU and in the countries in which we
provide our services or intend to provide our 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 us, that national
or international regulators or third parties will not raise material issues with
regard to our compliance or noncompliance with applicable regulations or that
any changes in applicable laws or regulations will not have a material adverse
effect on us.
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 2 directives that established these principles in
EU law: the Open Network Provision ("ONP") Framework Directive and the EC
Services Directive. These 2 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. As a
result, many new entrants entered the market, labeling their services as closed
user group 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. The purpose of the 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 EC issued the Full Competition Directive, which requires EU
Member States to permit alternative infrastructure providers, such as existing
networks of cable companies, railroads, electric and other utility companies, to
resell capacity on these networks for the provision of services other than voice
telephony from July 1996. This allows VersaTel to lease transmission capacity
from companies other than the PTTs. The Full Competition Directive also
established January 1, 1998 as the date by which the EU Member States had to
establish a legal framework which removes all remaining restrictions on the
provision of telecommunications services, including voice telephony. Although
Spain, Greece, Portugal, Ireland and Luxembourg were each allowed to delay
implementation for various periods, only Greece had not implemented the Full
Competition Directive as of January 1, 1999. Subject to the foregoing, each EU
Member State is obliged, under EU law, to enforce the terms of the Full
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Competition Directive. Enforceability of the Full Competition Directive may be
challenged at the EU level or at the EU Member State level.
In addition to the Full Competition Directive, the EC 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 with parties with significant market
power provide for access at cost-oriented rates.
The Interconnection Directive has been amended to provide for carrier
selection (ensuring that end-users can select the long distance or international
carrier of their choice on a call-by-call basis) as of January 1, 1998, and
carrier pre-selection (ensuring that end-users can select the long distance or
international carrier of their choice prior to the time calls are made) 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.
There are currently few laws and regulations that specifically regulate
communications on the Internet. European and U.S. Government authorities and
agencies are considering laws and regulations that address issues such as user
privacy, pricing, on-line content regulation and taxation of on-line products
and services. In November 1995, the EC adopted a general directive regarding
certain privacy rights of citizens of EU Member States and in December 1997, the
EU adopted another directive designed to specifically address privacy rights in
the area of telecommunications services. These directives impose restrictions on
the collection and use of personal data, guaranteeing citizens of EU Member
States the right of access to their data, the right to know where the data
originated and the right to recourse in the event of unlawful processing.
Although, to the best of our knowledge, no European court has ever held a
telecommunications services provider liable for content transmitted over its
network, we can give no assurances that no laws or regulations will be adopted
that will impose such liability, or that any future court rulings will not
impose such liability. Any future regulation of the Internet could impose
restrictions on the way we conduct our business and could seriously affect our
business.
An overview of the regulatory framework in the individual markets where we
operate or intend 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. We
require licenses, authorizations or registrations in all countries in which we
operate to
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provide our services. Licenses, authorizations and/or registrations have been
obtained in The Netherlands and Belgium and we have received an International
Facilities License in the United Kingdom. We have applied for a network license
in Germany. We intend to apply for such licenses and registrations in Luxembourg
and France in the near future. Although we expect that these licenses and
registrations will be granted, there can be no assurance that we will be able to
obtain such licenses, authorizations or registrations or that our operations
will not become subject to other regulatory authorization or registration
requirements in the countries in which we operate or plan to operate.
THE NETHERLANDS
The Telecommunications Act of 1998 provides the current regulatory
framework in The Netherlands. This new telecommunications act came into force on
December 15, 1998, and remedied the old legislative and regulatory patchwork
that had existed as a result of the implementation of a series of EC directives.
The new telecommunications act contains provisions that give registered
telecommunication services providers rights-of-way, subject to certain
conditions, thereby facilitating the construction of the VersaTel Network.
As part of the liberalization of the Netherlands telecommunications market,
the new independent supervisory authority, 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. The rulings of OPTA, to date, have given us
confidence that new providers of telecommunications services will be granted
fair and equal access to the market in The Netherlands.
The Telecommunications Act also requires providers of public
telecommunications services to comply with the specific privacy provisions
contained in the act, which are based on the privacy directive of December 1997.
In general, providers of public telecommunications services must ensure the
protection of personal data and privacy of subscribers and remove the processed
data on subscribers with respect to the actual use of the network. In The
Netherlands, ISPs are considered to be providers of public telecommunications
service providers referred to in the Telecommunications Act. As a result, ISPs
are also bound by the specific privacy provisions for providers of public
telecommunications services contained in the Telecommunications Act.
In August 1997, we obtained one of the first Netherlands registrations to
operate as a telecommunications service provider of public voice telephony
(other than KPN Telecom). In September 1997, we obtained an infrastructure
license with rights-of-way for the construction and operation of
telecommunications facilities in a limited geographic area. In December 1998, we
obtained the first authorizations under the new telecommunications act to
operate as a public telecommunications services provider and network operator.
We have received licenses which allow us to test point-to-multipoint radio
technology in The Netherlands. It is expected that the Netherlands Government
will conduct an auction on frequencies for this point-to-multipoint radio
technology (fixed-wireless access) by the end of 1999. Since May 1999, we have
been able to offer our customers our own subscriber numbers, all of which start
with "750".
Since our founding in October 1995, we have adopted a proactive regulatory
strategy. In October 1996, we successfully challenged KPN Telecom's use of our
invoice records to offer our customers additional discounts. In a warning letter
to KPN Telecom, the Directorate for Competition (DG IV) of the EC held this to
be an abuse of power by KPN Telecom. Not only did the EC require KPN Telecom to
stop using information regarding the calling behavior of customers for
competitive activities, such as approaching our customers with discounts and
other special offers, it also questioned the legitimacy of KPN 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 EC
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had delegated this matter, has recently ruled that these discount plans indeed
violate competition law principles and has required KPN Telecom to change them.
We were one of the first voice telephony competitors in The Netherlands to
interconnect with KPN Telecom and to implement a carrier select code in all of
KPN Telecom's telephone switches. The introduction of carrier pre-selection in
The Netherlands, which is expected to be introduced on January 1, 2000, will
allow customers the option to pre-select a carrier other than KPN Telecom for
all their international and national long distance calls. We continue to seek to
obtain lower interconnection rates from KPN Telecom. In July 1998, OPTA ruled
that KPN Telecom's origination and termination charges had to be reduced by
approximately 55% and 30%, respectively. The terms and conditions of
interconnection have had and will continue to have a material effect on the
competitive position of VersaTel.
In December 1998, OPTA issued a ruling on KPN Telecom's end-user tariffs,
which were deemed contrary to the principles on cost orientation. As a result,
KPN Telecom lowered its end-user tariffs for its national long distance services
by approximately 10% as of January 1, 1999. It is expected that OPTA's ruling
will have some negative effects on competition in the market in The Netherlands.
In December 1998, VersaTel filed a complaint with OPTA asserting that the
limited access provided by KPN Telecom to the KPN Telecom network hampered
VersaTel's growth. Our customers often experienced busy signals when they tried
to dial into the VersaTel Network through our access code. Other Netherlands
telecommunications services providers voiced similar complaints. OPTA recently
ruled that KPN Telecom must allow us access to their entire interconnection
network. In addition, OPTA ruled that KPN Telecom would be responsible for the
additional costs associated with the implementation of such ruling. The ruling
does not affect KPN Telecom's access rates.
In March 1999, OPTA issued a ruling, requiring KPN Telecom to offer
unbundled access to local customer access lines at the MDF in KPN Telecom's
central exchange offices. Unbundled local access may enable us to offer a high
bandwidth package to those customers that are not directly connected to our
Network.
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 Belgium Institute for Post and
Telecommunications (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
administrative 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.
On the basis of the amended telecommunications act, we applied for a
licence to construct and operate public telecommunications infrastructure and a
license to provide voice telephony nationwide. Both licenses where granted in
June 1998. For marketing purposes, we have reserved the same carrier select code
"1611" as we currently use in The Netherlands. In August, 1998, we obtained
interconnection with Belgacom for carrier selection and call termination
services in advance of concluding a definitive interconnect agreement in
November 1998.
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In July 1998, various Royal Decrees were published to replace the temporary
regime with a definitive one. On that basis, we had to file new applications for
an infrastructure license and a license for voice services. On November 9, 1998,
we were the first alternative telecommunications services provider to obtain a
definitive license for the provision of voice services. On December 21, 1998, we
obtained a definitive infrastructure license in Belgium and thereby obtained
rights of way in all of Belgium and a special interconnect tariff which is 15%
below the tariff for voice service providers.
In October 1998, we were granted geographic number ranges for the main
cities in Belgium, including Brussels, Antwerp, Kortrijk and Gand, in which we
plan to start operations. In addition, we obtained number ranges for toll-free
(0800) phone services and premium rate services.
Pursuant to the new telecommunications act, Belgacom is required as of
January 1, 2000, to introduce number portability and carrier pre-selection
(equal access). We expect that Belgacom will request the Belgian regulatory
entity, the Belgisch Instituut voor Post en Telecommunicatie, to delay these
introductions by 4 to 6 months.
The Belgisch Instituut voor Post en Telecommunicatie is also expected to
grant licenses for the utilization of point-to-multipoint systems for broadband
fixed wireless access. However, the procedure of assignment has not been chosen
by the Belgisch Instituut voor Post en Telecommunicatie. VersaTel intends to
file applications once such procedures are implemented.
LUXEMBOURG
The Luxembourg telecommunications market has been liberalized since July 1,
1998, 6 months after liberalization in most other EU Member States. Until that
date, P&T Telecom Luxembourg, a state-owned company, had a 100% monopoly in the
provision of basic voice telephony and telecommunications infrastructure. A new
regulatory entity, the Luxembourg Institute of Telecommunications (Institut
Luxembourgeois des Telecommunications), has been installed to oversee the newly
deregulated market. Under this new regulatory regime, competition is expected to
develop along the same lines as in the other Benelux countries.
In the second quarter of 1998, the Institut Luxembourgeois des
Telecommunications, in co-operation with the Ministry of Telecommunications,
published most of the secondary legislation and rulings with the intention to
provide a full liberalization of the telecommunications market. However, in the
third quarter of 1998, the EC initiated an infringement procedure against
Luxembourg asserting the insufficient implementation of the liberalization
directives and certain other directives. It primarily concerned the definition
of "universal service," the vocal telephony licensing procedure, the financing
of the Institut Luxembourgeois des Telecommunications and the adaptation of the
Luxembourg law in line with the EC Satellite Directive. In most instances, the
situation was assessed as resulting mainly from delays in the adoption of the
secondary legislation.
In January 1999, the Luxembourg government started a consultation period
which may lead to an assignment procedure for frequencies to operate
point-to-multi point systems for broadband fixed wireless access.
PROPERTIES
Our principal executive offices are located at Paalbergweg 36,
Amsterdam-Zuidoost, The Netherlands. The lease agreement for this location will
expire in May 2003. Our Belgian offices are located at Noorderlaan 133 in
Antwerp. The lease agreement for this location will expire in May 2007. We are
currently looking for additional or new office space in Amsterdam to accommodate
our future needs.
VuurWerk's offices are located at Gedempte Oude Gracht 82-E, 2011 GV
Haarlem, The Netherlands. The lease agreement for this location will expire on
September 31, 2000.
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SpeedPort's offices are located at Kruislaan 400, 1098 SM Amsterdam, The
Netherlands. The lease agreement for this location expires November 1, 1999.
CSNet's offices are located at Brugweg 56, 2741 KZ Wadinxveen, The
Netherlands. The lease agreement for this location expires on November 1, 1999.
ITinera's offices are located at Dam 171, 8500 Kortrijk, Belgium. The lease
agreement for this location expires on August 31, 2006.
Svianed's offices are located at Jan Tooropstraat 109, 1040 HD Amsterdam,
The Netherlands. The lease agreement for this location expires on January 1,
2000.
EMPLOYEES
As of May 31, 1999, VersaTel had 289 full-time employees and approximately
100 full-time consultants. In addition, we employ approximately 50 temporary
employees at any given time. None of our employees is represented by a labor
union or covered by a collective bargaining agreement, and we have never
experienced a work stoppage. We consider our employee relations to be good. With
our recent acquisitions of Vuurwerk Internet B.V., SpeedPort N.V., ITinera
Services N.V. and Svianed B.V., we have added 9, 18, 19 and 60 employees,
respectively.
INTELLECTUAL PROPERTY
We have registered the trademark (woordmerk) "VersaTel" with the Benelux
trademark bureau (Benelux Merkenbureau). Applications for similar registrations
are pending in the other EU Member States. We have obtained rights to the
Internet domain name "www.versatel.com" and initiated formal registration
procedures with Internic, the European Union domain registration authority.
LEGAL PROCEEDINGS
We have 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. We also make routine filings with the regulatory agencies
and governmental authorities in the countries in which we operate or intend to
operate.
Cromwilld, one of our shareholders, objected to the Recapitalization, the
First Offering and the Second Offering and threatened to challenge in court
certain of VersaTel's actions in connection with the Recapitalization, the First
Offering and the Second Offering. In January 1999, Cromwilld filed, pursuant to
Article 2:345 of the Netherlands Civil Code, a petition with the Enterprise
Chamber (Ondernemingskamer) of the Court of Appeals in Amsterdam requesting the
appointment of one or more experts to investigate the management and affairs of
VersaTel. In May 1999, the Enterprise Chamber denied Cromwilld's request.
On July 20, 1999, we entered into, along with our shareholders and certain
other parties, a Settlement Agreement with one of our major shareholders,
Cromwilld Limited, in order to resolve disputes arising out of our shareholders'
agreement and other matters. The major terms of the Settlement Agreement provide
for:
- the transfer of 146,988 of our ordinary shares held by Telecom Founders
B.V. to Cromwilld;
- the issuance of 200,000 of our shares on July 20, 1999 to Cromwilld at a
price of NLG 7.50 per ordinary share;
- the ability for Cromwilld to include 1,800,000 of its ordinary shares in
this offering;
- certain piggyback registration rights in favor of Cromwilld that will
take effect 180 days from the date hereof;
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- the payment by us of $300,000 for Cromwilld's fees and expenses related
to the Settlement Agreement and certain other matters;
- the acknowledgement by all parties to our shareholders' agreement that
the shareholders' agreement will be terminated concurrently with the
closing of this offering;
- the withdrawal by Cromwilld of its pending legal proceedings against us
and our shareholders;
- Cromwilld's full cooperation with this offering; and
- the obligation of our shareholders, including Cromwilld, to procure the
resignation or dismissal of Cromwilld's nominee, Denis O'Brien, from our
Supervisory Board, after the closing of this offering.
VersaTel is from time to time involved in routine litigation in the
ordinary course of business. We believe that no currently pending litigation to
which VersaTel is a party will have a material adverse effect on our financial
position or results of operations.
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<PAGE> 92
MANAGEMENT
The members of the supervisory board and the management board of VersaTel
and other significant employees of VersaTel and their respective ages and
positions are set forth below.
MANAGEMENT BOARD
R. Gary Mesch is the sole managing director (statutair directeur) of
VersaTel.
SUPERVISORY BOARD
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Leo W.A.M. van Doorne..................... 39 Chairman
Denis O'Brien, Jr.* ...................... 41 Member
Johan G. Wackwitz......................... 44 Member
James R. Meadows.......................... 46 Member
</TABLE>
* Pursuant to the Settlement Agreement, our shareholders, including Cromwilld,
are obligated to procure the resignation of Denis O'Brien from the Supervisory
Board after the closing of this offering.
EXECUTIVE OFFICERS AND KEY MANAGEMENT
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
R. Gary Mesch............................. 46 Managing Director
W. Greg Mesch............................. 39 Chief Operations Officer
Raj Raithatha............................. 36 Chief Financial Officer
Larry Hendrickson......................... 56 Chief Technology Officer
Marc A.J.M. van der Heijden............... 40 Chief Regulatory Counsel
Jan J. Niewold............................ 52 Managing Director Svianed
Roel van der Wiele........................ 50 Senior Manager Operations Svianed
Philip Mathuis............................ 34 Manager Belgium Operations
John J.L. de Rooij........................ 40 Manager Business Services
Jaap J.R. Zuiderveld...................... 35 Manager Local Access Services
Gert Post................................. 35 Manager Carrier Services
Attila Gultuna............................ 33 Manager Product Marketing
Stephanie C.M. Kies....................... 31 Manager Marketing Communications
Leo Y.J. van der Veen..................... 43 Finance Manager
Ike Knuivers.............................. 44 Manager Network Operations
Hein A.M. Boot............................ 35 Manager Network Development
Ronan Murphy.............................. 32 Manager IT Operations & Development
</TABLE>
SUPERVISORY BOARD
Under Netherlands law and the articles of association of VersaTel, the
management of VersaTel 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
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<PAGE> 93
supervise the policies pursued by the management board and the general course of
affairs of VersaTel and its business. In fulfilling their duties, the members of
the supervisory board are required to act in the best interests of VersaTel 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 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 supervisory board meets each time
this is deemed necessary by one of its members. 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.
A member of the supervisory board may at any time be suspended or removed
by the general meeting of shareholders. The members of the supervisory board may
receive such compensation as may be determined by the general meeting of
shareholders.
We expect that Sander van Brummelen, a member of the board of directors of
Gak Groep N.V., will become a member of our Supervisory Board effective on July
23, 1999.
MANAGEMENT BOARD
The management of VersaTel 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,
among other things: (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 the name of VersaTel or its property.
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 appoints 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 VersaTel. 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 VersaTel. 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 he managed the commercial operations of NovaNet, a
Denver-based provider of satellite-based data communications 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
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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.
LEO W.A.M. VAN DOORNE has served as Chairman of the Supervisory Board of
VersaTel nominated by NeSBIC since December 1995. Since 1996, Mr. van Doorne has
been the Managing Director of NeSBIC Groep B.V., a venture capital company and a
subsidiary of Fortis, an international group of more than 200 companies
operating in the fields of insurance, banking and investments. Worldwide, Fortis
has over 58,000 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
VersaTel nominated by 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 which he founded in 1991. In addition to his positions
with Esat, Mr. O'Brien has been the Chairman of the Board of Esat Digifone since
1996. Prior to the founding of ESAT Telecom plc, he was employed by Guinness
Peat Aviation ("GPA Group"), from 1983 to 1985. Mr. O'Brien holds an M.B.A. from
Boston College.
JOHAN G. WACKWITZ has served as a member of the Supervisory Board of
VersaTel nominated by 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 in its capital markets division and responsible for
the Benelux within the investment banking group. From 1979 to 1991 he served at
various management positions at Bankers Trust Company. Mr. Wackwitz serves as a
member of the supervisory board of various other companies. 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
VersaTel nominated by 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 a member of the
Board of Directors of Lone Star 2000, a public policy foundation, and of
Comptel. 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 VersaTel's inception in 1995 until August 1998, he served as a
member of the Supervisory Board of VersaTel nominated by Telecom Founders and
has performed operations consulting roles for VersaTel. From 1993 to 1997, Mr.
Mesch was the Chief Operations Officer of Esat Telecom plc, a public company
listed on NASDAQ. From 1986 to 1992, he served as Chief Executive Officer of
Nova Net, a Denver-based provider of satellite-based data communications
networks, which 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 and is an Advisory Board Member to NeSBIC Converging
Technologies Fund. Mr. Mesch has an M.B.A. from Denver University.
RAJ RAITHATHA has served as Chief Financial Officer of VersaTel 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, Wales.
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<PAGE> 95
LARRY HENDRICKSON has served as Chief Technology Officer of VersaTel 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 Chief Regulatory Counsel to
VersaTel since June 1998. Mr. van der Heijden served as regulatory counsel to
VersaTel 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 EC, the governments of The
Netherlands and the United Kingdom, and various telephone companies, such as
France Telecom and KPN 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. Mr. Van der
Heijden holds a degree in law.
JAN J. NIEWOLD has served as Managing Director of Svianed since 1995. From
1986 to 1995 he held various positions in the EDP (Electronic Data Processing)
department of Gak. From 1982 to 1986 he was a network consultant employed by
Shell Nederland and Shell International. From 1972 to 1982 he was responsible
for the datacommunications network of the Netherlands National Aerospace
Laboratorium. From 1969 to 1972 he was a systems programmer at AKZO. Mr. Niewold
holds a degree in chemical engineering.
ROEL VAN DER WIELE has served as deputy director of Svianed since 1997. He
joined Svianed in 1995 as manager of the network operations department. From
1972 to 1995 he held various positions in the EDP department of Gak.
PHILIP MATHUIS has served as Manager Belgium Operations since January 1999.
From 1998 to 1999 he was Vice President of New Business Development for ASCOM
Tateco B.V., a telecommunications service provider. From 1997 to 1998, he served
as Business Development Director for Ericsson Paging Systems B.V. Holland, a
joint venture between ASCOM and Ericsson A.B. From 1988 to 1997 he served in
various other management positions at Ascom. Mr. Mathius holds an M.B.A. from
the Paris School of Management.
JOHN J.L. DE ROOIJ has served as Manager Business Services of VersaTel
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. The last 3 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.
JAAP J.R. ZUIDERVELD has served as Manager Local Access Services of
VersaTel since January 1999. From 1996 to 1999 he worked at KPN Telecom. At KPN
Telecom he held several sales management positions, lastly as manager in the
IT/Software sector. From 1993 to 1996 he served as Global Account Manager and in
various other sales positions at BT(Worldwide) Ltd. From 1989 to 1993 he served
as account manager and in various other sales positions at Rank Xerox, The
Netherlands. Mr. Zuiderveld holds a degree in business administration.
GERT POST has served as Manager Carrier Services of VersaTel since May
1999. From 1991 to 1996 he held various management and sales positions at BT
(Worldwide) Ltd. From 1996 to 1999 he held various positions at Telfort B.V.,
most recently as a Business Unit Manager, responsible for Telfort's carrier and
wholesale services. From 1985 to 1991 he served as an Account Manager for KPN
Telecom. Mr. Post holds degrees in business administration and electrical
engineering.
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ATTILA GULTUNA has served as Manager Product Marketing of VersaTel since
November 1998. From 1997 to 1998 he was Manager Marketing and Business
Intelligence at Enertel, a facilities-based carrier in The Netherlands. From
1989 to 1997 he worked at KPN Telecom, in several positions in network
development, strategic planning and product marketing in the area of both data
and voice services. Mr. Gultuna holds a degree in electrical engineering.
STEPHANIE C.M. KIES has served as Manager Marketing Communications of
VersaTel since April 1999. From 1990 to March 1999 she worked at various
marketing positions at TNT, a global express distribution company, lastly in the
positions of Manager of Marketing Communications Benelux and Project Manager of
Corporate Identity Benelux.
LEO Y.J. VAN DER VEEN has served as Finance Manager of VersaTel 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.
IKE KNUIVERS has served as Manager Network Operations of VersaTel since
September 1998. From 1995 to 1998 he worked as Manager Network Services at
CasTel, a cable and telecommunications company in The Netherlands. From 1993 to
1995 he has served as Manager Projects of EDON, a utility company. From 1986 to
1993 he worked in various IT positions at HCS. From 1982 to 1986 he served as
Training Manager Air Traffic Control systems for Holland Signaal in Apeldoorn.
Mr. Knuivers holds a degree in electronics and computer science.
HEIN A.M. BOOT has served as Manager Network Development of VersaTel since
April 1999. From 1997 to March 1999 he worked at various positions at Telfort
B.V., a Netherlands based telecommunications service provider formed by British
Telecom and Nederlands Spoorwegen N.V., lastly as Manager Implementation and
Provisioning. From 1991 to 1996 he worked at various positions at BT (Worldwide)
Ltd., including Manager Systems Engineering. From 1989 to 1991 he worked at KPN
Telecom. Mr. Boot holds a degree in electrical engineering.
RONAN MURPHY has served as Manager IT Operations & Development of VersaTel
since March 1998. From 1996 to 1997 he worked as IT Manager at Esat Telecom
Group plc. During 1995 he was a consultant at various software companies in
Dublin. From 1989 to 1994 he served as development manager at AGS (a subsidiary
of NYNEX) and The Walt Disney Company. Mr. Murphy holds a degree in mathematics.
EXECUTIVE COMPENSATION
The total aggregate compensation for the supervisory board of VersaTel for
services in all capacities for 1998 was NLG 34,477. The total aggregate
compensation (including amounts paid pursuant to management and consulting
agreements) of all executive officers and key management (including the managing
director) of VersaTel as a group for 1998 was NLG 3,474,151. The total aggregate
compensation for the management board of VersaTel for services in all capacities
for 1998 was NLG 326,483. In 1998, options covering 1,100,000 ordinary shares
were granted to members of the management board and no options were granted to
members of the supervisory board. In 1999, we added a number of additional key
managers and we, therefore, expect the total aggregate compensation for all
executive officers and key management to increase for 1999. See "Material
Relationships and Related Transactions -- Additional Agreements."
During 1998, VersaTel did not accrue any amounts to provide pension,
retirement and similar benefits to the executive officers of VersaTel or to any
of the managing or supervisory directors of VersaTel.
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STOCK OPTION PLANS
1997 STOCK OPTION PLAN
In December 1996, our shareholders approved the 1997 Stock Option Plan. The
1997 Plan provides for the grant of options to certain key employees of VersaTel
to purchase depositary receipts representing an equal number of ordinary shares
of VersaTel. Under the 1997 Plan, no options have been granted with an
expiration date of more than 5 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 VersaTel or to another party
designated by VersaTel at the applicable purchase price. 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 the date of this prospectus, 398,000 options
to purchase 398,000 depositary receipts had been granted under the 1997 Plan and
VersaTel does not intend to grant any more options under the 1997 Plan.
1998 STOCK OPTION PLAN
In March 1998, our shareholders approved the 1998 Stock Option Plan. The
1998 Plan allows VersaTel to grant options to employees to purchase depositary
receipts representing an equal number of ordinary shares of VersaTel. The option
period will commence at the date of the grant and will last 5 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 exercise
of the option, to VersaTel or to another party designated by VersaTel, at a
purchase price equal to the economic value of the depositary receipts.
As of the date of this prospectus, 5,000,000 options to purchase 5,000,000
depositary receipts have been granted under the 1998 Plan and the Company does
not intend to grant any more options under the 1998 Plan.
1999 STOCK OPTION PLAN
In January 1999, our shareholders approved the 1999 Stock Option Plan. The
1999 Plan allows VersaTel to grant options to employees to purchase depositary
receipts representing an equal number of ordinary shares of VersaTel. The option
period will commence at the date of the grant and will last 5 years. The option
exercise price shall be determined by VersaTel.
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 exercise
of the option, to VersaTel or to another party designated by VersaTel, at a
purchase price equal to the economic value of
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the depositary receipts. The 1999 Plan contains specific provisions for the
determination of the economic value of the depositary receipts.
As of the date of this prospectus, 1,908,500 options to purchase depositary
receipts have been granted under the 1999 Plan. VersaTel expects to grant an
additional 591,500 options under the 1999 Plan.
The depositary receipts issued under the 1997 Plan, the 1998 Plan and the
1999 Plan will be administered by the Stichting Administratiekantoor VersaTel.
As of the date of this prospectus, there have been 5,543,000 options granted to
our executive officers and key management. No options have been granted to any
of our supervisory board members.
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PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of the ordinary shares of VersaTel as of July 21, 1999 and as adjusted
to reflect the sale of Shares and ADSs offered hereby, by each beneficial owner
of 5.0% or more of the ordinary shares and by the executive officers and
directors of VersaTel as a group. None of the principal shareholders or the
executive officers and directors will sell any Shares or ADSs in this offering.
Other than Cromwilld, no selling shareholders own, as of the date of this
prospectus, any ordinary shares of VersaTel and 457,492 of the Shares and ADSs
expected to be sold by the selling shareholders, other than Cromwilld, will be
issued to the selling shareholders concurrently with the closing of this
offering upon the cashless exercise by such selling shareholders of 38,800
warrants to purchase ordinary shares at an exercise price of NLG 2.55 per share.
These warrants were issued by VersaTel on May 27, 1998 and December 3, 1998 as
part of the First High Yield Offering and the Second High Yield Offering,
respectively.
<TABLE>
<CAPTION>
PERCENT OF SHARES
OUTSTANDING(1)
------------------------
NUMBER BEFORE THE AFTER THE
NAME OF BENEFICIAL OWNER OF SHARES OFFERING OFFERING
- ------------------------ ---------- ---------- ----------
<S> <C> <C> <C>
Telecom Founders B.V.(2)(3).......................... 6,603,596 16.7% 11.2%
NeSBIC Venture Fund C.V.(3)(4)....................... 15,162,896 38.3 25.7
Cromwilld Limited(3)(5).............................. 7,653,036 19.3 9.9
Paribas Deelnemingen N.V. ........................... 7,282,340 18.4 12.3
NPM Capital N.V. .................................... 2,352,942 5.9 4.0
---------- ----- ----
Total.............................................. 39,054,810 98.6% 63.1%
All directors and executive officers as a group(6)... 14,256,632 36.0% 10.5%
</TABLE>
- -------------------------
(1) Percentages reflect the issuance of an aggregate of 555,000 ordinary shares
that we are obligated to issue and that have been approved for issuance by
our shareholders in connection with the acquisitions of CS Net, SpeedPort
and ITinera, but exclude 130,000 shares approved for issuance by our
shareholders in connection with earn-out obligations relating to the
acquisitions of SpeedPort and ITinera. Does not give effect to dilution from
the exercise of warrants covering 4,482,891 ordinary shares issued in the
First High Yield Offering and the Second High Yield Offering that not being
exercised concurrently with this offering or to options granted to employees
covering 7,231,500 ordinary shares (348,000 of which are non-dilutive in
that the shares underlying such options are currently outstanding and will
be provided to us by the holders thereof) (all as adjusted to give effect to
the 2-for-1 stock split on April 13, 1999). See "Management -- Stock Option
Plans" and "Description of Capital Stock -- Warrants."
Percentage of shares outstanding after the offering is based on the
39,609,810 ordinary shares assumed to be outstanding prior to this offering
plus (i) the 18,992,508 shares offered by VersaTel and (ii) the 457,492
warrant shares being offered.
(2) Reflects the 146,988 shares transferred by Telecom Founders to Cromwilld in
connection with the settlement agreement. 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 Company understands
that Telecom Founders B.V. has issued depositary receipts representing
nearly half of its shareholding in VersaTel to certain persons including
officers and directors of VersaTel. Telecom Founders intends to exchange
some of those depositary receipts for ordinary shares of VersaTel at or
following this offering.
(3) Includes an aggregate 348,000 ordinary shares that may be forfeited by
Telecom Founders B.V., NeSBIC Venture Fund C.V. and Cromwilld Limited
pursuant to options exercised under the 1997 option plan. Includes 146,988
shares transferred to Cromwilld by Telecom Founders and 200,000 shares
issued to Cromwilld at a price of NLG 7.50 per share in connection with the
Settlement Agreement.
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(4) Includes 1,274,510 ordinary shares held by NeSBIC Groep B.V., an affiliate
of NeSBIC Venture Fund C.V.
(5) Cromwilld Limited, an Isle of Man company, is controlled by Denis O'Brien, a
member of the Supervisory Board of VersaTel. Pursuant to the Settlement
Agreement, Mr. O'Brien will resign from the Supervisory Board upon the
closing of this offering. Includes (i) 200,000 shares purchased on July 20,
1999 at NLG 7.50 per share and (ii) the receipt of 146,488 shares from
Cromwilld on July 20, 1999, in each case pursuant to the Settlement
Agreement.
(6) Reflects (i) the 6,603,596 shares held by Telecom Founders B.V., beneficial
ownership of which may be attributed to Mr. Mesch and/or certain other
officers and directors of VersaTel upon the exchange of their depositary
receipts in Telecom Founders, and (ii) 7,653,036 shares held by Cromwilld
Limited, beneficial ownership of which may be attributed to Mr. O'Brien.
Percentage of shares outstanding after the offering reflects Mr. O'Brien's
anticipated resignation from the Supervisory Board following the offering
pursuant to the Settlement Agreement.
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SELLING SHAREHOLDERS
The following table sets forth estimated information regarding the
beneficial ownership of ordinary shares by the selling shareholders. Other than
Cromwilld, no selling shareholders own, as of the date of this prospectus, any
ordinary shares of VersaTel. All of the Shares and ADSs being sold by the
selling shareholders other than Cromwilld will be issued to such selling
shareholders concurrently with the closing of this offering upon the cashless
exercise by such selling shareholders of an aggregate of 38,800 warrants at an
exercise price of NLG 2.55 per share. Such warrants were issued by VersaTel on
May 27, 1998 and December 3, 1998 as part of the First High Yield Offering and
the Second High Yield Offering, respectively.
<TABLE>
<CAPTION>
BEFORE THE OFFERING AFTER THE OFFERING
----------------------- ------------------------
NUMBER PERCENT SHARES NUMBER PERCENT
OF SHARES OF SHARES BEING OF SHARES OF SHARES
NAME OWNED OUTSTANDING OFFERED OWNED OUTSTANDING
- ---- --------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Cromwilld Limited.................... 7,653,036 19.1% 1,800,000 5,853,036 9.9%
Grosvenor House
66/67 Athol Street
Douglas, Isle of Man
Boston Safe Deposit & Trust Co.(1)... 23,582 * 23,582 0 *
Mellon Bank Center, Room 3631
Pittsburgh, PA 15259
American Express Trust Co............ 211,060 * 211,060 0 *
Reorganization Department N10/922
733 Marquette Ave.
Minneapolis, MN 55402
Deutsche BK AG....................... 3,537 * 3,537 0 *
31 West 52nd St.
New York, NY 10019
Fifth Third Bank..................... 23,582 * 23,582 0 *
Kim Honey - A.V.P.
38 Fountain Square Plaza
Cincinnati, OH 45263
U.S. Bank Trust N.A. ................ 195,731 * 195,731 0 *
Marg Larson - SPER0503
18 E. 5th St.
St. Paul, MN 55101
</TABLE>
- ---------------
* Less than 1.0%.
(1) After this offering, Boston Safe Deposit & Trust Co. will continue to hold
5,280 warrants exercisable into approximately 70,403 ordinary shares. Boston
Safe Deposit & Trust Co., together with other warrant holders will own
336,200 warrants covering 4,482,891 ordinary shares after the closing of
this offering. All outstanding warrants become exercisable upon the closing
of this offering. See "Shares Eligible for Future Sale."
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<PAGE> 102
MATERIAL RELATIONSHIPS AND RELATED TRANSACTIONS
SHAREHOLDERS' AGREEMENT
In December 1996, Telecom Founders, NeSBIC and Cromwilld entered into a
participation and shareholders' agreement, which contains, among other things,
provisions relating to the appointment of members of the Management Board and
the Supervisory Board, and provisions with respect to the funding of the
Company. The shareholders' agreement also contains provisions restricting the
transfer of shares of the Company. If a shareholder wishes to transfer its
shares, it must first offer the other shareholders the right to purchase such
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. In
connection with their investment in VersaTel as part of the recapitalization,
Paribas and Nederlandse Participatie Maatschappij agreed to be bound by the
terms of the Shareholders' Agreement pursuant to deeds of accession and
acknowledgment.
Pursuant to the Settlement Agreement, the shareholders' agreement will
terminate upon the completion of this offering.
ADDITIONAL AGREEMENTS
Mr. Greg Mesch is 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.
RELATIONSHIPS
Lehman Brothers Inc., an affiliate of Lehman Brothers International
(Europe), was an initial purchaser in the First High Yield Offering. Lehman
Brothers Inc., Lehman Brothers International (Europe) and Paribas Corporation,
an affiliate of Paribas, were the initial purchasers in the Second High Yield
Offering. Lehman Brothers International (Europe), ING Barings Limited and ING
Barings LLC are underwriters in the Third High Yield Offering. ING Barings
Limited and ING Barings LLC are each affiliates of the other. Hambrecht & Quist
LLC, an underwriter in this offering, will act as a qualified independent
underwriter, as defined in Rule 2720 of the Conduct Rules of the National
Association of Securities Dealers, Inc., in the Third High Yield Offering.
Paribas Deelnemingen N.V., an affiliate of each of Paribas and Paribas
Corporation, is a shareholder of VersaTel. Lehman Commercial Paper Inc., an
affiliate of each of Lehman Brothers Inc. and Lehman Brothers (International)
Europe, and ING (U.S.) Capital, LLC, an affiliate of each of ING Barings Limited
and ING Barings LLC, are lenders under the Interim Loans, which will be repaid
with a portion of the net proceeds of the Third High Yield Offering.
Affiliates of Lehman Brothers may provide loans to the Chief Executive
Officer, Chief Operating Officer and Chief Technology Officer of VersaTel in an
aggregate amount of approximately NLG 6.0 million to fund the exercise price of
certain employee options that may be exercised by them at the time of the
closing of this offering. Any such loans would be made on commercial terms,
including a pledge of the shares received upon such exercise and reimbursement
of legal fees and other expenses. Shares received upon exercise of such options
would remain subject to the lock-up arrangements described under "Shares
Eligible for Future Sale."
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<PAGE> 103
DESCRIPTION OF CAPITAL STOCK
VersaTel was incorporated under the law of The Netherlands on October 10,
1995, as a private company with limited liability, referred to as besloten
vennootschap met beperkte aansprakelijkheid or a B.V. VersaTel converted its
legal structure from a B.V. to a public company with limited liability, referred
to as naamloze vennootschap or an N.V., on October 15, 1998. VersaTel has its
corporate seat in Amsterdam, The Netherlands. VersaTel is registered under
number 33272606 at the Commercial Register in Amsterdam, The Netherlands.
On April 13, 1999, VersaTel effected a 2-for-1 stock split. On July 14,
1999, a general meeting of shareholders approved an amendment to VersaTel's
articles of association to provide for, among other things, a consolidation of
its current Class A shares and Class B shares into one single class of ordinary
shares and the possible issuance of preference shares A, preference shares B and
a priority share. The amended articles of association will become effective
prior to the closing of this offering. Set forth below is a summary of the
relevant provisions of the amended articles of association of VersaTel and of
relevant provisions of Netherlands law.
SHARE CAPITAL
The authorized capital of VersaTel is NLG 9.0 million consisting of
80,000,000 ordinary shares with a par value of NLG 0.05 each, 20,000,000
preference shares A with a par value of NLG 0.05 each, 80,000,000 preference
shares B with a par value of NLG 0.05 each and 1 priority share with a par value
of NLG 0.05. The authorized capital of VersaTel may be increased by a
shareholders' resolution and subsequent amendment of the articles of
association. The issued capital must at all times at least equal 20.0% of the
authorized capital.
ORDINARY SHARES
Holders of ordinary shares are entitled to one vote per share. There are no
cumulative voting rights. Holders of ordinary shares have pre-emptive rights
with respect to an issue of ordinary shares in proportion to the total par value
of their individual shareholdings. Each ordinary share is entitled to
participate equally in dividends and in the distribution of funds in the event
of liquidation or dissolution of VersaTel and, in each case, following
distributions on preference shares A, preference shares B and the priority
share, if issued.
Ordinary shares may be issued pursuant to a resolution passed at a general
meeting of shareholders or the shareholders, at a general meeting, may delegate
this power to another corporate body.
The ordinary shares may, at the option of the shareholder, be in registered
form or bearer form. The ordinary shares shall, however, be made out to bearer
unless the shareholder indicates in writing to VersaTel that it wishes to
receive an ordinary share in registered form. Only ordinary shares in bearer
form are eligible for trading on the AEX.
Ordinary Bearer Shares
Ordinary shares in bearer form will be represented by a single global share
certificate which will not be exchanged for single or other multiple physical
securities, and which VersaTel will lodge with NECIGEF for safe-keeping on
behalf of the parties entitled to the underlying ordinary shares. The ordinary
shares may only be transferred through the book-entry system maintained by
NECIGEF and in accordance with the articles of association of VersaTel.
Ordinary Registered Shares
Holders of ordinary shares in registered form are entered in the register
of shareholders, which is updated regularly. No share certificates are issued,
however each shareholder may request VersaTel to issue an extract from the
shareholders' register with respect to its right to one or more registered
shares.
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<PAGE> 104
VersaTel is required to do this free of charge. A holder of an ordinary share in
registered form may at all times have such shares made out to bearer as further
described in the articles of association.
As of the date of this prospectus, 39,054,810 ordinary shares are issued
and outstanding. Upon completion of this offering, 59,059,810 ordinary shares
will be issued and outstanding (assuming the underwriters do not exercise their
over-allotment option and certain other matters).
PREFERENCE SHARES A
Holders of preference shares A will be entitled to one vote per share.
There are no cumulative voting rights. Preference shares A have no pre-emptive
rights. Preference shares A are entitled to an annual dividend, to be set by the
corporate body authorized to issue the preference shares A.
Preference shares A may be issued pursuant to a resolution passed at a
general meeting of shareholders or the shareholders, at a general meeting, may
delegate this power to another corporate body. The preference shares A will be
in registered form and share certificates will not be issued.
As of the date of this prospectus, no preference shares A are issued or
outstanding.
PREFERENCE SHARES B
Holders of preference shares B will be entitled to one vote per share.
There are no cumulative voting rights. Preference shares B have no pre-emptive
rights. Preference shares B are entitled to a cumulative annual dividend
calculated on the basis of a fixed interest rate, as may be issued by the
European Central Bank from time to time, on the paid up portion of the nominal
value of the preference shares B, to the extent of the distributable profits,
prior to any dividend distribution on any of our other shares being made.
Preference shares B may be issued pursuant to a resolution passed at a
general meeting of shareholders or the shareholders, at a general meeting, may
delegate this power to another corporate body. Notwithstanding such delegation,
an issue of preference shares B that would exceed 100% of the number of our
other outstanding shares will require the approval of our shareholders at a
general meeting. The preference shares B will be in registered form and share
certificates will not be issued.
As of the date of this prospectus, no preference shares B are issued or
outstanding.
PRIORITY SHARE
The holder of the priority share will be entitled to one vote. There are no
cumulative voting rights. However, the priority share will have certain special
voting rights as described below. The priority share has no pre-emptive rights.
The priority share is entitled to a nominal annual dividend of 20% of its
nominal value, to the extent of distributable profits.
The priority share may be issued pursuant to a resolution passed at a
general meeting of shareholders or the shareholders, at a general meeting, may
delegate this power to another corporate body. The priority share will be in
registered form and share certificates will not be issued.
As of the date of this prospectus, the priority share is not issued or
outstanding.
WARRANTS
As of the date of this prospectus, there were 375,000 outstanding warrants
to purchase 5,000,100 ordinary shares at an exercise price of NLG 2.55 per
share. All such warrants become exercisable upon the completion of this offering
and we expect that 38,800 of such warrants will be exercised concurrently with
this offering pursuant to a cashless exercise thereof, which will leave 336,200
unexercised warrants following the closing of this offering. The warrant
agreements governing the warrants provide that we must file a shelf registration
statement with the Securities and Exchange Commission pursuant to Rule 415
within 180 days after the closing of this offering, for those warrant holders
who elect not to
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<PAGE> 105
participate in this offering. Our obligation to file a shelf registration
statement becomes effective immediately in respect of any Warrant holders who
elect to sell shares issued upon the exercise of warrants in this offering but
are not allowed to sell any such shares by the underwriters.
DIVIDENDS
The profits of VersaTel are at the disposal of the shareholders at a
general meeting. Dividends shall be paid after the adoption of the annual
accounts of VersaTel. We may only pay dividends up to the distributable part of
our equity. Under Netherlands law, the sum of the called and paid-up capital and
certain statutory reserves is not distributable. Subject to the same limitation,
the general meeting of shareholders may resolve to pay dividends out of a
reserve not required by Netherlands law. Each ordinary share is entitled to
participate equally in dividends and in the distribution of funds in the event
of liquidation or dissolution of VersaTel. Preference shares A are entitled to
an annual dividend, to be set by the corporate body authorized to issue such
preference shares A. Preference shares B will be paid a cumulative annual
dividend calculated on the basis of a fixed interest rate on the paid up portion
of their nominal value, to the extent of distributable profits. The priority
share will be entitled to a nominal annual dividend of 20% of the nominal value,
to the extent of distributable profits.
ANNUAL ACCOUNTS
Within 5 months after the end of our financial year, the board of managing
directors is required to prepare the annual accounts. This period may be
extended by the general meeting of shareholders for a period of 6 months on the
basis of special circumstances. The annual accounts accompanied by an annual
report must be submitted to the board of supervisory directors for signing and
must thereafter be adopted by the general meeting of shareholders. The annual
accounts and the annual report will be available to the shareholders and holders
of depositary receipts of shares at the office of VersaTel as from the date of
its preparation by the board of managing directors. See "Where You Can Find More
Information."
ANTI-TAKEOVER PROVISIONS
The issuance of preference shares and priority shares may have an
anti-takeover effect and delay, defer or prevent a tender offer or takeover
attempt that a shareholder might consider to be in that shareholder's best
interests, including attempts that might result in a premium over the market
price to be paid for the ordinary shares.
PREFERENCE SHARES. Our management board is expected to seek, from the
shareholders at a general meeting, the authority to issue preference shares
subject only to the prior approval of the supervisory board. Upon obtaining such
authority, our management board is expected to grant a call option on the
preference shares not exceeding 100% of all our other outstanding shares to an
independent foundation (stichting) to be established under Netherlands law. In
the event of a threatened hostile takeover bid, the foundation may exercise this
option. The foundation will be entrusted with the obligation to take into
consideration our best interests and to prevent influences that may threaten our
continuity, independence or identity. The minimum amount required to be paid on
the preference shares upon issuance is 25% of the nominal amount issued.
Notwithstanding any delegation by the shareholders at a general meeting of
the power to authorize the issuance of any preference shares, a proposed
issuance of preference shares B that would exceed 100% of the number of our
other outstanding shares will require the approval of our shareholders at a
general meeting. In all instances where preference shares are issued without
direct shareholder approval, the management board must explain the reason for
the issuance within 4 weeks at a general meeting of shareholders. Within 2 years
after the first issuance of preference shares, a general meeting of shareholders
must be held to vote on whether the preference shares should be repurchased or
canceled.
PRIORITY SHARES. Our management board is expected to seek, from the
shareholders at a general meeting, the authority to issue a priority share
subject only to the prior approval of the supervisory board. Upon obtaining such
authority, our management board is expected to grant a call option on the
priority
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<PAGE> 106
share to an independent foundation (stichting), to be established under
Netherlands law. In the event of a threatened hostile takeover bid, the
foundation may exercise this option. The priority share can only be transferred
with the approval of the management board and the supervisory board. The
priority share carries the following special voting rights:
- the right to nominate members for appointment to the management board and
supervisory board, which nominations may only be set aside by a
resolution of the general meeting of shareholders adopted by two-thirds
of the votes cast representing more than one-half of the issued nominal
capital, and
- the exclusive right to propose amendments to our articles of association,
our merger or de-merger transactions or our dissolution.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the ADRs is The Bank of New York.
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DESCRIPTION OF AMERICAN DEPOSITARY RECEIPTS
AMERICAN DEPOSITARY RECEIPTS
The Bank of New York will issue the American Depositary Receipts, or ADRs.
Each ADR will represent an ownership interest in a number of American Depositary
Shares, each of which represents one ordinary share which VersaTel will deposit
with a custodian in The Netherlands. Each ADR will also represent securities,
cash or other property deposited with The Bank of New York but not distributed
to ADR holders. The Bank of New York's Corporate Trust Office is located at 101
Barclay Street, New York, New York 10286, and its principal executive office is
located at One Wall Street, New York, NY 10286.
You may hold ADRs either directly or indirectly through your broker or
other financial institution. If you hold ADRs directly, you are an ADR holder.
This description assumes you hold your ADRs directly. If you hold the ADRs
indirectly, you must rely on the procedures of your broker or other financial
institution to assert the rights of ADR holders described in this section. You
should consult with your broker or financial institution to find out what those
procedures are.
Because The Bank of New York will be the legal owner of the ordinary
shares, ADR holders must rely on it to exercise the rights of a shareholder of
VersaTel. The obligations of The Bank of New York are set out in a deposit
agreement among VersaTel, The Bank of New York and you, as an ADR holder. The
deposit agreement and the ADRs are governed by New York law.
SHARE DIVIDENDS AND OTHER DISTRIBUTIONS
The Bank of New York has agreed to pay to you the cash dividends or other
distributions it or the custodian receives on ordinary shares or other deposited
securities, after deducting its fees and expenses. You will receive these
distributions in proportion to the number of ordinary shares your ADRs
represent.
Cash. The Bank of New York will convert any cash dividend or other cash
distribution VersaTel pays on the ordinary shares into U.S. dollars. If it is
not possible for The Bank of New York to convert such foreign currency in whole
or in part into U.S. dollars, or if any approval or license of any government is
needed and cannot be obtained, The Bank of New York may distribute the foreign
currency to, or in its discretion may hold the foreign currency uninvested and
without liability for interest for the accounts of, ADR holders entitled to
receive the same.
Before making a distribution, The Bank of New York will deduct any
withholding taxes that must be paid under Netherlands law. See "Tax
Considerations -- Netherlands Tax Considerations." It will distribute only whole
U.S. dollars and cents and will round fractional cents to the nearest whole
cent.
Shares. The Bank of New York may, with the consent of VersaTel, and must
upon VersaTel's request, distribute new ADRs representing any shares VersaTel
may distribute as a dividend or free distribution. The Bank of New York will
only distribute whole ADRs. It will sell shares which would require it to issue
a fractional ADR and distribute the net proceeds in the same way as it does with
dividends or distributions of cash. If The Bank of New York does not distribute
additional ADRs, each ADR will also represent the additional deposited shares.
Rights to receive additional shares. If VersaTel offers holders of its
ordinary shares any rights to subscribe for additional ordinary shares or any
other rights, The Bank of New York may make these rights available to you.
VersaTel must first instruct The Bank of New York to do so and furnish it with
satisfactory evidence that it is legal to do so. If VersaTel does not furnish
this evidence and/or give these instructions, or if The Bank of New York
determines in its reasonable discretion that it is not lawful and feasible to
make such rights available to all or certain owners, The Bank of New York may
sell the rights
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and allocate the net proceeds to Owner's accounts. The Bank of New York may
allow rights that are not distributed or sold to lapse. In that case, you will
receive no value for them.
If The Bank of New York makes rights available to you, upon instruction
from you it will exercise the rights and purchase the shares on your behalf. The
Bank of New York will then deposit the shares and issue ADRs to you. It will
only exercise rights if you pay it the exercise price and any other charges the
rights require you to pay.
U.S. securities laws may restrict the sale, deposit, cancellation, and
transfer of the ADRs issued after exercise of rights. For example, you may not
be able to trade the ADRs freely in the United States. In this case, The Bank of
New York may issue the ADRs under a separate restricted deposit agreement which
will contain the same provisions as the agreement, except for changes needed to
put the restrictions in place.
Other Distributions. The Bank of New York will send to you anything else
VersaTel distributes on deposited securities by any means it thinks is legal,
fair and practical. If it cannot make the distribution in that way, The Bank of
New York has a choice. It may decide to sell what VersaTel distributed and
distribute the net proceeds, in the same way as it does with cash. Or, it may
decide to hold what VersaTel distributed, in which case ADRs will also represent
the newly distributed property.
The Bank of New York is not responsible if it decides that it is unlawful
or impractical to make a distribution available to any ADR holders. VersaTel has
no obligation to register ADRs, shares, rights or other securities under the
Securities Act. VersaTel also has no obligation to take any other action to
permit the distribution of ADRs, shares, rights or anything else to ADR holders.
This means that you may not receive the distributions VersaTel makes on its
shares or any value for them if it is illegal or impractical for VersaTel to
make them available to you.
DEPOSIT, WITHDRAWAL AND CANCELLATION
The Bank of New York will issue ADRs if you or your broker deposit shares
or evidence of rights to receive shares with the custodian. Upon payment of its
fees and expenses and of any taxes or charges, such as stamp taxes or stock
transfer taxes or fees, The Bank of New York will register the appropriate
number of ADRs in the names you request and will deliver the ADRs at its
Corporate Trust Office to the persons you request.
You may turn in your ADRs at the Corporate Trust Office of The Bank of New
York's office. Upon payment of its fees and expenses and of any taxes or
charges, such as stamp taxes or stock transfer taxes or fees, The Bank of New
York will deliver the deposited securities underlying the ADRs at the office of
the custodian, except that The Bank of New York may deliver at its Corporate
Trust Office any dividends or distributions with respect to the deposited
securities represented by the ADRs, or any proceeds from the sale of any
dividends, distributions or rights, which may be held by The Bank of New York.
Or, at your request, risk and expense, The Bank of New York will deliver the
deposited securities at its Corporate Trust Office.
VOTING RIGHTS
You may instruct The Bank of New York to vote the shares underlying your
ADRs but only if VersaTel asks The Bank of New York to ask for your
instructions. Otherwise, you will not be able to exercise your right to vote
unless you withdraw the ordinary shares underlying the ADRs. However, you may
not know about a meeting at which you may be entitled to vote enough in advance
to withdraw the shares.
If VersaTel asks for your instructions, The Bank of New York will notify
you of the upcoming vote and arrange to deliver voting materials to you. The
materials will (1) describe the matters to be voted on and (2) explain how you,
on a certain date, may instruct The Bank of New York to vote the shares or
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other deposited securities underlying your ADRs as you direct. For instructions
to be valid, The Bank of New York must receive them on or before the date
specified. The Bank of New York will try, as far as practical, subject to
Netherlands law and the provisions of VersaTel's articles of association, to
vote or to have its agents vote the shares or other deposited securities as you
instruct. The Bank of New York will only vote or attempt to vote as you
instruct. However, if The Bank of New York does not receive your voting
instructions on or before the date specified, it will give a proxy to vote your
shares to a person designated by VersaTel.
VersaTel cannot assure you that you will receive the voting materials in
time to ensure that you can instruct The Bank of New York to vote your shares.
In addition, The Bank of New York and its agents are not responsible for failing
to carry out voting instructions or for the manner of carrying out voting
instructions. This means that you may not be able to exercise your right to vote
and there may be nothing you can do if your shares are not voted as you
requested.
The Bank of New York shall fix a record date whenever:
- any cash dividend or distribution shall become payable,
- any distribution other than cash shall be made,
- rights shall be issued with respect to the deposited securities,
- The Bank of New York, for any reason, causes a change in the number of
ordinary shares that are represented by each ADS, or
- The Bank of New York receives notice of any meeting of holders of
ordinary shares or other deposited securities.
The purpose of fixing a record date is to determine which ADR holders are:
- entitled to receive such dividend, distribution or rights,
- entitled to receive the net proceeds from the sale of such dividend,
distribution or rights, and
- entitled to give instructions for the exercise of voting rights at any
such meeting.
FEES AND EXPENSES
<TABLE>
<CAPTION>
If: You must pay:
<S> <C> <C>
- - An ADR is issued to you, including as $5.00 (or less) per 100 ADSs (or
a result of a distribution of shares portion thereof)
or rights or other property
- - Your ADR is cancelled, including if $5.00 (or less) per 100 ADSs (or
the deposit agreement terminates portion thereof)
- - You receive any cash payment $0.02 (or less) per ADS
- - There is a transfer and registration Registration or transfer fees
of shares on the share register of
VersaTel's registrar or foreign
registrar from your name to the name
of The Bank of New York or its agent
when you deposit or withdraw shares
- - The Bank of New York converts NLG to Expenses of The Bank of New York
U.S. dollars
</TABLE>
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<PAGE> 110
<TABLE>
<CAPTION>
If: You must pay:
<S> <C> <C>
- - The Bank of New York sends a cable, Expenses of The Bank of New York
telex or facsimile transmission (if
expressly provided in the deposit
agreement)
- - The Bank of New York or the custodian Your proportionate share of those
pays taxes and other governmental taxes or charges
charges on any ADR or underlying
share, such as stock transfer taxes,
stamp duty or withholding taxes.
</TABLE>
PAYMENT OF TAXES
The Bank of New York may deduct the amount of any taxes owed from any
payments to you. It may also sell deposited securities, by public or private
sale, to pay any taxes owed. You will remain liable if the proceeds of the sale
are not enough to pay the taxes. If The Bank of New York sells deposited
securities, it will, if appropriate, reduce the number of ADRs to reflect the
sale and pay to you any proceeds, or send to you any property, remaining after
it has paid the taxes.
RECLASSIFICATIONS, RECAPITALIZATIONS AND MERGERS
<TABLE>
<CAPTION>
If VersaTel: Then:
<S> <C> <C>
- - Changes the nominal or par value of The cash, shares or other securities
its shares received by The Bank of New York will
become deposited securities.
- - Reclassifies, splits up or Each ADR will automatically represent
consolidates any of the deposited its equal share of the new deposited
securities securities.
- - Recapitalizes, reorganizes, merges, The Bank of New York may with
liquidate, sells all or substantially VersaTel's approval and will if
all of its assets, or takes any VersaTel asks it to, execute and
similar action deliver additional ADRs or ask you to
surrender your outstanding ADRs in
exchange for new ADRs, identifying
the new deposited securities.
</TABLE>
AMENDMENT AND TERMINATION
Versatel may agree with The Bank of New York to amend the deposit agreement
and the ADRs without your consent for any reason. If the amendment adds or
increases fees or charges, except for taxes and other governmental charges or
certain expenses of The Bank of New York, or prejudices an important right of
ADR holders, it will only become effective 30 days after The Bank of New York
notifies you of the amendment. At the time an amendment becomes effective, you
are considered, by continuing to hold your ADR, to agree to the amendment and to
be bound by the ADRs and the agreement as amended.
The Bank of New York will terminate the agreement if Versatel asks it to do
so. The Bank of New York may also terminate the agreement if The Bank of New
York has told VersaTel that it would like to resign and VersaTel has not
appointed a new depositary bank within 90 days. In both cases, The Bank of New
York must notify you at least 90 days before termination.
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After termination, The Bank of New York and its agents will be required to
do only the following under the agreement: (1) collect dividends and
distributions on the deposited securities, (2) deliver shares and other
deposited securities upon cancellation of ADRs, and shall sell rights as
provided in the agreement. One year after termination, The Bank of New York may
sell any remaining deposited securities by public or private sale. After that,
The Bank of New York will hold the money it received on the sale, as well as any
other cash it is holding under the agreement for the pro rata benefit of the ADR
holders that have not surrendered their ADRs. It will not invest the money and
has no liability for interest. The Bank of New York's only obligations will be
to account for the money and other cash and with respect to indemnification.
After termination our only obligations will be with respect to indemnification
and to pay certain amounts to The Bank of New York.
The Bank of New York upon the written request or with the written approval
of VersaTel, may appoint one or more co-transfer agents for the purpose of
effecting transfers, combinations and split-ups of ADRs at designated transfer
offices on behalf of The Bank of New York. A co-transfer agent may require
evidence of your authority and compliance with applicable laws and other
requirements will be entitled to protection and indemnity to the same extent as
The Bank of New York.
LIMITATIONS ON OBLIGATIONS AND LIABILITY TO ADR HOLDERS
The deposit agreement expressly limits VersaTel's obligations and the
obligations of The Bank of New York. It also limits VersaTel's liability and the
liability of The Bank of New York. VersaTel and The Bank of New York:
- are only obligated to take the actions specifically set forth in the
agreement without negligence or bad faith;
- are not liable if either is prevented or delayed by law or the articles
of association of VersaTel, or circumstances beyond their control from
performing their obligations under the agreement;
- are not liable if either exercises, or fails to exercise, discretion
permitted under the agreement;
- have no obligation to become involved in a lawsuit or other proceeding
related to the ADRs or the agreement on your behalf or on behalf of any
other party; and
- may rely upon any advice of or information from legal counsel,
accountants, any person depositing Shares, any ADR holder or any other
person whom they believe in good faith is competent to give them that
advice or information.
In the agreement, VersaTel and The Bank of New York agree to indemnify each
other under specified circumstances.
REQUIREMENTS FOR DEPOSITARY ACTIONS
Before The Bank of New York will issue or register transfer of an ADR, make
a distribution on an ADR, or permit withdrawal of shares, The Bank of New York
may require:
- payment to stock transfer or other taxes or other governmental charges
and transfer or registration fees charged by third parties for the
transfer of any shares or other deposited securities, as well as the fees
and expenses of The Bank of New York;
- production of satisfactory proof of the identity of the person presenting
shares for deposit or ADRs upon withdrawal and genuineness of any
signature or other information it deems necessary; and
- compliance with laws or regulations relating to ADRs or to the withdrawal
of deposited securities and any such reasonable regulations it may
establish, from time to time, consistent with the agreement, including
presentation of transfer documents.
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The Bank of New York may refuse to deliver, transfer, or register transfers
of ADRs generally when the transfer books of The Bank of New York, or VersaTel
are closed or at any time if The Bank of New York or VersaTel thinks it
advisable to do so.
You have the right to cancel your ADRs and withdraw the underlying shares
at any time except:
- when temporary delays arise because: (1) The Bank of New York or VersaTel
has closed its transfer books; (2) the transfer of shares is blocked to
permit voting at a shareholders' meeting; or (3) Versatel is paying a
dividend on the shares;
- when you owe money to pay fees, taxes and similar charges; or
- when it is necessary to prohibit withdrawals in order to comply with any
laws or governmental regulations that apply to ADRs or to the withdrawal
of shares or other deposited securities.
This right of withdrawal may not be limited by any other provision of the
deposit agreement.
PRE-RELEASE OF ADRS
In certain circumstances described below, subject to the provisions of the
deposit agreement, The Bank of New York may issue ADRs before deposit of the
underlying shares. This is called a pre-release of the ADR. The Bank of New York
may also deliver shares upon the receipt and cancellation of pre-released ADRs
(even if the ADRs are cancelled before the pre-release transaction has been
closed out). A pre-release is closed out as soon as the underlying shares are
delivered to The Bank of New York. The Bank of New York may receive ADRs instead
of shares to close out a pre-release. The Bank of New York may pre-release ADRs
only under the following conditions:
(1) before or at the time of the pre-release, the person to whom the
pre-release is being made must represent to The Bank of New York in
writing that it or its customer, as the case may be:
(a) owns the Shares or ADRs to be remitted,
(b) will assign all beneficial rights, title and interest in the ADRs or
shares to The Bank of New York and for the benefit of the holders,
and
(c) will not take any action with respect to the ADRs or Shares that is
inconsistent with the assignment of beneficial ownership (including,
without the consent of The Bank of New York, disposing of the ADRs
or Shares) other than in satisfaction of the pre-release;
(2) the pre-release must be fully collateralized with cash or other
collateral that The Bank of New York considers appropriate; and
(3) The Bank of New York must be able to close out the pre-release on not
more than five business days' notice.
In addition, The Bank of New York will limit the number of ADRs that may be
outstanding at any time as a result of pre-release, although The Bank of New
York may disregard the limit from time to time, if it thinks it is appropriate
to do so.
REPORTS AND OTHER COMMUNICATIONS
The Bank of New York will make available for your inspection at its
Corporate Trust Office any reports and communications, including any proxy
soliciting material, it receives from VersaTel, if those reports and
communications are both (a) received by The Bank of New York as the holder of
the deposited securities and (b) made generally available by VersaTel to the
holders of the deposited securities. The Bank of New York will also, upon
written request, send you copies of those reports it receives from VersaTel.
VersaTel will provide those reports and communications, including any proxy
soliciting material, in English.
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INSPECTION OF TRANSFER BOOKS
The Bank of New York will keep books for the registration and transfer of
ADRs, which will be open for your inspection at all reasonable times. You will
only have the right to inspect those books if the inspection is for the purpose
of communicating with other owners of ADRs in connection with the business of
VersaTel or a matter related to the agreement or the ADRs.
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DESCRIPTION OF MATERIAL INDEBTEDNESS
THE FIRST HIGH YIELD OFFERING
In the First High Yield Offering in May 1998, VersaTel issued units
consisting of $225,000,000 in aggregate principal amount of 13 1/4% Senior Notes
due 2008 and warrants to purchase 3,000,000 (as adjusted) ordinary shares. The
units were sold to Lehman Brothers, Inc., as initial purchaser, who subsequently
sold them to institutional investors in reliance on exemptions under the
Securities Act. The notes and the warrants were separated in August 1998. In
December 1998, VersaTel completed a public exchange offer pursuant to which all
the notes issued in the First High Yield Offering were exchanged for
substantially identical notes registered under the Securities Act that are not
subject to transfer restrictions. For the purposes of this prospectus, the terms
"First Notes," "Second Notes" and "Existing Notes" shall refer to notes issued
initially and to notes exchanged therefor pursuant to the exchange offers
described in this section. The warrants issued in the First High Yield Offering
remain subject to transfer restrictions. As a result of the consummation of such
exchange offer, we are now subject to the information reporting requirements of
the Exchange Act. Interest on the First Notes will be paid semi-annually on May
15 and November 15, beginning November 15, 1998. In connection with the First
High Yield Offering, we purchased, pledged and placed in escrow U.S. government
securities in an amount sufficient to fund the first 6 interest payments on the
First Notes (through the interest payment date on May 15, 2001). The First Notes
are redeemable at our option, in whole or in part, at any time on or after May
15, 2003, at 106.625% of their principal amount, plus accrued interest,
declining to 100% of their principal amount, plus accrued interest, on or after
May 15, 2006. The First Notes may also be redeemed at the option of VersaTel, in
whole but not in part, at any time at a redemption price equal to the aggregate
principal amount thereof, plus liquidated damages, if any, to the date fixed by
VersaTel for redemption, and all additional amounts, if any, then due and which
will become due as a result of the redemption or otherwise, in the event of
changes affecting Netherlands taxes or as a result of any change in the
application of Netherlands tax laws or regulations that require VersaTel to pay
additional amounts that VersaTel determines cannot be avoided by taking
reasonable steps. The First Notes rank equal in right of payment to the Second
Notes, the Third Notes and all other senior indebtedness of VersaTel and will be
senior in right of payment to any future subordinated indebtedness of VersaTel.
The indenture governing the First Notes contains covenants applicable to
VersaTel and certain of its subsidiaries, limitations and requirements with
respect to indebtedness, restricted payments, dividends and other payments
affecting restricted subsidiaries, the issuance and sale of capital stock of
restricted subsidiaries, transactions with stockholders and affiliates, liens,
asset sales, issuances of guarantees of indebtedness by restricted subsidiaries,
sale-leaseback transactions, consolidations and mergers and provision of
financial statements and reports. The indenture also requires VersaTel to
commence and consummate an offer to purchase the First Notes for 101% of their
aggregate principal amount, upon events constituting or which may constitute a
change of control of VersaTel. In addition, under certain circumstances,
VersaTel is required by the indenture to offer to purchase the First Notes with
the proceeds of the sale of certain assets. The indenture also provides for
events of default which, if any of them occurs, would permit or require the
principal of, premium, if any, interest and any other monetary obligations on
the First Notes to become or to be declared to be immediately due and payable.
Holders of First Notes may under certain circumstances be entitled to receive
additional payments in respect of taxes and similar charges in respect of
payments on the First Notes. The terms of such covenants, such required offers
to purchase, such events of default and their consequences and such additional
payments, as well as related definitions, set forth in the indenture governing
the First High Yield Offering are substantially identical to those applicable to
the Second Notes, except that the indenture governing the Second High Yield
Offering also includes an optional redemption provision whereby VersaTel may,
for the first 3 years after such offering, redeem up to 35% of the Second Notes
with the net proceeds of
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certain public equity offerings by VersaTel. The indenture governing the First
Notes is subject to, and governed by, the Trust Indenture Act of 1939, as
amended.
THE SECOND HIGH YIELD OFFERING
In the Second High Yield Offering in December 1998, VersaTel issued units
consisting of $150,000,000 in aggregate principal amount of 13 1/4% Senior Notes
due 2008 and warrants to purchase 2,000,100 (as adjusted) ordinary shares. The
units were sold to Lehman Brothers, Inc., Lehman Brothers International (Europe)
and Paribas Corporation, as initial purchasers, who subsequently sold them to
institutional investors in reliance on exemptions under the Securities Act. The
notes and the warrants were separated in January 1999. In February 1999,
VersaTel completed a public exchange offer pursuant to which all the notes
issued in the Second High Yield Offering were exchanged for substantially
identical notes registered under the Securities Act that are not subject to
transfer restrictions. The warrants issued in the Second High Yield Offering
remain subject to certain transfer restrictions. Interest on the Second Notes
will be paid semi-annually on May 15 and November 15, beginning May 15, 1999. In
connection with the Second High Yield offering, we purchased, pledged and placed
in escrow U.S. government securities in an amount sufficient to fund the first 5
interest payments on the Second Notes (through interest payment date on May 15,
2001). The Second Notes are redeemable at the option of VersaTel, in whole or in
part, at any time on or after May 15, 2003, at 106.625% of their principal
amount, plus accrued interest, declining to 100% of their principal amount, plus
accrued interest, on or after May 15, 2006. In addition, at any time prior to
November 15, 2001, VersaTel may, at its option, redeem from time to time up to
35% of the aggregate principal amount of the Second Notes at a redemption price
equal to 113 1/4% of the aggregate principal amount thereof plus accrued and
unpaid interest, additional amounts, if any, and liquidated damages, if any, to
the date of redemption with the proceeds of one or more public equity offerings
by VersaTel, provided that at least 65% of the aggregate original principal
amount of the Second Notes remains outstanding immediately after the occurrence
of such redemption. The Second Notes may also be redeemed at our option of
VersaTel, in whole but not in part, at any time at a redemption price equal to
the aggregate principal amount thereof, plus liquidated damages, if any, to the
date fixed by VersaTel for redemption, and all additional amounts, if any, then
due and which will become due as a result of the redemption or otherwise, in the
event of changes affecting Netherlands taxes or as a result of any change in the
application of Netherlands tax laws or regulations that require VersaTel to pay
additional amounts that VersaTel determines cannot be avoided by taking
reasonable steps. The Second Notes rank equal in right of payment to the First
Notes, the Third Notes and all other senior indebtedness of VersaTel and will be
senior in right of payment to any future subordinated indebtedness of VersaTel.
The indenture governing the Second Notes contains covenants applicable to
VersaTel and certain of its subsidiaries, including limitations and requirements
with respect to indebtedness, restricted payments, dividends and other payments
affecting restricted subsidiaries, the issuance and sale of capital stock of
restricted subsidiaries, transactions with stockholders and affiliates, liens,
asset sales, issuances of guarantees of indebtedness by restricted subsidiaries,
sale-leaseback transactions, consolidations and mergers and provision of
financial statements and reports. The indenture also requires VersaTel to
commence and consummate an offer to purchase the Second Notes, for 101% of the
aggregate principal amount, upon certain events constituting or which may
constitute a change of control of VersaTel. In addition, under certain
circumstances, VersaTel is required by the indenture to offer to purchase the
Second Notes with the proceeds of the sale of certain assets. The indenture also
provides for events of default which, if any of them occurs, would permit or
require the principal of, premium, if any, interest and any other monetary
obligations on the Second Notes to become or to be declared to be immediately
due and payable. Holders of Second Notes may under certain circumstances be
entitled to receive additional payments in respect of taxes and similar charges
in respect of payments on the Second Notes. The indenture governing the Second
Notes is also subject to, and governed by, the Trust Indenture Act.
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THE THIRD HIGH YIELD OFFERING
Concurrent with this offering, VersaTel will issue $150 million in
aggregate principal amount of % Senior Dollar Notes due 2009 and
E100 million in aggregate principal amount of % Senior Euro Notes due
2009. The notes will be sold to Lehman Brothers International (Europe), ING
Barings LLC and ING Barings Limited, as underwriters. Interest on the Third
Notes will be paid semi-annually on and , beginning , 2000.
Unlike the holders of the Existing Notes, the holders the Third Notes will not
have the benefit of any securities placed in escrow to fund any interest
payments on the Third Notes. The Third Notes will be redeemable at the option of
VersaTel, in whole or in part, at any time on or after , 2004, at
% of their principal amount, plus accrued interest, declining to 100% of
their principal amount, plus accrued interest, on or after , 2007. In
addition, at any time prior to , 2002, VersaTel may, at its option,
redeem from time to time up to 35% of the aggregate principal amount of either
series of Third Notes at a redemption price equal to % of the aggregate
principal amount thereof plus accrued and unpaid interest and additional
amounts, if any, to the date of redemption with the proceeds of one or more
public equity offerings by VersaTel, provided that at least 65% of the aggregate
original principal amount of such series remains outstanding immediately after
the occurrence of such redemption. The Third Notes may also be redeemed at our
option of VersaTel, in whole but not in part, at any time at a redemption price
equal to the aggregate principal amount thereof, and all additional amounts, if
any, then due and which will become due as a result of the redemption or
otherwise, in the event of changes affecting Netherlands taxes or as a result of
any change in the application of Netherlands tax laws or regulations that
require VersaTel to pay additional amounts that VersaTel determines cannot be
avoided by taking reasonable steps. The Third Notes rank equal in right of
payment to the First Notes, the Second Notes (except with respect to the
securities placed in escrow to fund interest payments on the First Notes and
Second Notes, respectively) and all other senior indebtedness of VersaTel and
will be senior in right of payment to any future subordinated indebtedness of
VersaTel.
The indenture governing each series of Third Notes will contain covenants
applicable to VersaTel and certain of its subsidiaries, including limitations
and requirements with respect to indebtedness, restricted payments, dividends
and other payments affecting restricted subsidiaries, the issuance and sale of
capital stock of restricted subsidiaries, transactions with stockholders and
affiliates, liens, asset sales, issuances of guarantees of indebtedness by
restricted subsidiaries, consolidations and mergers and provision of financial
statements and reports. Each indenture will also require VersaTel to commence
and consummate an offer to purchase the Third Notes, for 101% of the aggregate
principal amount, upon certain events constituting or which may constitute a
change of control of VersaTel. Under certain circumstances, VersaTel will be
required by each indenture to offer to purchase the Third Notes with the
proceeds of the sale of certain assets. Each indenture will also provide for
events of default which, if any of them occurs, would permit or require the
principal of, premium, if any, interest and any other monetary obligations on
the Third Notes to become or to be declared to be immediately due and payable.
Holders of Third Notes may under certain circumstances be entitled to receive
additional payments in respect of taxes and similar charges in respect of
payments on the Third Notes. Each indenture governing the Third Notes will also
be subject to, and governed by, the Trust Indenture Act.
NORTEL VENDOR FINANCING
In May 1999, VersaTel Telecom Europe B.V., as borrower, VersaTel Telecom
International N.V., as guarantor, and Nortel Networks International Finance &
Holding B.V., as agent and security agent, entered into a E45.4 million
(approximately NLG 100.0 million) multi-draw amortizing term loan facility,
governed by a loan agreement (the "Nortel Facility"). The purpose of the
facility is to finance the acquisition of telecommunications equipment from
Nortel. Interest is payable quarterly in arrears at a floating rate based on the
Euro Interbank Offered Rate. The Nortel Facility is solely secured by a lien on
the equipment acquired with the proceeds advanced under the Nortel Facility. In
addition, the Nortel
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Facility is guaranteed by VersaTel Telecom International N.V., VersaTel Telecom
Netherlands B.V. and VersaTel Telecom Belgium N.V. As of the date hereof, no
advances have been made under the Nortel Facility. The Nortel Facility also
contains covenants applicable to VersaTel and its affiliates. The covenants
include, but are not limited to, restrictions on the incurrence of additional
indebtedness, the issuance of capital stock, amalgamations and mergers, asset
sales and acquisitions and joint ventures. In addition, under certain
circumstances, VersaTel Europe may be required to repay the facility upon the
occurrence of a change of control. The Nortel Facility provides for events of
default which, if any of them occurs, would permit or require the principal,
interest and any other monetary obligations under the Nortel Facility to become
or to be declared immediately due and payable.
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SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of ordinary shares in the public market
following the offering could adversely affect the market price of the ordinary
shares and adversely affect our ability to raise capital at a time and on terms
favorable to us.
Of the 70,556,201 ordinary shares to be outstanding after the offering on a
fully-diluted basis (assuming that the underwriters do not exercise their
over-allotment option), the 21,250,000 Shares and ADSs offered hereby will be
freely tradeable without restriction in the public market unless such shares are
held by our "affiliates," as that term is defined in Rule 144(a) under the
Securities Act. For purposes of Rule 144, an "affiliate" of an issuer is a
person that, directly or indirectly through one or more intermediaries,
controls, or is controlled by or is under common control with, such issuer. The
remaining ordinary shares to be outstanding after the offering may only be sold
(i) in the public market upon the expiration of certain holding periods
applicable to "restricted securities" under Rule 144, subject to the applicable
volume, manner of sale and other limitations of Rule 144, (ii) in offshore
transactions under Regulation S of the Securities Act or (iii) pursuant to an
effective registration statement under the Securities Act.
In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares for at least one year, including an "affiliate," as
that term is defined in the Securities Act, is entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of (1)
1.0% of the then outstanding ordinary shares or (2) the average weekly trading
volume during the 4 calendar weeks preceding filing of notice of such sale.
Sales under Rule 144 are also subject to certain manner of sale provisions,
notice requirements and the availability of current public information about us.
A shareholder who is deemed not to have been an "affiliate" of ours at any time
during the 90 days preceding a sale, and who has beneficially owned restricted
shares for at least 2 years, would be entitled to sell such shares under Rule
144(k) without regard to the volume limitations, manner of sale provisions or
public information requirements.
As of the date of this prospectus, there are 375,000 outstanding warrants
to purchase 5,000,100 ordinary shares at an exercise price of NLG 2.55 per
share. All such warrants become exercisable, and we expect that approximately
38,800 of such warrants will be exercised (on a cashless basis), upon completion
of this offering. We expect that a total of 2,257,492 Shares and ADSs will be
sold by the selling shareholders in this offering. After the closing of this
offering, we expect that there will be approximately 336,200 unexercised
warrants outstanding which, when exercised, would result in the issuance of
4,482,891 ordinary shares that could only be resold in compliance with the
registration requirements of the Securities Act or pursuant to an exemption
therefrom. The warrant agreements governing the warrants provide that we must
file a shelf registration statement with the Securities and Exchange Commission
pursuant to Rule 415 under the Securities Act within 180 days after the closing
of this offering for those warrant holders who elect not to participate in this
offering. Our obligation to file a shelf registration statement becomes
effective immediately in respect of any warrant holders who elect to sell shares
issued upon the exercise of warrants in this offering but are not allowed to
sell any such shares by the underwriters.
In addition, as of the date of this prospectus, there are outstanding
options to purchase 7,231,500 depositary receipts issued for ordinary shares
(348,000 of which are non-dilutive in that the shares underlying such options
are currently outstanding and will be provided to us by the holders thereof),
none of which are fully vested and exercisable. An additional 591,500 shares
have been reserved for issuance under our 1999 Stock Option Plan. All of the
Company's stock option plans provide that the option holder is not entitled to
retain any depositary receipts received by it as a result of the exercise of its
option, nor is the option holder entitled to exchange any depository receipts
for ordinary shares. Within one year after the exercise of its option, the
option holder is required to offer the depositary receipts
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received by it to VersaTel or to another party designated by VersaTel for the
fair market value of the underlying shares.
Cromwilld Limited, which will own 5,853,036 shares after this offering, has
been granted certain piggyback registration rights which become effective 180
days from the date of this prospectus.
In connection with the acquisitions of CS Net, Speedport and ITinera, we
are obligated to issue up to 555,000 additional ordinary shares, which will be
issued following this offering. We also have earn-out obligations to former
shareholders of SpeedPort and ITinera covering 130,000 ordinary shares. Upon
issuance, any such shares could only be resold in compliance with the
registration requirements of the Securities Act or pursuant to an exemption
therefrom.
LOCK-UP ARRANGEMENTS
Along with our executive officers and directors our current shareholders,
we have agreed, subject to certain exceptions, not to sell or otherwise dispose
of any ordinary shares (other than the Shares and ADSs offered by VersaTel in
this offering, shares issuable upon exercise of options or shares issued to
consummate acquisitions) for a period of 180 days after the date of this
prospectus without the prior written consent of Lehman Brothers Inc.
Because we do not have a history of net profits, AEX regulations prohibit
any member of our supervisory board or management board, subject to the
exception described below, from disposing, after the date of this offering, of
any ordinary shares acquired by such member before the date of this offering. In
addition, under AEX regulations, any holder of 5% or more of our outstanding
share capital before the date of this offering may not, for three years after
the date of this offering, sell, collectively with all other holders of 5% or
more of our outstanding share capital acquired before the date of this offering,
in the aggregate more than 25% of the number of our ordinary shares outstanding
before the date of this offering. This lock-up requirement applies unless we
report a profit, in which case such shareholders are entitled to dispose
collectively of a maximum of (i) 50% of the shares issued and outstanding before
the date of this offering if a profit was made for one year or (ii) 75% of the
shares issued and outstanding before the date of this offering if a profit was
made for two years.
Under AEX regulations, holders of 5% or more of our outstanding share
capital may dispose of their remaining interest if such disposition (i) is
consummated through a public secondary offering involving a due diligence
investigation and the issuance of a prospectus, (ii) complies with the listing
rules of the AEX and (iii) occurs at least one year after the date of this
offering. In addition, the lock-up arrangements will not prohibit any member of
our supervisory board or management board from disposing of any ordinary shares
acquired after the date of this offering pursuant to the exercise of options
which were granted under our stock option plans prior to this offering.
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TAX CONSIDERATIONS
NETHERLANDS TAX CONSIDERATIONS
The following discussion, subject to the limitations set forth therein,
describes the material Netherlands tax consequences of the acquisition,
ownership and disposition of the Shares or ADSs and is the opinion of Arthur
Andersen, special Netherlands tax counsel (belastingadviseurs) to VersaTel. This
opinion represents Arthur Andersen's interpretation of existing law. This
opinion does not address the income taxes imposed by any political subdivision
of The Netherlands or any tax imposed by any other jurisdiction. This opinion
does not discuss all the tax consequences that may be relevant to the holders in
light of their particular circumstances or to holders that are subject to
special treatment under applicable law and is not intended to be applicable in
all respects to all categories of investors. Changes in VersaTel's
organizational structure or the manner in which VersaTel conducts its business
may invalidate this opinion. The laws upon which this opinion is based are
subject to change, sometimes with retroactive effect. Changes in the applicable
laws may invalidate this opinion and this opinion will not be updated to reflect
such subsequent changes. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS
REGARDING THE PARTICULAR TAX CONSEQUENCES OF THEIR ACQUIRING, OWNING AND
DISPOSING OF THE SHARES OR ADSs.
SUBSTANTIAL INTEREST
A shareholder that owns, either via shares or options, directly or
indirectly, 5% or more of any class of shares, or 5% or more of the total issued
share capital of a company resident in The Netherlands (a "Substantial
Interest") is subject to special rules. Profit participation rights which give
the holder rights to 5% or more of the annual profit or 5% or more of the
liquidation proceeds of the target company will also qualify as substantial
interest. A deemed substantial interest is present if (part of) a substantial
interest has been disposed of, or is deemed to have been disposed of, on a
non-recognition basis. With respect to individuals, attribution rules exist in
determining the presence of a Substantial Interest. Unless indicated otherwise,
the term "shareholder", as used herein, includes individuals and entities as
defined under Netherlands tax law holding ordinary shares, but does not include
any such person having a Substantial Interest in VersaTel.
TAX CONSEQUENCES FOR RESIDENTS OR DEEMED RESIDENTS OF THE NETHERLANDS
DIVIDEND WITHHOLDING TAX
Dividends that VersaTel distributes are subject to withholding tax at a
rate of 25%, unless:
1. the participation exemption applies and the ordinary shares are
attributable to the business carried out in The Netherlands, or
2. dividends are distributed to a qualifying EU corporate shareholder
satisfying the conditions of the EU directive, or
3. the rate is reduced by treaty.
Dividends may include:
- distributions of cash,
- distributions of property in kind,
- constructive dividends,
- hidden dividends,
- liquidation proceeds in excess of our recognized paid-in capital,
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- proceeds from the redemption of shares in excess of our recognized
paid-in capital,
- stock dividends equal to their nominal value (unless distributed out of
our recognized paid-in share premium), and
- the repayment of paid-in capital not recognized as capital.
The term "recognized paid-in capital" or "share premium" relates to our
paid-in capital or share premium as recognized for Netherlands tax purposes.
Generally, a shareholder that resides, or is deemed to reside, in The
Netherlands will be allowed a credit against Netherlands income tax or
corporation tax for the tax withheld on dividends paid on ordinary shares. A
legal entity resident in The Netherlands that is not subject to Netherlands
corporate income tax, may, under certain conditions, request a refund of the tax
withheld.
Dividends VersaTel pays to a corporate shareholder that qualifies for the
"participation exemption" (as defined in Article 13 of The Netherlands
Corporation Tax Act 1969 (the "Corporation Tax Act")) will not be subject to the
dividend withholding tax if the ordinary shares are attributable to the
shareholder's business carried out in The Netherlands. A resident corporate
shareholder will qualify for the participation exemption if, among other things,
the resident shareholder owns generally at least 5% of the nominal paid-up
capital.
INDIVIDUAL INCOME TAX AND CORPORATION INCOME TAX
If the Shares or ADSs are held by an individual who resides, or is deemed
to reside, in The Netherlands, income derived from the Shares or ADSs is subject
to Netherlands income tax on a net income basis at graduated rates. An
individual generally is entitled to a dividend exemption of NLG 1,000 a year
(NLG 2,000 a year for married couples). Ordinary shares distributed to
individual shareholders from our share premium account (as recognized for
Netherlands tax purposes) are also exempt from Netherlands income tax. The
dividend exemption is not available to an individual shareholder if the ordinary
shares are:
1. attributable to a trade or business carried on by the shareholder, or
2. form part of a Substantial Interest.
Dividends accruing to individual shareholders that hold a Substantial
Interest are subject to income tax at a rate of 25% on a net basis.
Dividends received from Shares or ADSs or ordinary shares by an entity that
resides, or is deemed to reside, in The Netherlands will be subject to
Netherlands corporation tax on a net basis unless the company's shareholding
qualifies for the participation exemption. Dividends received from ordinary
shares by a pension fund as defined in the Corporation Tax Act are not subject
to Netherlands corporation tax.
CAPITAL GAINS REALIZED FROM THE SALE OR EXCHANGE OF SHARES OR ADSS
Capital gains derived from the sale, conversion or disposition of Shares or
ADSs by an individual shareholder who resides, or is deemed to reside, in The
Netherlands are not subject to Netherlands income tax provided:
1. the Shares or ADSs were not acquired directly or indirectly by VersaTel
or a subsidiary of VersaTel,
2. the shareholder did not have a (deemed) Substantial Interest in
VersaTel's share capital at the time of the sale or exchange, and
3. the Shares or ADSs were not assets of a business.
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Capital gains realized by an individual shareholder that is a resident or a
deemed resident of The Netherlands on the disposal of Shares or ADSs forming
part of a (deemed) Substantial Interest are subject to tax at a rate of 25%.
Capital gains realized by an individual resident shareholder from the sale or
exchange of Shares or ADSs forming part of the assets of a shareholder's
business are subject to tax on a net income basis at the progressive income tax
rates.
If the Shares or ADSs are held by an entity that is a resident or a deemed
resident of The Netherlands, capital gains realized from the sale or exchange of
ordinary shares are subject to corporation tax unless the shareholding qualifies
for the participation exemption. If the Shares or ADSs are held by a qualifying
pension fund, gains realized from the sale or exchange of ordinary shares are
exempt from Netherlands corporation tax.
NET WEALTH TAX
An individual who resides, or is deemed to reside, in The Netherlands
generally will be subject to a net wealth tax at a rate of 0.7% on the fair
market value of the Shares or ADSs.
GIFT TAX AND INHERITANCE TAX
Netherlands gift tax or inheritance tax will be due with respect to a gift
or inheritance of Shares or ADSs from a person who resided, or was deemed to
have resided, in The Netherlands at the time of the gift or his or her death.
Netherlands tax will be due in the case of a gift of Shares or ADSs by an
individual who at the time of the gift was neither resident nor deemed to be
resident in The Netherlands, if such individual dies within 180 days after the
date of the gift, while being resident or deemed resident in The Netherlands. A
Dutch national is deemed to have been resident of The Netherlands if he or she
was a resident in The Netherlands at any time during the 10 years preceding the
date of the gift or the date of his or her death. For gift tax purposes, each
person (regardless of nationality) is deemed to be a Netherlands resident if he
or she was a resident in The Netherlands at any time during the 12 months
preceding the date of the gift. The 10-year and 12-month residency rules may be
modified by treaty.
Liability for payment of the gift tax or inheritance tax rests with the
donee or heir, respectively. The rate at which these taxes are levied is
primarily dependent on the fair market value of the gift or inheritance and the
relationship between the donor and donee or the deceased and heir(s). Exemptions
may apply under specific circumstances.
TAX CONSEQUENCES FOR NON-RESIDENTS OF THE NETHERLANDS
This subsection applies to U.S. Holders (as defined below).
DIVIDEND WITHHOLDING TAX
Dividends VersaTel distributes are subject to withholding tax at a rate of
25%, unless:
1. the participation exemption applies and the ordinary shares are
attributable to the business carried out in The Netherlands, or
2. dividends are distributed to a qualifying EU corporate shareholder
satisfying the conditions of the EU directive, or
3. the rate is reduced by treaty.
Dividends may include:
- distributions of cash,
- distributions of property in kind,
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- constructive dividends,
- hidden dividends,
- liquidation proceeds in excess of our recognized paid-in capital,
- proceeds from the redemption of shares in excess of our recognized
paid-in capital,
- stock dividends equal to their nominal value (unless distributed out of
our recognized paid-in share premium), and
- the repayment of paid-in capital not recognized as capital.
The term recognized paid-in capital or share premium relates to our paid-in
capital or share premium as recognized for Netherlands tax purposes.
A non-resident shareholder may benefit from a reduced dividend withholding
tax rate pursuant to an income tax treaty in effect between the shareholder's
country of residence and The Netherlands. Under most Netherlands income tax
treaties, the withholding tax rate is reduced to 15% or less provided that:
1. the recipient shareholder does not have a permanent establishment in
The Netherlands to which the ordinary shares and are attributable, and
2. the recipient shareholder is the beneficial owner of the dividends.
Under the Income Tax Treaty of December 18, 1992 concluded between The
Netherlands and the United States (the "Treaty"), dividends we pay to a resident
of the United States generally will be subject to a dividend withholding tax
rate of 15%. The rate may be reduced to 5% if the beneficial owner is a United
States corporation that directly holds 10% or more of the voting power in our
Company. The Treaty exempts from withholding tax, dividends received by exempt
pension trusts and exempt organizations, under conditions as defined in the
Treaty. Except in the case of exempt organizations, dividends paid may benefit
from the reduced dividend withholding tax rate (or exemption from dividend
withholding tax) by filing the proper forms in advance of the dividend payment.
Exempt organizations remain subject to the statutory withholding rate of 25% and
must file a return to claim a refund of the tax withheld.
A shareholder may not claim Treaty benefits unless:
1. the shareholder is a "resident" of the United States, as that term is
defined in the Treaty, and
2. Article 26 (the "treaty shopping rules") does not preclude the
shareholder's ability to claim Treaty benefits.
The withholding of tax on dividend distributions on Shares or ADSs to a
non-resident corporate shareholder carrying on a business through a Netherlands
permanent establishment is not required as long as:
1. the Netherlands participation exemption applies, and
2. the Shares or ADSs form a part of the permanent establishment's
business assets.
To qualify for the participation exemption, this entity should hold
generally at least 5% of our nominal paid-up capital and the Shares or ADSs must
form a part of the permanent establishment's business assets.
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INDIVIDUAL INCOME TAX AND CORPORATION INCOME TAX
A non-resident shareholder will not be subject to Netherlands income tax on
dividends received from VersaTel provided such shareholder does not or has not:
1. carried on a business in The Netherlands through a permanent
establishment or a permanent representative that includes in its assets
the Shares or ADSs,
2. held a Substantial Interest in VersaTel's share capital or, in the
event the non-resident shareholder has held a Substantial Interest in
VersaTel, such interest was a business asset in the hands of the
shareholder,
3. shared directly (not through the beneficial ownership of shares or
similar securities) in the profits of an enterprise managed and
controlled in The Netherlands that owned or was deemed to have owned
the Shares and ADSs, and
4. carried out employment activities in The Netherlands or served as a
director or board member of any entity resident in The Netherlands, or
served as a civil servant of a Netherlands public entity with which the
holding of the Shares or ADSs was connected.
CAPITAL GAINS REALIZED FROM THE SALE OR EXCHANGE OF SHARES OR ADSS
A non-resident shareholder will not be subject to Netherlands income tax on
capital gains derived from the sale, conversion or disposition of Shares or ADSs
provided the non-resident shareholder does not have or has not:
1. carried on a business in The Netherlands through a permanent
establishment or a permanent representative that included in its assets
the Shares or ADSs,
2. held a Substantial Interest in VersaTel's share capital or, in the
event the non-resident shareholder has held a Substantial Interest in
VersaTel, such interest was a business asset in the hands of the
shareholder,
3. shared directly (not through the beneficial ownership of shares or
similar securities) in the profits of an enterprise managed and
controlled in The Netherlands which owned or was deemed to have owned
Shares or ADSs, and
4. carried out employment activities in The Netherlands, or served as a
director or board member of any entity resident in The Netherlands, or
served as a civil servant of a Netherlands public entity, with which
the holding of the Shares or ADSs was connected.
Capital gains derived from the sale, conversion or disposition of Shares or
ADSs by a non-resident corporate shareholder, carrying on a business through a
permanent establishment in The Netherlands, are not subject to Netherlands
corporation tax provided:
1. the Netherlands participation exemption applies, and
2. the Shares or ADSs are attributable to the business carried out in The
Netherlands.
To qualify for the participation exemption, the shareholder must generally
hold at least 5% of our nominal paid-up capital and meet other requirements.
Under most Netherlands tax treaties, the right to tax capital gains
realized by a non-resident shareholder from the sale or exchange of Shares or
ADSs is in many cases allocated to the shareholder's country of residence.
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NET WEALTH TAX
A non-resident individual shareholder will not be subject to Netherlands
net wealth tax in respect of the Shares or ADSs provided the non-resident
shareholder does not or has not:
1. carried on a business in The Netherlands through a permanent
establishment or a permanent representative that included in its assets
the Shares or ADSs, and
2. shared directly (not through the beneficial ownership of shares or
similar securities) in the profits of an enterprise managed and
controlled in The Netherlands, which owned or was deemed to have owned
Shares or ADSs.
GIFT TAX AND INHERITANCE TAX
A gift or inheritance of Shares or ADSs from a non-resident shareholder
will not be subject to Netherlands gift tax or inheritance tax in the hands of
the donee or heir provided the non-resident shareholder was not:
1. a Dutch national who has been resident in The Netherlands at any time
during the 10 years preceding the date of gift or the date of death or,
in the event he or she was resident in The Netherlands during such
period, the non-resident shareholder was not a Dutch national at the
time of gift or death,
2. solely for the purpose of the gift tax, a resident of The Netherlands
at any time during the 12 months preceding the time of the gift
(however, in case of a gift by an individual who at the time of the
gift was neither resident nor deemed to be resident in The Netherlands
and such individual dies within 180 days after the date of the gift,
while being resident or deemed to be resident in The Netherlands, such
tax will be due),
3. engaged in a business in The Netherlands through a permanent
establishment or a permanent representative which included in its
assets Shares or ADSs, and
4. shared directly (not through the beneficial ownership of shares or
similar securities) in the profits of an enterprise managed and
controlled in The Netherlands which owned or is deemed to have owned
Shares or ADSs.
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes the material U.S. federal income tax
considerations that may be relevant to a prospective purchaser of Shares or ADSs
that is a U.S. Holder (as defined below) and, subject to the limitations and
qualifications stated herein, represents the opinion of Shearman & Sterling,
special tax counsel to the Company, as to the material U.S. federal income tax
consequences to a U.S. Holder of the receipt of distributions on, and the
disposition of, Shares or ADSs. This discussion 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 of the date hereof and all of which are subject to change,
possibly with retroactive effect, and different interpretations). Except as
specifically set forth herein, this discussion deals only with Shares and ADSs
held by a U.S. Holder as capital assets within the meaning of Section 1221 of
the Code. This discussion does not address all of the tax consequences that may
be relevant to prospective purchasers of Shares or ADSs in light of their
particular circumstances or to persons subject to special tax rules, such as
insurance companies, financial institutions, dealers in securities or foreign
currencies, tax-exempt investors, persons holding Shares or ADSs as a position
in a "straddle," as a part of a short-sale, or as part of a hedging (conversion
or other integrated transaction, persons owning) directly, indirectly or
constructively, 10% or more of the voting stock of the Company or persons whose
functional currency (as defined in Section 985 of the Code) is not the U.S.
dollar. Prospective purchasers of Shares or ADSs should consult with their own
tax advisors regarding the application of the U.S. federal income tax laws
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to their particular situations as well as to any additional tax consequences of
purchasing, holding or disposing of Shares or ADSs, including the applicability
and effect of the tax laws of any state, local or foreign jurisdiction.
As used in this section, the term "U.S. Holder" means a beneficial owner of
a Share or ADS who or that is for U.S. federal income tax purposes (i) a citizen
or individual resident of the United States, (ii) a corporation or partnership
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 (A) a
U.S. court is able to exercise primary supervision over the administration of
the trust and one or more U.S. persons have the authority to control all
substantial decisions of the trust or (B) the trust has a valid election in
effect under applicable U.S. Treasury regulations to be treated as a U.S.
person.
In general, for U.S. federal income tax purposes, U.S. Holders of ADRs
evidencing ADSs will be treated as the owners of the Shares represented by the
ADSs.
CASH DISTRIBUTIONS
To the extent that a distribution on Shares or ADSs is paid to a U.S.
Holder out of the Company's current or accumulated earnings and profits (as
determined for U.S. federal income tax purposes), such distribution will be
includible in the U.S. Holder's gross income as foreign source dividend income
in an amount equal to the U.S. dollar value of such distribution (without
reduction for any applicable foreign withholding tax). Therefore, in the event
that any foreign tax is withheld from a distribution on the Shares or ADSs, a
U.S. Holder generally will be required to report gross income in an amount
greater than the cash received (although, as discussed below, such U.S. Holder
may be eligible to claim a deduction or a foreign tax credit in respect of such
foreign tax). To the extent that the amount of any distribution on the Shares or
ADSs exceeds the current and accumulated earnings and profits of the Company (as
determined for U.S. federal income tax purposes), a U.S. Holder's pro rata share
of such excess amount would be treated first as a nontaxable return of capital
that would be applied against and would reduce the U.S. Holder's tax basis in
its Shares or ADSs (but not below zero), and then as capital gain. Distributions
in excess of the Company's current and accumulated earnings and profits (as
determined for U.S. federal income tax purposes) generally will not give rise to
foreign source income and a U.S. Holder may be unable to claim a foreign tax
credit in respect of any Netherlands or other foreign withholding tax imposed on
such distributions unless (subject to applicable limitations) the U.S. Holder
has other foreign source income in the appropriate category for foreign tax
credit purposes. The Company believes that it does not presently have current or
accumulated earnings and profits for U.S. federal income tax purposes. However,
the Company cannot predict whether it will have any such earnings and profits
for future taxable years.
Subject to certain conditions and limitations (including certain minimum
holding period requirements), the U.S. dollar value of the foreign income taxes,
if any, withheld from a distribution to a U.S. Holder on the Shares or ADSs may
be claimed as a credit against the U.S. Holder's U.S. federal income tax
liability. Alternatively, a U.S. Holder may claim a deduction for such amount of
foreign income taxes withheld in a taxable year, but only if such U.S. Holder
does not elect to claim a foreign tax credit in respect of any foreign taxes
paid by it in the taxable year. However, with respect to any withholding tax
that may be imposed by The Netherlands, because Netherlands tax law may not
require the Company to remit the full amount of such withholding tax to the
Netherlands taxing authorities, U.S. Holders may be limited in their ability to
deduct or credit such Netherlands withholding tax for U.S. federal income tax
purposes. Dividends on Shares or ADSs generally will constitute "passive income"
or, in the case of certain U.S. Holders, "financial services income" for U.S.
foreign tax credit purposes. Special rules apply to certain individuals whose
foreign source income during the taxable year
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consists entirely of "qualified passive income" and whose creditable foreign
taxes paid or accrued during the taxable year do not exceed $300 ($600 in the
case of a joint return).
The rules relating to foreign tax credits are extremely complex and the
availability of a foreign tax credit depends on numerous factors. Prospective
purchasers of Shares or ADSs should consult their own tax advisors concerning
the application of the U.S. foreign tax credit rules to their particular
situations.
The U.S. dollar value of any distribution to a U.S. Holder on Shares or
ADSs that is paid in a foreign currency will be calculated by reference to the
exchange rate in effect at the time the distribution is received by the U.S.
Holder (or a nominee, custodian or other agent of the U.S. Holder). A U.S.
Holder generally should not recognize any foreign currency gain or loss if such
foreign currency is converted into U.S. dollars on the day received. If a U.S.
Holder does not convert such foreign currency into U.S. dollars on the date of
receipt, however, such Holder may recognize foreign currency gain or loss (which
generally will be taxable as ordinary income or loss) upon a subsequent sale or
other disposition of the foreign currency.
A corporate U.S. Holder will not be entitled to a dividends received
deduction with respect to distributions on Shares or ADSs by the Company.
SALE OF SHARES AND ADSS
A U.S. Holder generally will recognize gain or loss upon a sale or other
disposition of Shares or ADSs in an amount equal to the difference between the
U.S. dollar value of the amount realized on the sale or other disposition and
the U.S. Holder's adjusted tax basis in the Shares or ADSs. Subject to the PFIC
discussion below, such gain or loss generally will be capital gain or loss and,
in the case of certain non-corporate U.S. Holders, may be subject to U.S.
federal income tax at a preferential rate where the U.S. Holder's holding period
exceeds one year. Any gain or loss recognized by a U.S. Holder on a sale or
other disposition of Shares or ADSs generally will be treated as United States
source gain or loss for foreign tax credit purposes. As a result of certain
limitations under the foreign tax credit provisions of the Code, a U.S. Holder
may be unable to claim a foreign tax credit for Netherlands withholding taxes,
if any, imposed on the proceeds received upon a sale, exchange, repurchase by
the Company or other disposition of Shares or ADSs. A U.S. Holder's ability to
deduct capital losses in respect of Shares and ADSs is subject to limitations.
PASSIVE FOREIGN INVESTMENT COMPANY
In general, a foreign corporation is a PFIC for any taxable year in which
(i) 75% or more of its gross income consists of passive income (such as
dividends, interest, rents and royalties) or (ii) 50% or more of the average
quarterly value of its assets consists of assets that produce, or are held for
the production of, passive income. The Company was a PFIC for its 1998 taxable
year. While, based on its projections, the Company does not expect to be a PFIC
for its 1999, or any subsequent, taxable year, because those projections may
prove to be inaccurate and, in particular, because the Company has substantial
passive assets in the form of cash from the First High Yield Offering and the
Second High Yield Offering, and will raise additional capital in this offering
and the Third High Yield Offering, no assurance can be provided in that regard.
If the Company were a PFIC for any taxable year, a U.S. Holder that held
Shares or ADSs in that taxable year generally would be subject to special rules
with respect to certain distributions made by the Company on the Shares or ADSs
and with respect to gains from dispositions of Shares or ADSs. In general, such
a U.S. Holder would be required to allocate such distributions or gains (as the
case may be) ratably over its holding period for such Shares or ADSs. That
portion of any such distributions or gains allocated to a prior taxable year
(other than a year prior to the first year in which the Company was a PFIC)
would effectively be taxed at the highest U.S. federal income tax rate in effect
for such year with respect to ordinary income and the U.S. Holder would be
subject to an interest charge on the
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resulting tax liability (determined as if such tax liability had been due with
respect to the particular taxable year). That portion, if any, of such
distributions or gains not so allocated to a prior taxable year of the U.S.
Holder in which the Company was a PFIC would be included in the U.S. Holder's
income for the taxable year of the particular distribution or disposition and
taxed as ordinary income. The foregoing rules with respect to distributions and
dispositions may be avoided if a U.S. Holder is eligible for and timely makes
either a valid "QEF election" (in which case the U.S. Holder generally would be
required to include in income on a current basis its pro rata share of the
ordinary income and net capital gains of the Company) or a valid
"mark-to-market" election (in which case, subject to certain limitations, the
U.S. Holder would essentially be required to take into account the difference,
if any, between the fair market value and the adjusted tax basis of its Shares
and ADSs, at the end of a taxable year, in calculating its income for such
year). Prospective purchasers are urged to consult their own tax advisors
regarding the consequences of an investment in a PFIC.
BACKUP WITHHOLDING
"Backup" withholding and information reporting requirements may apply to
payments made within the United States of dividends on Shares or ADSs and to
certain payments of proceeds of a sale or redemption of a Share or ADS paid to a
U.S. Holder. The Company, its agent, a broker, the Trustee or any paying agent,
as the case may be, may be required to withhold tax from any payment that is
subject to backup withholding at a rate of 31% of such payment if the U.S.
Holder fails to furnish the U.S. Holder's taxpayer 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, corporations) are not
subject to the backup withholding and information 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 U.S. Holder's U.S.
federal income tax liability provided that the required information is furnished
to the U.S. Internal Revenue Service. Treasury regulations, generally effective
for payments made after December 31, 2000, modify certain of the certification
requirements for backup withholding. It is possible that the Company and other
withholding agents may request a new withholding certificate from U.S. Holders
in order to qualify for continued exemption from backup withholding under
Treasury regulations when they become effective.
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UNDERWRITING
The underwriters of the offering of the Shares and ADSs in the United
States and Canada, for whom Lehman Brothers Inc. is acting as global coordinator
and U.S. representative, have severally but not jointly agreed, subject to the
terms and conditions of a U.S. underwriting agreement (the form of which is
filed as an exhibit to the Registration Statement of which this prospectus is a
part), to purchase from VersaTel and the selling shareholders the following
respective numbers of ordinary shares in the form of Shares and ADSs:
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS Shares and ADSs
- ----------------- ---------------
<S> <C>
Lehman Brothers Inc.........................................
ING Barings LLC.............................................
Bear, Stearns & Co. Inc. ...................................
Paribas Corporation.........................................
Hambrecht & Quist LLC.......................................
E*TRADE Securities, Inc.....................................
-------
Total.............................................
=======
</TABLE>
The underwriters of the concurrent offering of the Shares and ADSs outside
the United States and Canada, for whom Lehman Brothers International (Europe) is
acting as global coordinator and lead manager, have severally but not jointly
agreed, subject to the terms and conditions of an international underwriting
agreement (the form of which is filed as an exhibit to the Registration
Statement of which this prospectus is a part) to purchase from VersaTel and the
selling shareholders the following respective numbers of ordinary shares in the
form of Shares and ADSs:
<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL MANAGERS Shares and ADSs
- ---------------------- ---------------
<S> <C>
Lehman Brothers International (Europe)......................
ING Barings Limited as agent for ING Bank N.V., London
Branch....................................................
Bear, Stearns International Limited.........................
Paribas.....................................................
Hambrecht & Quist LLC.......................................
-------
Total.............................................
=======
</TABLE>
The underwriters may elect to receive all or a portion of their allotment
of ordinary shares (including ordinary shares purchased pursuant to the
over-allotment option described below) in the form of Shares or ADSs in order to
accommodate requests of investors.
Each underwriting agreement provides that the obligations of the
underwriters are subject to the satisfaction of certain conditions, including
the delivery of legal opinions by legal counsel. The underwriters are obligated
to purchase all of the Shares or ADSs (other than those covered by the over-
allotment option) if they purchase any of the Shares or ADSs. The offering price
(per Share and per ADS) and underwriting discounts and commissions for the U.S.
offering and the international offering are identical. The closing of the
international offering is a condition to the closing of the U.S. offering, and
the closing of the U.S. offering is a condition to the closing of the
international offering.
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The selling shareholders will enter into a custody agreement pursuant to
which the selling shareholders will deposit with a custodian prior to the
closing of this offering the warrants they expect to exercise (or, in the case
of Cromwilld, the ordinary shares it expects to sell) at the closing of this
offering. In addition, pursuant to a power of attorney to be granted to one or
more officers of VersaTel by each selling shareholder, such officers will, in
the case of selling shareholders other than Cromwilld, exercise the warrants for
ordinary shares to be sold in this offering and will, for each selling
shareholder, execute the underwriting agreements on behalf of such selling
shareholder.
We expect to incur approximately $ million of expenses in connection
with this offering.
The underwriters propose to offer some of the shares directly to the public
at the public offering price set forth on the cover page of this prospectus and
some of the shares to certain dealers at the public offering price less a
concession not in excess of E per Share or $ per ADS. The underwriters
may allow, and such dealers may reallow, a concession not in excess of E per
Share or $ per ADS on sales to certain other dealers. If all of the shares
are not sold at the initial offering price, the representatives may change the
public offering price and the other selling terms.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to 3,187,500 additional ordinary
shares in the form of Shares or ADSs at the public offering price less the
underwriting discount. The underwriters may exercise this option solely for the
purpose of covering over-allotments, if any, in connection with this offering.
To the extent this option is exercised, each underwriter will be obligated,
subject to various conditions, to purchase a number of additional Shares or ADSs
approximately proportionate to its initial purchase commitment.
We, our executive officers and directors and our current shareholders have
agreed not to do any of the following, whether any transaction described in
clause (1), (2) or (3) below is to be settled by delivery of ordinary shares or
other securities, in cash or otherwise, in each case without the prior written
consent of the representatives, on behalf of the underwriters, for a period of
180 days after the date of this prospectus:
(1) offer, sell, pledge, or otherwise dispose of, or enter into any transaction
or device which is designed to, or could be expected to, result in the
disposition by any person at any time in the future of, any ordinary shares
or securities convertible into or exchangeable for ordinary shares, other
than any of the following:
- the ordinary shares (in the form of Shares or ADSs) sold under this
prospectus,
- ordinary shares we issue pursuant to employee benefit plans, qualified
stock option plans or other employee compensation plans existing on the
date of this prospectus or pursuant to currently outstanding options,
warrants or rights, or
- ordinary shares we use as consideration for acquisitions or that we issue
in connection with strategic alliances, provided that the recipient of
these ordinary shares agrees to be bound by any applicable transfer
restrictions,
(2) sell or grant options, rights or warrants for ordinary shares or securities
convertible into or exchangeable for our ordinary shares except for ordinary
shares and options for ordinary shares which we issue or grant to our
officers, directors or employees, or
(3) enter into any swap or other derivatives transaction that transfers to
another, in whole or in part, any of the economic benefits or risks of
ownership of ordinary shares.
Because we do not have a history of net profits, AEX regulations prohibit
any member of our supervisory board or management board, subject to the
exception described below, from disposing, after the date of this offering, of
any ordinary shares acquired by such member before the date of this offering.
Under AEX regulations, any holder of 5% or more of our outstanding share capital
before the date of this
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offering may not, for three years after the date of this offering, sell,
collectively with all other holders of 5% or more of our outstanding share
capital acquired before the date of this offering, in the aggregate more than
25% of the number of our ordinary shares outstanding before the date of this
offering. This lock-up requirement applies unless we report a profit, in which
case such shareholders are entitled to dispose collectively of a maximum of (i)
50% of the shares issued and outstanding before the date of this offering if a
profit was made for one year or (ii) 75% of the shares issued and outstanding
before the date of this offering if a profit was made for two years.
Under AEX regulations, holders of 5% or more of our outstanding share
capital may dispose of their remaining interest if such disposition (i) is
consummated through a public secondary offering involving a due diligence
investigation and the issuance of a prospectus, (ii) complies with the listing
rules of the AEX and (iii) occurs at least one year after the date of this
offering. In addition, the lock-up arrangements will not prohibit any member of
our supervisory board or management board from disposing of any ordinary shares
acquired after the date of this offering pursuant to the exercise of options
which were granted under our stock option plans prior to this offering.
The U.S. underwriters and the international managers have entered into an
agreement among U.S. underwriters and international managers, pursuant to which
each U.S. underwriter has agreed, as part of the distribution of the Shares and
ADSs offered in the U.S. offering, that:
- it is not purchasing any of the Shares and ADSs for the account of anyone
other than a U.S. Person (as defined below), and
- it has not offered or sold, will not offer, sell, resell or deliver,
directly or indirectly, any of the Shares and ADSs or distribute any
prospectus relating to the U.S. offering to anyone other than a U.S.
Person.
In addition, pursuant to the same agreement, each international manager has
agreed that, as part of the distribution of the Shares and ADSs offered in the
international offering:
- it is not purchasing any of the Shares and ADSs for the account of a U.S.
Person, and
- it has not offered or sold, and will not offer, sell, resell or deliver,
directly or indirectly, any of the Shares and ADSs, and will not
distribute any prospectus relating to the international offering to any
U.S. Person.
The limitations described above do not apply to stabilization transactions
or other transactions specified in the underwriting agreements and the agreement
among U.S. underwriters and international underwriters, including:
- some purchases and sales between U.S. underwriters and the international
managers,
- some offers, sales, resales, deliveries or distributions to or through
investment advisors or other persons exercising investments discretion,
- purchases, offers or sales by a U.S. underwriter who is also acting as an
international manager or by an international manager who is also acting
as a U.S. underwriter, and
- other transactions specifically approved by the U.S. representative and
the lead manager.
As used herein, the term "U.S. Person" means any resident or national of
the United States or Canada, any corporation, partnership or other entity
created or organized in or under the laws of the United States or Canada, or any
estate or trust the income of which is subject to U.S. or Canadian federal
income taxation regardless of the source, the term "United States" means the
United States of America (including the District of Columbia) and its
territories, its possessions and other areas subject to its jurisdiction, and
the term "Canada" means Canada, its provinces, its territories, its possessions
and other areas subject to its jurisdiction.
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<PAGE> 132
Each U.S. underwriter and international manager has represented and agreed
to all of the following:
- it has not offered or sold and, prior to the date six months after the
date of issue of the Shares or ADSs, will not offer or sell any Shares or
ADSs to persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their business or
otherwise in circumstances which have not resulted and will not result in
an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995,
- it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 and the Regulation with respect to anything
done by it in relation to the Shares or ADSs in, from or otherwise
involving the United Kingdom, and
- it has only issued or passed on, and will only issue or pass on, to any
person in the United Kingdom any document received by it in connection
with the issue of the Shares or ADSs if that person is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom such
document may otherwise be issued or passed upon.
Pursuant to the agreement among the U.S. underwriters and international
managers, sales may be made between the U.S. underwriters and the international
managers of the number of Shares or ADSs as may be mutually agreed. The price of
any Shares or ADSs so sold shall be the public offering price as then in effect
for the Shares or ADSs being sold by the U.S. underwriters and the international
managers less an amount equal to the selling concessions allocable to those
Shares or ADSs, unless otherwise determined by mutual agreement. To the extent
that there are sales between the U.S. underwriters and the international
managers pursuant to the agreement among U.S. underwriters and international
managers, the number of Shares or ADSs available for sale by the U.S.
underwriters or by the international managers may be more or less than the
amount specified on the cover page of this prospectus.
At our request, the underwriters have reserved up to 900,000 ordinary
shares (in the form of Shares or ADSs), offered hereby for sale to selected
persons, including to our employees, supervisory board members, business
associates and other related parties, at a 10% discount from the initial public
offering price (in the case of the employees). The number of ordinary shares in
the form of Shares or ADSs available for sale to the general public will be
reduced to the extent these persons purchase reserved shares.
The underwriters have informed us that they will not confirm sales to
discretionary accounts in excess of 5% of the Shares or ADSs offered by them.
In connection with this offering, the U.S. representative and the lead
manager, on behalf of the U.S. underwriters and the international managers,
respectively, may purchase and sell Shares or ADSs in the open market. These
transactions may include over-allotment, syndicate covering transactions and
stabilizing transactions. Over-allotment involves syndicate sales of Shares or
ADSs in excess of the number of Shares or ADSs to be purchased by the
underwriters in the offering, which creates a syndicate short position.
Syndicate covering transactions involve purchases of our Shares or ADSs in the
open market after the distribution has been completed in order to cover
syndicate short positions. Stabilizing transactions consist of certain bids or
purchases of our Shares or ADSs made for the purpose of preventing or retarding
a decline in the market price of our Shares or ADSs while this offering is in
progress.
The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when the
U.S. representative or the lead manager, in covering syndicate short positions
or making stabilizing purchases, repurchases Shares or ADSs originally sold by
that syndicate member.
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<PAGE> 133
Any of these activities may cause the price of our Shares or ADSs to be
higher than the price that otherwise would exist in the open market in the
absence of such transactions. These transactions may be effected on a stock
exchange, in the over-the-counter market or otherwise and, if commenced, may be
discontinued at any time.
Neither we, the selling shareholders nor the underwriters make any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the Shares or ADSs. In
addition, neither we, the selling shareholders nor the underwriters make any
representation that anyone will engage in these transactions or that these
transactions, once commenced, will not be discontinued without notice.
Purchasers of the Shares or ADSs offered in this prospectus may be required
to pay stamp taxes and other charges under the laws and practices of the country
of purchase, in addition to the offering price listed on the cover of this
prospectus.
Prior to this offering, there has been no public market for the Shares or
the ADSs. The initial public offering price was negotiated among us and the
underwriters. Among the factors considered in determining the initial public
offering price of the Shares and ADSs, in addition to prevailing market
conditions, were our historical performance, estimates of our business potential
and our earnings prospects, an assessment of our management and the
consideration of the above factors in relation to market valuation of companies
in related businesses. There can be no assurance that the initial public
offering price corresponds to the price at which the Shares and ADSs will trade
in the public market subsequent to this offering or that an active market for
the Shares and ADSs will develop and continue after this offering.
No action has been or will be taken in any jurisdiction by us, the selling
shareholders or by any underwriter that would permit a public offering of the
Shares or ADSs or possession or distribution of a prospectus in any jurisdiction
where action for that purpose is required, other than in the United States.
Persons who receive this prospectus are advised by us, the selling shareholders
and the underwriters to inform themselves about, and to observe any restrictions
as to, the offering of the Shares and ADSs and the distribution of this
prospectus.
This prospectus may be used in connection with offers and sales of Shares
and ADSs offered initially outside the United States and Canada insofar as such
Shares or ADSs are reoffered or resold from time to time in the United States in
transactions that require registration under the Securities Act.
This prospectus is not, and under no circumstances is to be construed as,
an advertisement or a public offering of the Shares or ADSs in Canada or any
province or territory thereof. Any offer or sale of the Shares or ADSs in Canada
will be made only pursuant to an exemption from the prospectus filing
requirement and an exemption from the dealer registration requirement (where
such an exemption is not available, offers or sales shall be made only by a
registered dealer) in the relevant Canadian jurisdiction where such offer or
sale is made.
Some of the underwriters have, directly or indirectly, performed investment
and commercial banking or financial advisory services to us, for which they have
received customary fees and commissions, and they expect to provide these
services to us and our affiliates in the future, for which they also expect to
receive customary fees and commissions. Lehman Brothers Inc., an affiliate of
Lehman Brothers International (Europe), was an initial purchaser in the First
High Yield Offering and the Second High Yield Offering. Lehman Brothers
International (Europe) was an initial purchaser in the Second High Yield
Offering and is an underwriter in the Third High Yield Offering. Each of ING
Barings Limited and ING Barings LLC, each an affiliate of the other, is an
underwriter in the Third High Yield Offering. Lehman Commercial Paper Inc., an
affiliate of each of Lehman Brothers Inc. and Lehman Brothers International
(Europe), and ING (U.S.) Capital, LLC, an affiliate of each of ING Barings
Limited and ING Barings LLC, are lenders of the Interim Loans which will be
repaid with
128
<PAGE> 134
a portion of the net proceeds of the Third High Yield Offering. Hambrecht &
Quist LLC, an underwriter in this offering, will act as a qualified independent
underwriter, as defined in Rule 2720 of the Conduct Rules of the National
Association of Securities Dealers, Inc., in the Third High Yield Offering.
Paribas Corporation was an initial purchaser in the Second High Yield Offering.
Paribas Deelnemingen N.V., an affiliate of each of Paribas and Paribas
Corporation, is a shareholder of VersaTel. See "Principal Shareholders."
Affiliates of Lehman Brothers may provide loans to the Chief Executive
Officer, Chief Operating Officer and Chief Technology Officer of VersaTel in an
aggregate amount of approximately NLG 6.0 million to fund the exercise price of
certain employee options that may be exercised by them at the time of the
closing of this offering. Any such loans would be made on commercial terms,
including a pledge of the shares received upon such exercise and reimbursement
of legal fees and other expenses. Shares received upon exercise of such options
would remain subject to the lock-up arrangements described under "Shares
Eligible for Future Sale."
VersaTel and the selling shareholders have agreed to indemnify the
underwriters against liabilities, including liabilities under the Securities
Act, or to contribute to payments the underwriters may be required to make in
respect of any of those liabilities.
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<PAGE> 135
LEGAL MATTERS
The validity of the Shares and ADSs offered hereby will be passed upon for
VersaTel by Shearman & Sterling, New York, New York. Certain legal matters will
be passed upon for the underwriters by Simpson Thacher & Bartlett, London,
England. The validity of the Shares and ADSs with respect to Netherlands
corporate law will be passed upon for VersaTel by Stibbe Simont Monahan Duhot,
Amsterdam, The Netherlands and certain matters of Netherlands tax law will be
passed upon for VersaTel by Arthur Andersen, Amsterdam, The Netherlands. Certain
matters of Netherlands law will be passed upon for the underwriters by Nauta
Dutilh, Amsterdam, The Netherlands.
EXPERTS
The financial statements of VersaTel as of December 31, 1996, 1997 and 1998
and for each of the years then ended, included in this prospectus, have been
audited by Arthur Andersen, and are included herein in reliance upon the
authority of said firm as expert in preparing said reports.
The financial statements of Svianed B.V. as of December 31, 1997 and 1998
and for each of the years in the two-year period ended December 31, 1998 have
been included in this prospectus in reliance upon the report of KPMG Accountants
N.V., and upon the authority of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, or the
"Commission," a Registration Statement on Form F-1 under the Securities Act, and
the rules and regulations promulgated thereunder, with respect to the Shares and
ADSs offered hereby. This prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits thereto. Statements contained in this
prospectus as to the contents of any contract or other document that is filed as
an exhibit to the Registration Statement are not necessarily complete and each
such statement is qualified in all respects by reference to the full text of
such contract or document.
You may read and copy all or any portion of the Registration Statement and
the exhibits thereto at the Commission's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, Suite 1300, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. You can request copies of these documents, upon payment of a
duplication fee, by writing to the Commission. Please call the Commission at
1-800-SEC-0330 for further information on the operation of the Commission's
public reference rooms. Also, the Commission maintains a World Wide Web site on
the Internet at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission.
As a result of the registration under the Securities Act of the Existing
Notes, we are subject to the information and period reporting requirements of
the Exchange Act of 1934 and, in accordance therewith, we file periodic reports
and other information with the Commission through its Electronic Data Gathering,
Analysis and Retrieval ("EDGAR") system. Such periodic reports and other
information will be available for inspection and copying at the public reference
facilities, regional offices and Web site of the Commission referred to above.
In addition, pursuant to the indentures governing the Existing Notes and
the warrant agreements governing the warrants, we have agreed to file with the
Securities and Exchange Commission all annual financial statements and other
financial information that are required to be contained in a filing with the
Commission on Form 20-F. Furthermore, we have agreed to file with the Commission
all quarterly financial statements and other financial information that would be
required to be contained in a filing with the Commission on Form 10-Q, if we
were required to file such form. Such quarterly information will be filed with
the Commission within 45 days following the end of each fiscal quarter, and such
annual information will be filed within 90 days following the end of each fiscal
year of VersaTel.
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<PAGE> 136
GENERAL LISTING INFORMATION
This offering has been authorized and approved at an extraordinary general
meeting of shareholders held on May 18, 1999 and will be authorized and approved
at a meeting of our supervisory board expected to be held on July 22, 1999. All
other consents, approvals, authorizations or other formalities required under
Netherlands law to be obtained or satisfied in connection with this offering
have been obtained or satisfied.
The latest audited financial information contained in this prospectus is as
of and for the year ended December 31, 1998. To the best of our knowledge, since
that date, there has been no material adverse change to our financial condition
that has not been disclosed in this prospectus.
An application has been made to list VersaTel Telecom International N.V.'s
outstanding ordinary share capital on the Official Market of the stock exchange
of Amsterdam Exchanges N.V.
We have taken appropriate measures to comply with the regulations on
insider trading pursuant to the Dutch Securities Transactions Supervision Act
1995 (Wet Toezicht Effectenverkeer 1995).
Our audited consolidated financial statements as of and for the years ended
December 31, 1998, 1997 and 1996 will be available in English and our articles
of association will be available in Dutch and in English at our head office,
located at Paalbergweg 36, Amsterdam-Zuidoost, The Netherlands, and at ING
Barings, located at Foppingadreef 7, 1102 BD Amsterdam-Zuidoost.
In The Netherlands, ING Bank N.V., located at Bijlmerplein 888, Amsterdam,
has been designated as dividend paying agent for the Shares.
The estimated aggregate costs for this offering are approximately NLG 32.1
million.
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<PAGE> 137
VERSATEL TELECOM INTERNATIONAL N.V.
FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets as of December 31, 1998, 1997
and 1996.................................................. F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1998, 1997 and 1996.......................... F-4
Consolidated Statements of Shareholders' Equity for the
Years Ended December 31, 1998, 1997 and 1996.............. F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996.......................... F-6
Notes to Financial Statements............................... F-7
Unaudited Consolidated Balance Sheets as of March 31, 1999
and 1998.................................................. F-17
Unaudited Consolidated Statements of Operations for the
Three Months Ended March 31, 1999 and 1998................ F-18
Unaudited Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1999 and 1998................ F-19
Notes to the Unaudited Consolidated Financial Statements as
of March 31, 1999 and for the Three Months Ended March 31,
1998 and 1998............................................. F-20
</TABLE>
F-1
<PAGE> 138
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To VersaTel Telecom International N.V.
We have audited the consolidated balance sheets as of December 31, 1996,
1997 and 1998 of VERSATEL TELECOM INTERNATIONAL N.V. (formerly known as VERSATEL
TELECOM B.V.) and the consolidated statements of operations, shareholders'
equity and cash flows for each of the years then ended. These consolidated
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with 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
International N.V. as of December 31, 1996, 1997 and 1998 and the result of its
operations and their cash flows for each of the years then ended, in conformity
with United States generally accepted accounting principles.
ARTHUR ANDERSEN
Amsterdam, The Netherlands
April 13, 1999
F-2
<PAGE> 139
VERSATEL TELECOM INTERNATIONAL N.V.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998, 1997 AND 1996
(AMOUNTS IN THOUSANDS OF DUTCH GUILDERS,
EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- ------
NLG NLG NLG
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash..................................................... 372,014 1,346 4,290
Restricted cash, current portion......................... 89,752 76 100
Accounts receivable, net................................. 7,902 1,804 1,209
Inventory, net........................................... 1,083 418 135
Prepaid expenses and other............................... 12,909 1,995 33
------- ------- ------
Total current assets.................................. 483,660 5,639 5,767
------- ------- ------
Fixed Assets:
Property and Equipment, net.............................. 38,608 13,619 2,340
Construction In Progress................................. 46,019 -- --
------- ------- ------
Total fixed assets.................................... 84,627 13,619 2,340
------- ------- ------
Restricted cash, net of current portion.................. 121,804 73 53
Capitalized finance costs, net........................... 28,750 -- --
Goodwill, net............................................ 4,556 -- --
------- ------- ------
Total assets.......................................... 723,397 19,331 8,160
======= ======= ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable......................................... 39,863 20,674 1,958
Due to related parties................................... 806 249 218
Accrued liabilities...................................... 28,005 7,691 1,653
Deferred income, current portion......................... -- 98 --
Current portion of capital lease obligations............. 71 279 253
------- ------- ------
Total current liabilities............................. 68,745 28,991 4,082
Deferred Income, net of current portion.................... -- 341 --
Capital Lease Obligations, net of current portion.......... 37 108 327
Subordinated Convertible Shareholder Loans................. -- 8,105 3,605
Long Term Liabilities...................................... 670 -- --
Long Term Debt (13 1/4% Senior Notes)...................... 688,018 -- --
------- ------- ------
Total Liabilities..................................... 757,470 37,545 8,014
------- ------- ------
Shareholders' Equity:
Ordinary shares, NLG 0.05 par value...................... 1,949 958 891
Additional paid-in capital................................. 51,112 6,037 4,604
Warrants................................................... 5,212 -- --
Accumulated deficit........................................ (92,346) (25,209) (5,349)
------- ------- ------
Total shareholders' equity............................ (34,073) (18,214) 146
------- ------- ------
Total liabilities and shareholders' equity....... 723,397 19,331 8,160
======= ======= ======
</TABLE>
F-3
<PAGE> 140
VERSATEL TELECOM INTERNATIONAL N.V.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(AMOUNTS IN THOUSANDS OF DUTCH GUILDERS,
EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1998 1997 1996
NLG NLG NLG
---------- ---------- ----------
<S> <C> <C> <C>
OPERATING REVENUES................................ 39,561 18,896 6,428
OPERATING EXPENSES:
Cost of Revenues, excluding depreciation........ 31,821 17,405 4,954
Selling, general and administrative............. 47,733 17,527 5,485
Depreciation and amortization................... 6,473 3,237 453
---------- ---------- ----------
Total operating expenses................ 86,027 38,169 10,892
---------- ---------- ----------
Operating loss............................... (46,466) (19,273) (4,464)
---------- ---------- ----------
OTHER INCOME (EXPENSES):
Foreign currency exchange gains (losses), net... 5,146 (53) --
Interest income................................. 11,857 21 4
Interest expense -- third parties............... (37,522) (41) (24)
Interest expense -- related parties............. (145) (514) (249)
---------- ---------- ----------
Total other income (expenses)........... (20,664) (587) (269)
---------- ---------- ----------
Loss before income taxes..................... (67,130) (19,860) (4,733)
PROVISION FOR INCOME TAXES........................ (7) -- --
---------- ---------- ----------
Net loss..................................... (67,137) (19,860) (4,733)
========== ========== ==========
NET LOSS PER SHARE (Basic and Diluted) in NLG..... (2.06) (1.10) (0.47)
Weighted average number of shares outstanding..... 32,622,194 18,084,188 10,008,494
</TABLE>
F-4
<PAGE> 141
VERSATEL TELECOM INTERNATIONAL N.V.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(AMOUNTS IN THOUSANDS OF DUTCH GUILDERS,
EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NUMBER OF ADDITIONAL
SHARES ORDINARY PAID-IN ACCUMULATED
OUTSTANDING SHARES CAPITAL WARRANTS DEFICIT TOTAL
----------- -------- ---------- -------- ----------- -------
NLG NLG NLG NLG NLG
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995...... 9,900,000 495 -- -- (616) (121)
Shareholder contributions......... 7,920,000 396 4,604 -- -- 5,000
Net loss........................ -- -- -- -- (4,733) (4,733)
---------- ----- ------ ----- ------- -------
Balance at December 31, 1996...... 17,820,000 891 4,604 -- (5,349) 146
Shareholder contributions......... 1,339,286 67 1,433 -- -- 1,500
Net loss........................ -- -- -- -- (19,860) (19,860)
---------- ----- ------ ----- ------- -------
Balance, December 31, 1997........ 19,159,286 958 6,037 -- (25,209) (18,214)
Shareholder contributions......... 19,695,524 985 44,750 5,212 -- 50,947
Shares issued for acquisition..... 130,000 6 325 -- -- 331
Net loss.......................... -- -- -- -- (67,137) (67,137)
---------- ----- ------ ----- ------- -------
Balance, December 31, 1998........ 38,984,810 1,949 51,112 5,212 (92,346) (34,073)
========== ===== ====== ===== ======= =======
</TABLE>
F-5
<PAGE> 142
VERSATEL TELECOM INTERNATIONAL N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(AMOUNTS IN THOUSANDS OF DUTCH GUILDERS,
EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- ------
NLG NLG NLG
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss................................................ (67,137) (19,860) (4,733)
Adjustments to reconcile net loss to net cash used in
operating activities --
Depreciation and amortization........................... 6,473 3,237 453
Amortization finance cost............................... 1,250 -- --
Restricted cash......................................... 149 4 --
Deferred income......................................... (440) 440 --
Changes in other operating assets and liabilities
Accounts receivable..................................... (6,098) (595) (1,157)
Inventory............................................... (665) (282) (114)
Prepaid expenses and other.............................. (10,914) (1,963) 330
Accounts payable........................................ 19,189 18,716 1,754
Due to related parties.................................. 557 30 218
Accrued liabilities..................................... 20,314 6,038 1,531
-------- ------- ------
Net cash provided by (used in) operating
activities......................................... (37,322) 5,765 (1,718)
-------- ------- ------
Cash Flows from Investing Activities:
Capital expenditures.................................... (77,255) (14,516) (2,569)
Goodwill paid on acquisition............................ (4,781) -- --
-------- ------- ------
Net cash used in investing activities................ (82,036) (14,516) (2,569)
-------- ------- ------
Cash Flows from Financing Activities:
Proceeds from (redemptions of) capital lease
obligations.......................................... (279) (193) 421
Proceeds from (repayments of) subordinated convertible
shareholder loans.................................... (8,105) 4,500 3,150
Proceeds from long term liabilities..................... 670 -- --
Proceeds from long term debt (13 1/4% Senior Notes)..... 688,018 -- --
Restricted cash......................................... (211,556) -- --
Finance cost............................................ (30,000) -- --
Warrants................................................ 5,212 -- --
Shareholder contributions............................... 46,066 1,500 5,000
-------- ------- ------
Net cash provided by financing activities............ 490,026 5,807 8,571
-------- ------- ------
Net Increase (Decrease) in Cash........................... 370,668 (2,944) 4,284
Cash, beginning of the year............................... 1,346 4,290 6
-------- ------- ------
Cash, end of the year..................................... 372,014 1,346 4,290
======== ======= ======
Supplemental Disclosures of Cash Flow Information:
Cash paid for --
Interest (net of amounts capitalized)................ 26,260 510 96
Income taxes......................................... -- -- --
</TABLE>
F-6
<PAGE> 143
VERSATEL TELECOM INTERNATIONAL N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. GENERAL
VersaTel Telecom International N.V., formerly known as VersaTel Telecom
B.V. ("VersaTel" or the "Company"), incorporated in Amsterdam on October 10,
1995, provides international and national telecommunications services in the
Benelux region.
2. FINANCIAL CONDITION AND OPERATIONS
For the year ended December 31, 1998, the Company had a loss from operating
activities of NLG 46,466. In addition, the Company had an accumulated deficit of
NLG 92,346 as of December 31, 1998.
Although 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, it has a positive working capital of NLG 414,915 at December 31, 1998,
which should enable it to continue its operations through December 31, 1999.
3. SIGNIFICANT ACCOUNTING PRINCIPLES
(a) BASIS OF PRESENTATION
The accompanying consolidated financial statements of the company have been
prepared in accordance with United States generally accepted accounting
principles ("U.S. GAAP"). 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.
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 U.S.
GAAP.
(b) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the operations
of the following wholly-owned (directly or indirectly) subsidiaries:
- VersaTel Telecom Europe B.V.
- Bizztel Telematica B.V.
- CS Net B.V.
- VersaTel Telecom Netherlands B.V.
- VersaTel Telecom Belgium N.V.
- CS Engineering B.V.
The results of the subsidiaries are included from the respective dates of
acquisition or incorporation by the Company during 1998. All significant
intercompany accounts and transactions have been eliminated.
F-7
<PAGE> 144
VERSATEL TELECOM INTERNATIONAL N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On May 29, 1998 and August 10, 1998 the Company acquired the shares of
Bizztel Telematica B.V. ("Bizztel") in 2 phases. The key figures of Bizztel as
included in the December 31, 1998 financial statements of VersaTel are sales of
NLG 269, total assets NLG 189, total equity of NLG (722) and net loss for the
period of NLG (257).
The Company applied the purchase accounting method. The goodwill, being the
difference between the purchase price amounting to NLG 1,132 in total and the
net asset value as of acquisition date, is being capitalized and amortized in 5
years.
On November 6, 1998 the Company acquired the shares of CS Net B.V., which
owns 100% of the shares of CS Engineering B.V. (together, "CS Net"). The key
figures of CS Net as included in the December 31, 1998 financial statements of
VersaTel are sales of NLG 897, total assets NLG 1,332, total equity of NLG 921
and net income for the period of NLG 80.
The Company applied the purchase accounting method. The goodwill, being the
difference between the purchase price amounting to NLG 3,307 in cash and 130,000
shares of VersaTel (valued at NLG 2.55 per share for the purpose of determining
the goodwill) and the net asset value as of acquisition date, is being
capitalized and amortized in 10 years. Furthermore, an earn-out arrangement with
the former shareholders has been agreed-upon. Any payments resulting from this
earn-out arrangement will be recorded as an adjustment to the purchase price
upon the time they become certain. No such adjustments have yet been recorded.
For both entities, pro forma financial statements have been omitted for
materiality reasons.
(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.
(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, and amounted to NLG 1,224, NLG
1,972 and NLG 5,259 in 1996, 1997 and 1998 respectively.
(f) INTANGIBLE ASSETS
Goodwill originating from the acquisition of investments represents the
difference of the net asset value and the acquisition cost of the investments at
the time of the acquisition. The goodwill is amortized on a straight-line basis
over a period varying from 5 to 10 years. Total accumulated amortization per
December 31, 1998 amounts to NLG 226.
F-8
<PAGE> 145
VERSATEL TELECOM INTERNATIONAL N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred financing costs are costs incurred in connection with the issuance
of Senior Notes (the "Notes") during 1998 by the Company. Amortization is being
recorded over the term of the Notes as interest expense in the consolidated
statement of operations.
(g) 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.
(h) SEGMENTAL REPORTING
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures
about Segments of an Enterprise and Related Information" has been issued and is
effective for fiscal years beginning after December 15, 1997. SFAS No. 131
requires certain disclosures about business segments of an enterprise, if
applicable. The adoption of SFAS No. 131 did not have an effect on the Company's
financial statements, as the Company currently manages its operations as one
segment under the guidelines of the new standard.
(i) RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued the Statement of Position 98-1
("SOP 98-1"), "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use," which provides guidance on accounting for the costs
of computer software developed or obtained for internal use. This SOP requires
computer software costs that are incurred in the preliminary project stage to be
expensed as incurred. Once the capitalization criteria of the SOP have been met,
directly attributable development costs should be capitalized. It also provides
guidance on the treatment of upgrade and maintenance expenditures. SOP 98-1 is
effective for fiscal years beginning after December 15, 1998. Costs incurred
prior to initial application of this SOP, whether capitalized or not, should not
be adjusted to the amounts that would have been capitalized had this SOP been in
effect when those costs were incurred. The Company has adopted this SOP in its
1998 consolidated financial statements.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or a liability
measured as its fair value. It also requires that changes in the derivative's
fair value be recognized currently into earnings unless specific hedge
accounting criteria are met. Special accounting for qualifying hedges allows a
derivative's gains and losses to offset related results on the hedged item in
the income statement, and requires that a company must formally document,
designate, and assess the effectiveness of transactions that receive hedge
accounting.
SFAS No. 133 is effective for fiscal years beginning after June 15, 1999
and can not be applied retroactively. The Company has not yet quantified the
impacts of adopting SFAS No. 133 on the financial statements and has not
determined the timing or method of adoption of SFAS No. 133.
F-9
<PAGE> 146
VERSATEL TELECOM INTERNATIONAL N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(j) ORDINARY SHARES AND STOCK SPLIT
Ordinary shares, with a par value of NLG 0.05 and consisting of 140,000,000
class A shares and 10,000,000 class B shares, of which 17,820,000, 19,159,286
and 38,984,810 class A shares were outstanding at December 31, 1996, 1997 and
1998, respectively. No class B shares were issued.
On April 13, 1999, a two-for-one stock split was effected, which resulted
in the issuance of 19,492,405 additional shares of class A ordinary shares. All
per share and weighted average share amounts have been restated to reflect this
stock split.
4. RECAPITALIZATION
To increase the equity of the Company by means of the conversion of
subordinated debt and cash contribution by its shareholders, the Company has
completed a four part recapitalization in 1998.
The Subordinated Convertible Shareholder Loans were converted into ordinary
shares of the Company in February and April 1998. Furthermore, additional cash
contributions in equity capital were received in April and May 1998 amounting to
NLG 43,100 in total.
5. RESTRICTED CASH
Restricted cash balances of NLG 153, NLG 149 and NLG 211,556 at December
31, 1996, 1997 and 1998, respectively, include mainly amounts restricted in
connection with the payment of interest to the holders of the Senior Notes, and
bank guarantees to the lessors of the Company's buildings.
The amounts restricted in connection with interest payments to the holders
of the Notes include the interest to be paid until and including May 15, 2001
over the first tranche of Senior Notes and the interest to be paid until and
including May 15, 2001 over the second tranche of Senior Notes, which have
restricted balances of NLG 125,777 and NLG 85,779 respectively. The (total)
current portion is presented as Current portion of restricted cash. The
non-current portion is presented as Restricted Cash, net of current portion.
The bank guarantee to the lessors terminates upon cancellation of the lease
agreements for the respective buildings, and amounted to NLG 90.
6. ACCOUNTS RECEIVABLE
Accounts receivable are presented net of an allowance for doubtful accounts
of NLG 0, NLG 65 and NLG 347 at December 31, 1996, 1997 and 1998, respectively.
7. PREPAID EXPENSES AND OTHER
Prepaid Expenses and Other as of December 31, 1998, 1997 and 1996,
respectively, include an amount of NLG 5,897, NLG 1,564 and NLG 0, respectively,
which relates to value added taxes.
8. 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.
F-10
<PAGE> 147
VERSATEL TELECOM INTERNATIONAL N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Listed below are the major classes of property and equipment and their
estimated useful lives in years as of December 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
USEFUL LIFE 1998 1997 1996
----------- ------ ------ -----
<S> <C> <C> <C> <C>
Leasehold improvements.................... 5 3,555 911 40
Telecommunications equipment.............. 2-10 37,264 14,750 2,376
Other..................................... 3-5 7,929 1,546 388
------ ------ -----
Property and equipment.................. 48,748 17,207 2,804
Less Accumulated depreciation........... 10,140 3,588 464
------ ------ -----
Property and equipment, net............. 38,608 13,619 2,340
====== ====== =====
</TABLE>
Presented under deferred income is cash received in connection with the
sublease by the company of part of its building. As the sublease was terminated
in 1998, the amount is no longer recorded in the December 31, 1998 balance
sheet.
9. CONSTRUCTION IN PROGRESS
The Company continues to build out its network in the Benelux and securing
rights-of-way. The resulting assets as of December 31, 1998 have been recorded
at cost under the caption "Construction in progress."
During the time of the construction interest is capitalized at a rate of
13 1/4%, the total capitalized interest at December 31, 1998 being NLG 1,393.
10. CAPITAL LEASE OBLIGATIONS
The Company entered into a master lease agreement with a finance company to
lease certain telecommunications and EDP equipment.
Commitments for minimum rentals under non-cancellable leases at the end of
1998 are as follows:
<TABLE>
<S> <C>
1999........................................................ NLG 73
2000........................................................ 19
2001........................................................ 19
2002........................................................ 4
-------
Total minimum lease payments................................ 115
Less amount representing interest........................... 7
-------
Present value of net minimum lease payments, including
maturities of NLG 71...................................... NLG 108
=======
</TABLE>
F-11
<PAGE> 148
VERSATEL TELECOM INTERNATIONAL N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Property, plant and equipment at year-end include the following amounts for
capitalized leases:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Telecommunications equipment..................... NLG 820 NLG 820
Other............................................ 28 28
------- -------
848 848
Less allowances for depreciation................. 740 461
------- -------
NLG 108 NLG 387
======= =======
</TABLE>
11. SENIOR NOTES
On May 27, 1998 and December 3, 1998 the company issued two tranches of
Senior Notes for respectively $225,000 and $150,000 with an interest rate of
13 1/4% due 2008, and warrants to purchase respectively 3,000,000 and 2,000,100
shares at an exercise price of NLG 2.55 per share, respectively.
The discount on the second tranche of Senior Notes (amounting to 4%) is
netted against the Notes and will be amortized on a straight-line basis over a
period equal to the term of the Senior Notes. The amortization charge is treated
as interest expense in the income statement.
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosure of fair value information about financial instruments
whether or not recognized in the balance sheet. The carrying amounts reported in
the consolidated balance sheets for cash, trade receivables, accounts payable
and accrued expenses approximate fair value based on the short-term maturity of
these instruments. The carrying amount of the Company's borrowings under the
long-term debt agreements approximates fair value as the interest rates on these
long-term debts approximates the current market interest rates.
12. EMPLOYEE BENEFIT PLANS
The Company has established two stock option plans: the 1997 Stock Option
Plan (the "1997 Plan"), and the 1998 Stock Option Plan (the "1998 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.
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.
F-12
<PAGE> 149
VERSATEL TELECOM INTERNATIONAL N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 December 31, 1998, 398,000 options to purchase 398,000 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 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 5 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 December 31, 1998, 5,000,000 options to purchase 5,000,000 depositary
receipts have been granted under the 1998 Plan.
The fair value of the depository receipts at the date of the grant equals
the exercise price of the options granted under the 1998 Stock Option Plan. This
value was based on transactions conducted on an at arm's length basis, with
third parties becoming shareholders.
The depositary receipts issued under both the 1997 Plan and the 1998 Plan
will be administered by the Stichting Administratiekantoor Versatel.
In October 1995, FASB Statement No. 123 "Accounting for Stock-Based
Compensation" was issued. The Company has adopted the disclosure provisions of
FASB Statement No. 123 in 1997, but opted to remain under the expense
recognition provisions of Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees" in accounting for options granted
under the Stock Option Plans. Accordingly, for the years ended December 31, 1997
and 1998 no compensation was recognized for options granted under these schemes.
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>
1998 1997
------- -------
NLG NLG
<S> <C> <C> <C>
Net Loss:...................................... As reported (67,137) (19,860)
Pro forma (69,405) (19,887)
Net loss per share (basic and diluted):........ As reported (2.06) (1.10)
Pro forma (2.06) (1.10)
</TABLE>
F-13
<PAGE> 150
VERSATEL TELECOM INTERNATIONAL N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The movement in options outstanding during the 2 years ended December 31,
1997 and 1998 is summarized in the following table:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED
SHARES SUBJECT AVERAGE EXERCISE
TO OPTION PRICE
-------------- ----------------
<S> <C> <C>
Outstanding at January 1, 1997.................... -- --
Granted during 1997............................... 398,000 NLG 0.54
---------
Outstanding at December 31, 1997.................. 398,000 NLG 0.54
Granted during 1998............................... 5,000,000 NLG 2.27
---------
Outstanding at December 31, 1998.................. 5,398,000 NLG 2.14
=========
</TABLE>
The weighted average fair value of options granted in the year ended
December 31, 1998 was estimated at NLG 0.46 as at the date of grant using the
Black-Scholes stock option pricing model. The following weighted average
assumptions were used: dividend yield of 0.00% per annum, annual standard
deviation (volatility) of 0.00%, risk free interest rate of 4.46% and expected
term of 5 years.
For options granted in the year ended December 31, 1998 with an exercise
price equal to market price at grant date, the weighted average exercise price
and fair value at grant date were estimated at NLG 2.27 and NLG 0.46
respectively.
The exercise prices for options outstanding at the end of the year ranged
from NLG 0.30 to NLG 2.55, with a weighted average exercise price of NLG 2.14
and a remaining contractual life of 4.28 years.
The following table summarizes information about the stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS CURRENTLY EXERCISABLE
- ------------------------------------------------------------------- -----------------------------
WEIGHTED WEIGHTED
RANGE AVERAGE AVERAGE WEIGHTED
OF EXERCISE REMAINING EXERCISE AVERAGE EXERCISE
PRICES NUMBER CONTRACTUAL LIFE PRICE NUMBER PRICE
----------- --------- ---------------- -------- --------- ----------------
<S> <C> <C> <C> <C> <C>
NLG 0.00 - 0.49......... 99,000 3.0 0.30 99,000 0.30
NLG 0.50 - 0.99......... 299,000 3.5 0.63 299,000 0.63
NLG 1.00 - 1.49......... -- -- -- -- --
NLG 1.50 - 1.99......... -- -- -- -- --
NLG 2.00 - 2.49......... 4,350,000 4.32 2.23 4,350,000 2.23
NLG 2.50 - 3.00......... 650,000 4.46 2.55 650,000 2.55
</TABLE>
13. TAXES
The Company had income tax carry-forwards of approximately NLG 1,800 at
December 31, 1996, NLG 8,200 at December 31, 1997 and NLG 42,300 at December 31,
1998, which may be utilized to reduce future income taxes payable.
F-14
<PAGE> 151
VERSATEL TELECOM INTERNATIONAL N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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. At December 31, 1998 a
temporary difference has arisen due to the different treatment of finance costs
for fiscal purposes. No deferred taxes have been recorded in this respect.
14. NET SALES
The geographical composition of net sales is as follows:
<TABLE>
<CAPTION>
1998
----------
<S> <C>
The Netherlands............................................. NLG 39,324
Belgium..................................................... 237
----------
Total............................................. NLG 39,561
==========
</TABLE>
In 1996 and 1997, all sales were realized in The Netherlands.
15. RELATED PARTY TRANSACTIONS
At December 31, 1996, 1997 and 1998 the Company had various accounts
payable to and accruals outstanding relating to related parties. These related
mainly to interest payable on the subordinated convertible shareholder loans of
approximately NLG 174 and NLG 199 at December 31, 1996 and 1997.
In the normal course of business, the Company uses a consultancy firm in
which one of the Company's officers is a director. Accounts payable to this
consultancy firm at December 31, 1998 amounted to NLG 806 and the 1998 expense
to the Company in this respect was approximately NLG 3,300.
16. RENT AND OPERATING LEASE COMMITMENTS
Future minimum commitments in connection with rent and other operating
lease agreements are as follows at December 31, 1998:
<TABLE>
<S> <C>
1999........................................................ NLG 4,635
2000........................................................ 4,571
2001........................................................ 4,571
2002........................................................ 4,313
2003........................................................ 2,092
2004 and further............................................ 2,352
----------
NLG 22,534
==========
</TABLE>
Rent and operating lease expenses amounted to approximately NLG 585 in 1997
and NLG 1,937 in 1998. The main part of future commitments relates to the
renting of Points-of-Presence ("POP's") for a ten-year period.
F-15
<PAGE> 152
VERSATEL TELECOM INTERNATIONAL N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
17. COMMITMENTS NOT REFLECTED IN THE BALANCE SHEET
Commitments in connection with the roll-out of the Company's network, not
yet recorded on the balance sheet amount to approximately NLG 75,000 as of
December 31, 1998. Reference is made to Note 9.
18. LEGAL PROCEEDING
One of the shareholders of the Company objected to the Recapitalization as
described under Note 4, and to the issuance of the 2 tranches of Senior Notes as
described under Note 11, and threatened to challenge in court certain of
VersaTel's actions in connection with the Recapitalization and the issuance of
the Notes. In January 1999, this shareholder filed, pursuant to article 2:345 of
the Netherlands Civil Code, a petition with the Enterprise Chamber of the Court
of Appeals in Amsterdam requesting the appointment of one or more experts to
investigate the management and affairs of VersaTel. If this request will be
granted, the person or persons appointed by the court will file a report with
the court upon conclusion of the investigation. The Netherlands Civil Code
provides that if the findings in such report indicate the mismanagement of the
company involved, the Enterprise Chamber of the Court of Appeals may, in its
discretion, at the request of either the petitioner, the other shareholders of
the company representing at least 10% of the outstanding share capital, or the
Solicitor-General with the Court of Appeals, take one or more of the following
actions: (i) suspend or dismiss one or more of the managing or supervisory
directors; (ii) appoint on a temporary basis one or more managing or supervisory
directors; (iii) deviate on a temporary basis from such provisions of the
articles of association of the company as indicated by the court; (iv) transfer
shares in the company on a temporary basis; and (v) dissolve the company.
Based upon advice from the Company's legal counsel, it is unlikely that
this objection would have a material impact on the Company's consolidated
balance sheets or statements of operations.
F-16
<PAGE> 153
VERSATEL TELECOM INTERNATIONAL N.V.
UNAUDITED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1999 AND 1998
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, 1998 MARCH 31, 1999
-------------- --------------
NLG NLG
<S> <C> <C>
ASSETS
Current Assets:
Cash.................................................... 5,149 329,551
Restricted cash, current portion........................ 76 94,201
Accounts receivable, net................................ 3,321 11,001
Inventory, net.......................................... 777 2,992
Prepaid expenses and other.............................. 1,837 17,439
------- --------
Total current assets............................ 11,160 455,184
------- --------
Fixed Assets:
Property, plant and equipment, net...................... 14,956 41,766
Construction in progress................................ -- 92,205
------- --------
Total fixed assets.............................. 14,956 133,971
------- --------
Restricted cash, net of current portion................... 73 135,614
Capitalized finance costs, net............................ -- 28,000
Goodwill, net............................................. -- 4,354
------- --------
Total assets.................................... 26,189 757,123
======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable........................................ 24,345 50,556
Due to related parties.................................. 530 --
Accrued liabilities..................................... 9,583 70,413
Current portion of capital lease obligations............ 269 71
------- --------
Total current liabilities....................... 34,727 121,040
------- --------
Capital lease obligations, net of current portion......... 50 23
------- --------
Long term liabilities..................................... 325 670
------- --------
Subordinated Convertible Shareholder Loans................ 8,105 --
------- --------
Prepaid Shareholder Contributions......................... 7,200 --
------- --------
Long term debt (13 1/4% Senior Notes)..................... -- 747,845
------- --------
Total liabilities............................... 50,407 869,578
Shareholders' Equity:
Ordinary shares, NLG 0.05 par value..................... 958 1,949
Additional paid-in capital.............................. 6,037 51,112
Warrants................................................ -- 5,212
Accumulated deficit..................................... (31,213) (170,728)
------- --------
Total shareholders' equity...................... (24,218) (112,455)
------- --------
Total liabilities and shareholders' equity...... 26,189 757,123
======= ========
</TABLE>
See notes to the unaudited consolidated financial statements.
F-17
<PAGE> 154
VERSATEL TELECOM INTERNATIONAL N.V.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND MARCH 31, 1998
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------
MARCH 31, 1998 MARCH 31, 1999
-------------- --------------
NLG NLG
<S> <C> <C>
OPERATING REVENUES........................................ 6,402 15,501
OPERATING EXPENSES:
Cost of Revenues, excluding depreciation................ 5,460 12,485
Selling, general and administrative..................... 5,544 20,179
Depreciation and amortization........................... 1,087 3,084
---------- ----------
Total operating expenses........................ 12,091 35,748
---------- ----------
Operating loss..................................... (5,689) (20,247)
---------- ----------
OTHER INCOME (EXPENSES):
Foreign currency exchange gains (losses), net........... (115) (40,283)
Interest income......................................... 14 6,043
Interest expense -- third parties....................... (27) (23,895)
Interest expense -- related parties..................... (187) --
---------- ----------
Total other income (expenses)................... (315) (58,135)
---------- ----------
Loss before income taxes............................. (6,004) (78,382)
PROVISION FOR INCOME TAXES................................ -- --
---------- ----------
Net loss............................................. (6,004) (78,382)
========== ==========
NET LOSS PER SHARE (Basic and Diluted) in NLG............. (0.31) (2.01)
Weighted average number of shares outstanding............. 19,159,286 38,984,810
</TABLE>
See notes to the unaudited consolidated financial statements.
F-18
<PAGE> 155
VERSATEL TELECOM INTERNATIONAL N.V.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND MARCH 31, 1998
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------
MARCH 31, 1998 MARCH 31, 1999
-------------- --------------
NLG NLG
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss................................................ (6,004) (78,382)
Adjustments to reconcile net loss to net cash used in
operating activities --
Depreciation and amortization........................... 1,087 3,084
Amortization finance cost............................... -- 750
Exchange loss on long-term debt and restricted cash..... -- 41,568
Changes in other operating assets and liabilities
Accounts receivable..................................... (1,517) (3,099)
Inventory............................................... (359) (1,909)
Prepaid expenses and other.............................. 158 (4,530)
Accounts payable........................................ 3,671 10,693
Due to related parties.................................. 281 (806)
Accrued liabilities..................................... 1,778 42,408
------ -------
Net cash provided by (used in) operating
activities...................................... (905) 9,777
====== =======
Cash Flows from Investing Activities:
Capital expenditures.................................... (2,424) (52,226)
------ -------
Net cash used in investing activities.............. (2,424) (52,226)
====== =======
Cash Flows from Financing Activities:
Redemptions of capital lease obligations................ (68) (14)
Shareholder contributions............................... 7,200 --
------ -------
Net cash provided by (used in) financing
activities...................................... 7,132 (14)
====== =======
Net Increase (Decrease) in Cash........................... 3,803 (42,463)
Cash, beginning of the period............................. 1,346 372,014
------ -------
Cash, end of the period................................... 5,149 329,551
====== =======
Supplemental Disclosures of Cash Flow Information:
Cash paid for --
Interest (net of amounts capitalized)................ -- --
Income taxes......................................... -- --
</TABLE>
See notes to the unaudited consolidated financial statements.
F-19
<PAGE> 156
VERSATEL TELECOM INTERNATIONAL N.V.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1999 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1998 AND 1999
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
1. FINANCIAL PRESENTATION AND DISCLOSURES
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements of VersaTel Telecom International N.V. and its
wholly-owned subsidiaries (the "Company") have been prepared in conformity with
US generally accepted accounting principles ("US GAAP") and contain all
adjustments (consisting only of normal recurring accruals) necessary to present
fairly the Company's consolidated financial position as of March 31, 1999, and
the results of operations and cash flows for the three months ended March 31,
1998 and 1999.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these financial statements
be read in conjunction with the Company's 1998 audited financial statements and
the notes related thereto, filed on Form 20-F. The results of operations for the
three months ended March 31, 1999 may not be indicative of the operating results
for the full year.
As of March 31, 1999, the Company (directly or indirectly) wholly-owned the
following subsidiaries:
- VersaTel Telecom Europe B.V.
- VersaTel Telecom Netherlands B.V.
- VersaTel Telecom Belgium N.V.
- Bizztel Telematica B.V.
- CS Net B.V.
- CS Engineering B.V.
All intercompany assets, liabilities and transactions have been eliminated
in consolidation.
2. SFAS NO. 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES"
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or liability
measured at its fair value. It also requires that changes in the derivative's
fair value be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate, and
assess the effectiveness of transactions that receive hedge accounting.
SFAS No. 133 is effective for fiscal years beginning after June 15, 1999
and can not be applied retroactively. The Company has not yet quantified the
impacts of adopting SFAS No. 133 on the financial statements and has not
determined the timing of or method of adoption of SFAS No. 133.
3. INVENTORIES
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.
F-20
<PAGE> 157
VERSATEL TELECOM INTERNATIONAL N.V.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. 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.
For the three months ended March 31, 1999 an unrealized exchange loss of
approximately NLG 59,800 was recorded on the long-term debt (13 1/4% senior
notes, denominated in U.S. dollars). In the same period, an unrealized exchange
gain was recorded on the restricted cash, denominated in U.S. dollars, to an
amount of approximately NLG 18,300.
5. FINANCIAL CONDITION AND OPERATIONS
For the period ended March 31, 1999, the Company had a loss from operating
activities of NLG 20,247. In addition, the Company had an accumulated deficit of
NLG 170,728 as of March 31, 1999.
Although 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, it has a positive working capital of NLG 334,144 at March 31, 1999,
which should enable it to continue its operations through December 31, 1999. The
Company expects to raise additional funds in 1999 through public or private
financings or from financial institutions.
6. COMMITMENTS
Commitments in connection to the roll-out of the Company's network, not yet
recorded on the balance sheet, amount to approximately NLG 65,000 as of March
31, 1999.
An earn-out arrangement with the former shareholders of CS Net B.V. has
been agreed-upon. Any payments resulting from this earn-out arrangement will be
recorded as an adjustment to the purchase price upon the time they become
certain. No such adjustments have yet been recorded.
7. LEGAL PROCEEDING
One of the shareholders of the Company objected to the 1998
recapitalization as described in Form 20-F, and to the issuance of the two
tranches of senior notes as described in Form 20-F, and threatened to challenge
in court certain of the Company's actions in connection with the
recapitalization and the issuance of the senior notes. In January 1999, this
shareholder filed, pursuant to article 2:345 of the Netherlands Civil Code, a
petition with the Enterprise Chamber of the Court of Appeals in Amsterdam
requesting the appointment of one or more experts to investigate the management
and affairs of the Company. In May 1999, the Enterprise Chamber denied the
shareholder's request. However, it is not certain whether or not this
shareholder will attempt to frustrate, block or challenge our future actions.
8. SUBSEQUENT EVENTS
In May 1999 the Company acquired Amstel Alpha B.V. and its direct and
indirect subsidiaries, SpeedPort N.V. and Glabana U.S.A., Inc. (collectively,
"SpeedPort"). The unaudited key figures of
F-21
<PAGE> 158
VERSATEL TELECOM INTERNATIONAL N.V.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SpeedPort as of April 30, 1999 are summarized as follows: no sales, total assets
NLG 1,000, and a net loss for the period since inception in 1998 until April 30,
1999 of NLG 2,200.
In May 1999 the Company acquired 7-Klapper Beheer B.V. and its subsidiaries
Vuurwerk Internet B.V. and Vuurwerk Acces B.V. (collectively "Vuurwerk"). The
unaudited figures of Vuurwerk as of December 31, 1998 are summarized as follows:
1998 sales of NLG 3,800, assets NLG 6,000 and a net income of NLG 1,400.
In June 1999 the Company acquired ITinera Services N.V. ("ITinera"). Key
(unaudited) figures for ITinera over 1998 are as follows: sales of NLG 870, a
net loss for the year of NLG 254 and total assets as of December 31, 1998 of NLG
1,481.
In June 1999 the Company acquired Svianed B.V. Key unaudited figures for
Svianed as of April 30, 1999 are sales of NLG 21,100, total assets NLG 40,100
and a net income for the period from January 1, 1999 until April 30, 1999 of NLG
3,300.
On April 13, 1999 a two-for-one stock split was effected, which resulted in
the issuance of 19,492,405 additional shares of class A ordinary shares. The
authorized capital of the Company now consists of 140,000,000 class A shares and
10,000,000 class B shares, each with a par value of NLG 0.05. All share, per
share and weighted average share amounts have been restated in this document to
reflect this stock split. As of March 31, 1999, 38,984,810 class A shares (as
adjusted) were outstanding and no class B shares were issued.
In 1999, the Company issued options to employees to purchase depositary
receipts representing an equal number of ordinary shares of VersaTel. As of the
date of this prospectus, 2,115,000 options to purchase depositary receipts have
been issued under the 1999 Plan. As the exercise price of the 1999 options is
significantly below the estimated fair market value of the shares, the Company
will have to record a compensation expense in its June 30, 1999 financial
statements. The Company is in the process of quantifying this compensation
expense.
F-22
<PAGE> 159
SVIANED B.V.
FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditors' Report................................ F-24
Balance Sheets as of December 31, 1998 and 1997............. F-25
Statements of Operations for the Years Ended December 31,
1998 and 1997............................................. F-26
Statements of Shareholder's Equity for the Years Ended
December 31, 1998 and 1997................................ F-27
Statements of Cash Flows for the Years Ended December 31,
1998 and 1997............................................. F-28
Notes to Financial Statements............................... F-30
Condensed Balance Sheets as of March 31, 1999 and 1998...... F-35
Condensed Statements of Operations for the Three Months
Ended March 31, 1999 and 1998............................. F-36
Condensed Statement of Shareholder's Equity as of March 31,
1999 and 1998............................................. F-37
Condensed Statements of Cash Flows for the Three Months
Ended March 31, 1999 and 1998............................. F-38
Condensed Notes to Financial Statements..................... F-39
</TABLE>
F-23
<PAGE> 160
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND THE SHAREHOLDER OF SVIANED B.V.
We have audited the accompanying balance sheets of Svianed B.V. as of
December 31, 1998 and 1997, and the related statements of operations,
shareholder's 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 generally accepted auditing
standards in The Netherlands which do not differ in any significant respect from
generally accepted auditing standards in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our 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 Svianed B.V. as of December
31, 1998 and 1997, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles in
the United States of America.
KPMG Accountants N.V.
Amsterdam, The Netherlands
March 15, 1999
F-24
<PAGE> 161
SVIANED B.V.
BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
(AMOUNTS IN THOUSANDS OF DUTCH GUILDERS
EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
NLG NLG
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................. 1,468 2,578
Trade accounts receivable, less allowance for doubtful
accounts of NLG 250 in 1998 and NLG nil in 1997.... 4,618 5,536
Due from group companies.............................. 5,476 4,254
Inventory............................................. 129 215
Prepaid expenses...................................... 190 298
Discounts to be received from KPN..................... 1,454 590
Other current assets.................................. 1,062 681
------ ------
Total current assets............................... 14,397 14,152
Property and equipment, less accumulated depreciation... 19,153 14,648
Deferred tax assets..................................... 105 70
------ ------
Total assets.................................. 33,655 28,870
====== ======
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Accounts payable...................................... 2,306 4,107
Due to group companies................................ 8,713 2,706
Short term portion of long term debt.................. 2,500 2,500
Deferred income....................................... 3,132 1,943
Accrued liabilities................................... 679 876
Other liabilities..................................... 1,508 250
------ ------
Total current liabilities.......................... 18,838 12,382
Long term debt.......................................... 2,500 5,000
Pension obligation...................................... 300 200
------ ------
Total liabilities.................................. 21,638 17,582
------ ------
Shareholder's equity
Common shares, NLG 1,000 par value, authorized 25,000
shares; issued and outstanding 5,000 in 1998 and
1997............................................... 5,000 5,000
Retained earnings..................................... 7,017 6,288
------ ------
Total shareholder's equity......................... 12,017 11,288
------ ------
Total liabilities and shareholder's equity.... 33,655 28,870
====== ======
</TABLE>
The accompanying notes form an integral part of these Financial Statements.
F-25
<PAGE> 162
SVIANED B.V.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
(AMOUNTS IN THOUSANDS OF DUTCH GUILDERS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
NLG NLG
<S> <C> <C>
OPERATING REVENUES:
Related party revenues.................................... 34,460 32,037
Other revenues............................................ 22,223 13,074
------ ------
Total operating revenues............................... 56,683 45,111
OPERATING EXPENSES:
Cost of Revenues, excluding depreciation.................. 26,878 23,550
Selling, general and administrative expenses.............. 11,890 8,331
Depreciation expense...................................... 8,751 6,754
------ ------
Total operating expenses............................... 47,519 38,635
------ ------
Operating Income.......................................... 9,164 6,476
OTHER INCOME (EXPENSE):
Interest income........................................... 85 111
Interest expense.......................................... (435) (542)
------ ------
Net income before income taxes.............................. 8,814 6,045
PROVISION FOR INCOME TAXES................................ (3,085) (2,120)
------ ------
Net income.................................................. 5,729 3,925
====== ======
</TABLE>
The accompanying notes form an integral part of these Financial Statements.
F-26
<PAGE> 163
SVIANED B.V.
STATEMENTS OF SHAREHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
(AMOUNTS IN THOUSANDS OF DUTCH GUILDERS)
<TABLE>
<CAPTION>
TOTAL
COMMON RETAINED SHAREHOLDER'S
SHARES EARNINGS EQUITY
------ -------- -------------
<S> <C> <C> <C>
Balance as at 31 December, 1996........................ 5,000 2,363 7,363
Net income............................................. -- 3,925 3,925
----- ------ ------
Balance as at 31 December, 1997........................ 5,000 6,288 11,288
Net income............................................. -- 5,729 5,729
Dividends.............................................. -- (5,000) (5,000)
----- ------ ------
Balance as at 31 December, 1998........................ 5,000 7,017 12,017
===== ====== ======
</TABLE>
The accompanying notes form an integral part of these Financial Statements.
F-27
<PAGE> 164
SVIANED B.V.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
(AMOUNTS IN THOUSANDS OF DUTCH GUILDERS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
NLG NLG
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income.................................................. 5,729 3,925
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation.............................................. 8,751 6,754
Deferred tax.............................................. (35) --
Deferred income........................................... 1,189 1,943
Provision for doubtful accounts........................... 250 --
Change in other operating assets and liabilities:
Decrease (increase) in accounts receivable................ 668 (3,796)
Increase in due from group companies...................... (1,222) (152)
Increase in accrued receivables and other receivables..... (1,137) (33)
Decrease (increase) in inventory.......................... 86 (215)
Decrease (increase) in accounts payable................... (1,801) 473
Increase (decrease) in due to group companies............. 6,007 (817)
Increase (decrease) in accrued and other liabilities...... 1,061 (1,460)
Increase in pension obligation............................ 100 --
------- ------
Net cash provided by Operating Activities.............. 19,646 6,622
======= ======
Cash flows from Investing Activities:
Capital expenditures...................................... (13,256) (8,454)
------- ------
Net cash used in Investing Activities..................... (13,256) (8,454)
======= ======
</TABLE>
The accompanying notes form an integral part of these Financial Statements.
F-28
<PAGE> 165
SVIANED B.V.
STATEMENTS OF CASH FLOWS -- (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
NLG NLG
<S> <C> <C>
Cash flows from Financing Activities:
Dividends paid............................................ (5,000) --
Repayment of borrowings................................... (2,500) (2,500)
------- -------
Net cash used by Financing Activities.................. (7,500) (2,500)
======= =======
Net decrease in cash and cash equivalents................... (1,110) (4,332)
Cash and cash equivalents at beginning of period............ 2,578 6,910
------- -------
Cash and cash equivalents at end of period.................. 1,468 2,578
======= =======
</TABLE>
Supplemental Disclosures of Cash Flow Information:
<TABLE>
<S> <C> <C>
Income tax paid............................................. 2,120 1,656
Interest paid............................................... 408 540
</TABLE>
The accompanying notes form an integral part of these Financial Statements.
F-29
<PAGE> 166
SVIANED B.V.
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Svianed B.V. (the "Company") is a wholly owned entity of Gak Holding B.V.,
which is wholly owned by Gak Group. The Company is a provider of integrated data
and telecommunications network services in The Netherlands. The Company
considers its operations to be in one business segment and internally makes
operating decisions, allocates resources and assesses performance based on one
segment.
Although the Company is a stand alone entity, an allocation was determined
for the pension costs associated with the Gak Holding B.V. defined benefit
pension plan based upon the employees future service costs in compliance with
statements of Financial Accounting Standards (SFAS) No. 87 Employers' Accounting
for Pensions. The fair value of the plan assets were allocated at the group
transfer value, which is a prescribed amount stipulated in the defined benefit
pension plan. Therefore these costs are not necessarily representative of the
pension costs of the company under a separate plan.
Included in the company results are group charges relating to costs in
connection with legal, internal audit and other administrative services provided
by Gak Holding B.V. on behalf of the Company. The Company's management believes
such costs are reflective of actual benefits received by the Company.
The Company is part of a fiscal unity with Gak Group. For purposes of these
financial statements the income taxes are calculated as if the company was a
stand alone corporation and therefore tax expense is calculated at 35% of pre
tax income, which represents the statutory income tax rate in The Netherlands.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist mainly of cash at banks on demand. For
purposes of the statement of cash flows, the Company considers all highly liquid
investments with original maturities of three months or less to be cash
equivalents.
(b) INVENTORY
Finished goods are stated at the lower of cost or market value. Cost is
determined using the first-in, first-out method. Cost of work in progress
consists of the direct salary costs and a charge for indirect costs.
(c) DISCOUNTS TO BE RECEIVED FROM KPN
Discounts represent volume discounts on the KPN network rental agreements
and are accrued based on volume utilized by the company on a monthly basis.
(d) REVENUE RECOGNITION
Revenues are recorded in the period in which the service is rendered. Cash
received in advance of services rendered is recorded as deferred income.
F-30
<PAGE> 167
SVIANED B.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(e) PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. The Company depreciates its
property and equipment using the straight-line method over the estimated useful
lives less the residual value. The useful life of property and equipment is 5
years or less.
(f) INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statements
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss carry forwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled.
(g) PENSIONS
The Company employees are covered under the Gak Group defined benefit
pension plan. The benefits are based on years of service and the employee's
compensation. The cost of this program is being funded currently. The Company
has included an allocation of the Gak Group defined benefit pension plan
obligation for its employees in compliance with SFAS No. 87 in the Company's
financial statements.
(h) ADVERTISING EXPENSE
Advertising costs are expensed as incurred, and amounted to NLG 415,000 in
1998 (1997: NLG 506,000).
(i) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles 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. Significant estimates and assumptions are used in the amounts
reflected as allowance for doubtful accounts and recovery of deferred tax
assets. Actual results could differ from those estimates.
(j) FAIR VALUE OF FINANCIAL INSTRUMENTS
For all financial instruments, the carrying value is considered to
approximate the fair value due to the relatively short maturity of the
respective instruments.
3. RELATED PARTY TRANSACTIONS
Of the 1998 revenues realized from group companies, NLG 5.7 million relate
to subscriptions recharges relating to telephone access (1997: NLG 6.5 million)
for all Gak Group companies. The rest of the group revenues relate mainly to
capacity leases.
1998 costs charged by group companies to the company includes lease on
premises of NLG 850,000 (1997: NLG 697,000) and charges for various
administrative services and support of NLG 538,000 (1997: 585,000).
F-31
<PAGE> 168
SVIANED B.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The accounts due to the group companies for 1998 as of December 31, 1998
includes income tax payable of NLG 3,120,000 (1997: NLG 2,120,000) and dividends
payable of NLG 5,000,000.
4. INVENTORY
Inventory is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
NLG NLG
(IN THOUSANDS)
<S> <C> <C>
Finished goods............................... 24 16
Work in progress............................. 105 199
--- ---
129 215
=== ===
</TABLE>
5. PROPERTY AND EQUIPMENT
Property and equipment is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
NLG NLG
(IN THOUSANDS)
<S> <C> <C>
Telecommunications and computer equipment.... 44,907 32,101
Furniture.................................... 29 --
------- -------
44,936 32,101
Accumulated depreciation..................... (25,783) (17,453)
------- -------
Property and equipment, net.................. 19,153 14,648
======= =======
</TABLE>
6. LONG-TERM DEBT
Svianed has a loan, maturing 1 December 2000, with ING Bank of originally
NLG 10,000,000. The fixed interest rate is 5.42% per year. Principal payments of
NLG 2,500,000 will be made in 1999 and 2000. Gak Holding B.V. is a joint
guarantor of the loan.
7. INCOME TAXES
Income tax expenses attributable to income consist of:
<TABLE>
<CAPTION>
1998 1997
----- ------
NLG NLG
(IN THOUSANDS)
<S> <C> <C>
Current..................................................... 3,120 2,120
Deferred.................................................... (35) --
----- ------
Total....................................................... 3,085 2,120
===== ======
</TABLE>
Since there are no material permanent differences between the book basis
and the tax basis, income tax expense approximates 35% (the Dutch statutory
rate) of net income before taxes.
F-32
<PAGE> 169
SVIANED B.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred taxes at December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
----- ------
NLG NLG
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Pension obligation.......................................... 105 70
</TABLE>
In assessing the ability to realize deferred tax assets, management
considers whether it is more likely than not that some portions or all of the
portions of all the deferred tax assets will not be realized. Based upon the
level of historical taxable income and projections for future taxable income and
the periods for which the deferred tax assets are deductible. Management
believes it is more likely than not that it will realize the benefits of these
deductible differences.
8. COMMITMENTS
As per 31 December 1998, Svianed has the following off balance sheet
commitments:
- Rental agreement for the building of NLG 951,000 per year. The agreement
has an expiration date of 1 January 2000. After this date, the agreement
is terminable every six months.
- Rental agreement KPN network of NLG 3,000,000 per year. After one year,
this agreement is converted into a month-to-month lease.
- Service agreement for the KPN network of NLG 744,000 per year. This is a
3-year agreement and can be terminated with sale of the network.
- Service agreements of NLG 200,000 per year.
- Subscription agreements with KPN for NLG 330,000 per year. After one year
this agreement is converted into a month-to-month lease.
- Subscription agreements with WorldCom and UUnet of NLG 2,900,000 per
year. The expiration date is 31 December 1999.
- Lease agreements for company cars for NLG 421,000 per year. The
agreements have a term of 3 years.
LEASES
Future minimum rental commitments under non-cancelable operating leases as
of 31 December 1998 are as follows:
<TABLE>
<CAPTION>
NLG
(IN THOUSANDS)
------------------
<S> <C>
1999........................................................ 7,602
2000........................................................ 421
2001........................................................ 421
-------
8,444
=======
</TABLE>
F-33
<PAGE> 170
SVIANED B.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Company is part of Gak Holding Group and therefore all companies within
the Gak Holding Group are jointly and severally liable.
9. PENSIONS
Pension costs incurred for the year ended December 31, 1998 was NLG 600,000
(1997: NLG 400,000). Contributions to the Gak Group plan were NLG 400,000 for
the year ended December 31, 1998 (1997: NLG 440,000).
The assumptions used in calculating the SFAS 87 pension obligation of the
Gak Group and allocated to Svianed B.V. were as follows:
<TABLE>
<CAPTION>
1998 1997
----- -----
NLG NLG
(IN THOUSANDS)
<S> <C> <C>
Weighed -- average assumptions as of 31 December:
Discount rate............................................... 5% 6%
Expected rate of return on plan assets...................... 6% 6%
Rate of compensation increase............................... 5% 5%
</TABLE>
10. SUBSEQUENT EVENTS (UNAUDITED)
On June 11, 1999, VersaTel Telecom International N.V. acquired 100% of the
capital of the Company.
Due to the change of the Company's shareholder, the Company will not
receive certain value added tax (VAT) benefits since it will not be part of the
Gak Holding B.V. fiscal tax unity, effective from the date of change of the
shareholder. As such, an estimated liability relating to VAT of approximately
NLG 1,2 million will be realized in 1999. The company expects to recover a total
amount of approximately NLG 1,1 million in the period 1999 through 2002.
F-34
<PAGE> 171
SVIANED B.V.
CONDENSED BALANCE SHEETS
AS OF MARCH 31, 1999 AND 1998
(AMOUNTS IN THOUSANDS OF DUTCH GUILDERS EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1999 1998
--------- ---------
NLG NLG
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents................................. 5,318 1,009
Trade accounts receivable, less allowance for doubtful
accounts of NLG 125 on March 31, 1999 and NLG nil on
March 31, 1998......................................... 7,008 5,572
Due from group companies.................................. 5,210 1,972
Inventory................................................. 397 187
Prepaid expenses.......................................... -- 793
Discounts to be received from KPN......................... 1,470 346
Other current assets...................................... 1,506 1,426
------ ------
Total current assets................................... 20,909 11,305
Property and equipment, less accumulated depreciation....... 20,427 17,442
Deferred tax assets......................................... 158 79
------ ------
Total assets...................................... 41,494 28,826
====== ======
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities
Accounts payable.......................................... 4,390 1,917
Due to group companies.................................... 4,759 2,555
Short term portion of long term debt...................... 2,500 2,500
Deferred income........................................... 1,536 3,132
Accrued expenses.......................................... 6,529 1,259
Other liabilities......................................... 101 247
------ ------
Total current liabilities.............................. 19,815 11,610
Long term debt.............................................. 7,500 5,000
Pension obligation.......................................... 450 225
------ ------
Total liabilities...................................... 27,765 16,835
Shareholder's equity
Common shares, NLG 1,000 par value, authorized 25,000
shares; issued and outstanding 5,000 in 1999 and
1998................................................... 5,000 5,000
Retained earnings......................................... 8,729 6,991
------ ------
Total shareholder's equity............................. 13,729 11,991
------ ------
Total liabilities and shareholder's equity........ 41,494 28,826
====== ======
</TABLE>
The accompanying notes form an integral part of these Unaudited Condensed
Financial Statements.
F-35
<PAGE> 172
SVIANED B.V.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(AMOUNTS IN THOUSANDS OF DUTCH GUILDERS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1999 1998
------------ ------------
NLG NLG
<S> <C> <C>
OPERATING REVENUES:
Related party revenues.................................... 9,429 8,467
Other revenues............................................ 6,150 3,375
------- -------
Total operating revenues............................... 15,579 11,842
OPERATING EXPENSES:
Cost of revenues, excluding depreciation.................. 6,628 6,342
Selling, general and administrative expenses.............. 3,734 2,448
Depreciation expenses..................................... 2,472 1,882
------- -------
Total operating expenses............................... 12,834 10,672
------- -------
Operating Income.......................................... 2,745 1,170
OTHER INCOME (EXPENSE):
Interest income........................................... 26 16
Interest expense -- third parties......................... (70) (104)
Interest expense -- related parties....................... (68) --
------- -------
Net income before income taxes............................ 2,633 1,082
PROVISION FOR INCOME TAXES.................................. (921) (379)
------- -------
Net income................................................ 1,712 703
======= =======
</TABLE>
The accompanying notes form an integral part of these Unaudited Condensed
Financial Statements.
F-36
<PAGE> 173
SVIANED B.V.
CONDENSED STATEMENTS OF SHAREHOLDER'S EQUITY
AS OF MARCH 31, 1999 AND 1998
(AMOUNTS IN THOUSANDS OF DUTCH GUILDERS)
(UNAUDITED)
<TABLE>
<CAPTION>
TOTAL
COMMON RETAINED SHAREHOLDER'S
SHARES EARNINGS EQUITY
------ -------- -------------
<S> <C> <C> <C>
Balance as at 31 December, 1997........................ 5,000 6,288 11,288
Net income............................................. -- 703 703
----- ------ ------
Balance as at 31 March, 1998........................... 5,000 6,991 11,991
===== ====== ======
Balance as at 31 December, 1998........................ 5,000 7,017 12,017
Net income............................................. -- 1,712 1,712
----- ------ ------
Balance as at 31 March, 1999........................... 5,000 8,729 13,729
===== ====== ======
</TABLE>
The accompanying notes form an integral part of these Unaudited Condensed
Financial Statements.
F-37
<PAGE> 174
SVIANED B.V.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(AMOUNTS IN THOUSANDS OF DUTCH GUILDERS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1999 MARCH 31, 1998
------------------ ------------------
NLG NLG
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income........................................ 1,712 703
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation.................................... 2,472 1,882
Deferred tax.................................... (53) (9)
Deferred income................................. (1,596) 1,189
Provision for doubtful accounts................. 125 --
Change in other operating assets and liabilities:
Increase in accounts receivable................. (2,515) (36)
Decrease in due from group companies............ 266 2,282
Increase in accrued receivables and other
receivables.................................. (270) (996)
Increase (decrease) in inventory................ (268) 28
Increase (decrease) in accounts payable......... 2,084 (2,190)
Decrease in due to group companies.............. (3,954) (151)
Increase in accrued and other liabilities....... 4,443 380
Increase in pension obligation.................. 150 25
------ ------
Net cash provided by Operating Activities.... 2,596 3,107
====== ======
Cash flows from Investing Activities:
Capital expenditures............................ (3,746) (4,676)
------ ------
Net cash used in Investing Activities........ (3,746) (4,676)
====== ======
Cash flows from Financing Activities:
Proceeds from new loan.......................... 5,000 --
------ ------
Net cash provided by Financing Activities.... 5,000 --
====== ======
Net increase (decrease) in cash and cash
equivalents..................................... 3,850 (1,569)
Cash and cash equivalents at beginning of
period.......................................... 1,468 2,578
------ ------
Cash and cash equivalents at end of period........ 5,318 1,009
====== ======
Supplemental disclosure of Cash Flow Information:
Income tax paid................................... -- --
Interest paid..................................... 137 101
</TABLE>
The accompanying notes form an integral part of these Unaudited Condensed
Financial Statements.
F-38
<PAGE> 175
SVIANED B.V.
CONDENSED NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. DESCRIPTION OF BUSINESS
Svianed B.V. (the "Company") is a wholly owned entity of Gak Holding B.V.,
which is wholly owned by Gak Group. The Company is a provider of integrated data
and telecommunications network services in The Netherlands. The Company
considers its operations to be in one business segment and internally makes
operating decisions, allocates resources and assesses performance based on one
segment.
Although the Company is a stand alone entity, an allocation was determined
for the pension costs associated with the Gak Holding B.V. defined benefit
pension plan based upon the employees future service costs in compliance with
Statements of Financial Accounting Standards (SFAS) No. 87 Employers' Accounting
for Pensions. The fair value of the plan assets were allocated at the group
transfer value, which is a prescribed amount stipulated in the defined benefit
pension plan. Therefore these costs are not necessarily representative of the
pension costs of the company under a separate plan.
Included in the Company results are group charges relating to costs in
connection with legal, internal audit and other administrative services provided
by Gak Holding B.V. on behalf of the Company. The Company's management believes
such costs are reflective of actual benefits received by the Company.
The Company is part of a fiscal unity with Gak Group. For purposes of these
financial statements the income taxes are calculated as if the company was a
stand alone corporation and therefore tax expense is calculated at 35% of pre
tax income, which represents the statutory income tax rate in The Netherlands.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements and related notes at March 31, 1999 and for the
three months ended March 31, 1998 are unaudited and prepared in conformity with
the accounting principles applied in the Company's 1998 financial statements for
the year ended December 31, 1998. In the opinion of management, such interim
financial statements include all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the results for such periods.
The results of operations for the three months ended March 31, 1999 are not
necessarily indicative of the results to be expected for the full year or any
other interim period.
3. INTERCOMPANY LOAN
The Company acquired a loan of Gak Holding B.V. of NLG 5 million as of
January 1, 1999. The fixed interest rate is 5.42% per year. Principal payments
of NLG 2,500,000 will be made as of December 31, 2001 and December 31, 2002.
4. SUBSEQUENT EVENTS
On June 11, 1999, VersaTel Telecom International N.V. acquired 100% of the
capital of the Company.
Due to the change of the Company's shareholder, the Company will not
receive certain value added tax (VAT) benefits since it will not be part of the
Gak Holding B.V. fiscal tax unity, effective from the date of change of the
shareholder. As such, an estimated liability relating to VAT of approximately
F-39
<PAGE> 176
SVIANED B.V.
CONDENSED NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NLG 1.2 million will be realized in 1999. The company expects to recover a total
amount of approximately NLG 1.1 million in the period 1999 through 2002.
Due to the change of the Company's shareholder, the loan of Gak Holding
B.V. has been fully repaid as of June 2, 1999, prior to its maturity.
F-40
<PAGE> 177
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.
ATM (ASYNCHRONOUS TRANSFER MODE) -- An international standard for
high-speed broadband packet-switched networks, operating at digital transmission
speeds above 1.544 Mbps.
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).
BITS -- The smallest unit of digital information utilized by electronic
information processing, storage or transmission systems.
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 -- A company authorized by a regulatory agency to provide
communications services.
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 first 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.
CIRCUIT SWITCHING -- A switching technique that establishes a dedicated
transmission path between originating and terminating points and holds that path
open for the duration of a call.
CO-LOCATION -- When an end-user or competing local telecommunications
service provider locates telephone network equipment at the building that houses
switches belonging to another telephone carrier, the user or competing provider
is said to be "co-located" with the other telephone carrier. The advantage for
the co-locating party is that it can make a direct connection to local and long
distance facilities and substantially reduce access costs.
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.
CONNECTIVITY -- The property of a network that allows dissimilar devices to
communicate with each other.
DARK FIBER -- Any installed fiber optic cable lacking a light transmission
or signal, as opposed to in-service or "lit" fiber.
DWDM (DENSE WAVELENGTH DIVISION MULTIPLEXING) -- A multiplexing technique
allowing multiple different signals to be carried simultaneously, with
transmission capacity as high as 160 Gbps, on a fiber by allocating resources
according to frequency on non-overlapping frequency bands.
DIAL AROUND -- Use of carrier access numbers and/or carrier identification
codes to place a call through a carrier other than the one presubscribed to the
originating phone.
A-1
<PAGE> 178
E1 -- The European counterpart to the North American T-1 transmission
speed. The T-1 is a type of digital carrier transmitting voice or data at 1.544
Mbps. A T-1 carrier can handle up to 24 multiplexed 64 Kbps digital voice/data
channels. A T-1 carrier system can use metallic cable, microwave radio or
optical fiber as a transmission media.
E3 -- The European counterpart to the North American T-3 transmission
speed. The T-3 is a type of digital carrier transmitting voice or data at 34
Mbps (see also "E1").
FACILITIES -- Transmission lines, switches and other physical components
used to provide telephone service.
FACILITIES-BASED -- When a carrier owns or leases a network and facilities
to run that network, services offered on it are said to be facilities-based.
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 -- A filament, usually of glass, through which light beams carrying
voice, data or video transmissions are guided.
FIBER OPTIC -- Technology based on thin filaments of glass or other
transparent materials used as the medium for transmitting coded light pulses
that represent data, image and sound. Fiber optic technology offers extremely
high transmission speeds. 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.
FIBER OPTIC RING NETWORK -- Where a network is configured in bi-directional
circular fashion. If a portion of the ring malfunctions, the signal can be
re-routed back the way it came, around the circle, to complete the connection.
FRAME RELAY -- A method of achieving high-speed, packet-switched data
transmissions within digital networks at transmission speeds between 56 Kbps and
1.544 Mbps.
GBPS (GIGA BITS PER SECOND) -- A measurement of speed for digital signal
transmission expressed in billions of bits per second.
INTERCONNECT -- Connection of a telecommunications device or service to the
PSTN.
INTRANET -- A corporate communications system that uses the global Internet
protocol for employee-to-employee communications and information transactions.
An intranet allows employees of a company to access company and customer
information not available to the public, receive company or customer information
and communicate with other employees.
IP (INTERNET PROTOCOL) -- The standard that defines the information unit
being passed among the host computers and packet-switched networks that make up
the Internet. The Internet protocol provides the basis for packet delivery on
the Internet.
IPX -- Novell NetWare connection protocol.
ISDN (INTEGRATED SERVICES DIGITAL NETWORK) -- Switched network providing
end-to-end digital connectivity for simultaneous transmission of voice and/or
data over multiple multiplexed communications channels and employing
transmission and out-of-band signaling protocols that conform to
internationally-defined standards.
A-2
<PAGE> 179
KBPS (THOUSANDS OF BITS PER SECOND) -- A measurement of speed for digital
signal transmission expressed in thousands of bits per second.
LAN (LOCAL AREA NETWORK) -- A private data communications network linking a
variety of data devices, such as computer terminals, personal computer
terminals, personal computers and microcomputers, all housed in a defined
building, plant or geographic area.
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 premises
interface which connects to the inside wiring and equipment at the customer
premises to a terminating point within the switching wire center.
MBPS (MILLIONS OF BITS PER SECOND) -- A measurement of speed for digital
signal transmission expressed in millions of bits per second.
MDF (MAIN DISTRIBUTION FRAME) -- patch panel for connecting customer
equipment.
MULTIPLEXING -- An electronic or optical process that combines a large
number of lower-speed transmission lines into one high-speed line by splitting
the total available bandwidth of the high-speed line into narrower bands, or by
allotting a common channel to several different transmitting devices, one at in
sequence. Multiplexing devices are widely used in networks to improve efficiency
by concentrating traffic.
NACD (NETWORK AUTOMATIC CALL DISTRIBUTION) -- provides call queuing and
distribution functions.
NUMBER PORTABILITY -- The ability of end users to keep their number when
changing operators.
OPERATING SUPPORT SYSTEMS -- A general term encompassing the electronic and
manual systems used to fill orders for retail and wholesale telephone services.
PLATFORM -- A group of unbundled network elements assembled and sold
together as a package.
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.
POP (POINTS OF PRESENCE) -- A location containing switches or other
networking equipment through which users connect to a network.
PROTOCOL -- A formal set of rules and conventions governing the formatting
and relative timing of message exchange between 2 communicating points in a
computer system or data communications network.
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.
REDUNDANCY -- Incorporation of duplicate components into a system so that a
duplicate component immediately takes over if the primary components fails.
REMOTE ACCESS -- A PBX feature that allows a user at an outside location to
access certain PBX features, such as call answering and advance calling, by
telephone. The user dials a direct distance dialing number to connect to the PBX
and then dials authorization and instruction codes to get the PBX services.
A-3
<PAGE> 180
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.
ROUTER -- A device for interconnecting local area networks that have
dissimilar operating protocols but which share a common network interconnection
protocol.
ROUTING -- Process of selecting the correct circuit path for a message.
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.
SONET (SYNCHRONOUS OPTICAL NETWORK STANDARD) -- An ultra-high-speed, fiber
optic transmission standard for large-scale, fiber-based digital transmission
networks that use equipment from many different manufacturers. It is the first
telecom industry agreement on standardized interfaces between fiber optic
transmission systems and is well on the way to becoming an international
standard.
STM-1 (SYNCHRONOUS TRANSPORT MODULE) -- SDH notation for data transport,
used for transport and connection providing capacity of 155 Mbps.
SWITCH -- A sophisticated computer that accepts instructions from a caller
in the form of a telephone number. Like an address on an envelope, the numbers
tell the switch where to route the call. The switch opens or closes circuits or
selects the paths or circuits to be used for transmission of information.
Switching is a process of 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.
T1 OR T3 -- see "E1" or "E3".
TELEPHONY -- A generic term describing voice telecommunications.
TRAFFIC -- A generic term that includes any and all calls, messages and
data sent and received by means of telecommunications.
WAN (WIDE AREA NETWORK) -- a large-scale, high speed communications network
used primarily for interconnecting local area and metro area networks located in
different cities, states or countries.
XDSL -- a digital subscriber line providing high speed customer connection
over copper pairs.
A-4
<PAGE> 181
LOGO
VERSATEL TELECOM INTERNATIONAL N.V.
21,250,000 ORDINARY SHARES
IN THE FORM OF SHARES OR
AMERICAN DEPOSITARY SHARES
----------------------------
PROSPECTUS
, 1999
----------------------------
LEHMAN BROTHERS
ING BARINGS
BEAR, STEARNS & CO. INC.
PARIBAS CORPORATION
HAMBRECHT & QUIST
E*TRADE SECURITIES, INC.
<PAGE> 182
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection with
the distribution of the securities being registered, other than underwriting
discounts and commissions.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 70,993
NASD filing fee............................................. 14,000
NASDAQ listing fee.......................................... 95,000
Printing and engraving expenses............................. 900,000
Legal fees and expenses..................................... 500,000
Accounting fees and expenses................................ 250,000
Blue sky fees and expenses.................................. 5,000
Miscellaneous expenses...................................... 50,000
----------
Total.................................................. 1,884,993
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Netherlands law does not prohibit indemnification of directors, employees
and agents of corporations. The Company has obtained liability insurance for its
directors, employees and agents. Under Netherlands law, the legal reasonableness
and fairness test means that such indemnity cannot be relied on where the
individual has been grossly negligent, fraudulent or dishonest.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following securities of the Company, that were sold by the Company
within the past three years, were not registered under the Securities Act. The
information has been adjusted for a two-for-one stock split which was effected
on April 13, 1999.
On December 27, 1996, VersaTel issued and sold 396,000 ordinary shares to
Telecom Founders B.V. for an aggregate consideration of NLG 249,999; 4,232,000
ordinary shares to Cromwilld Limited for an aggregate consideration of NLG
2,671,704; and 3,292,000 ordinary shares to NeSBIC Venture Fund C.V. for an
aggregate consideration of NLG 2,078,273. These shares were issued in reliance
on Regulation S under the Securities Act.
On October 21, 1997, VersaTel issued and sold 1,339,286 ordinary shares to
NeSBIC Venture Fund C.V. for an aggregate consideration of NLG 1,500,000. These
shares were issued in reliance on Regulation S under the Securities Act.
On April 8, 1998, VersaTel issued and sold 5,752,808 ordinary shares to
Paribas Deelnemingen N.V. for an aggregate consideration of NLG 12,799,998.
These shares were issued in reliance on Regulation S under the Securities Act.
On April 17, 1998, VersaTel issued and sold 629,214 ordinary shares to
Telecom Founders B.V. for an aggregate consideration of NLG 1,400,000. On the
same day, the NLG 1,767,000 subordinated convertible shareholder loan extended
by NeSBIC Venture Fund C.V. was converted into 1,051,786 ordinary shares, the
NLG 4,500,000 bridge loan extended by NeSBIC Venture Fund C.V. was converted
into 2,678,572 ordinary shares, and NeSBIC Venture Fund C.V. contributed an
additional NLG
II-1
<PAGE> 183
5,800,000 for 2,606,742 ordinary shares. These shares were issued in reliance on
Regulation S under the Securities Act.
On April 27, 1998, the NLG 1,838,000 subordinated convertible shareholder
loan extended by Cromwilld Limited was converted into 1,838,000 ordinary shares.
These shares were issued in reliance on Regulation S under the Securities Act.
On May 27, 1998, VersaTel issued and sold 725,370 ordinary shares to
Telecom Founders B.V. for an aggregate consideration of NLG 1,849,694; 1,274,510
ordinary shares to NeSBIC Groep B.V. for an aggregate consideration of NLG
3,250,000; 1,529,532 ordinary shares to Paribas Deelnemingen N.V. for an
aggregate consideration of NLG 3,900,306 and 2,352,942 ordinary shares to NPM
Capital N.V. for an aggregate consideration of NLG 6,000,000. These shares were
issued in reliance on Regulation S under the Securities Act.
On May 27, 1998, VersaTel issued and sold 225,000,000 units consisting of
$225,000,000 in principal amount of 13 1/4% senior notes due 2008 and warrants
to purchase 3,000,000 ordinary shares. The units were sold to Lehman Brothers,
Inc., as initial purchaser, who subsequently sold them to certain institutional
investors in reliance on Rule 144A and Regulation S under the Securities Act.
The notes and the warrants were separated in August 1998. In December 1998,
VersaTel completed a public exchange offer pursuant to which all the notes
issued in this offering were exchanged for substantially identical notes
registered under the Securities Act. The warrants issued in this offering have
not been registered under the Securities Act.
On December 3, 1998, VersaTel issued and sold 150,000 issued units
consisting of $150,000,000 in principal amount of 13 1/4% senior notes due 2008
and warrants to purchase 2,000,100 ordinary shares. The units were sold to
Lehman Brothers, Inc., Lehman Brothers International (Europe) and Paribas
Corporation, as initial purchasers, who subsequently sold them to certain
institutional investors in reliance on Rule 144A and Regulation S under the
Securities Act. The notes and the warrants were separated in January 1999. In
February 1999, VersaTel completed a public exchange offer pursuant to which all
the notes issued in this offering were exchanged for substantially identical
notes registered under the Securities Act. The warrants issued in this offering
have not been registered under the Securities Act.
In connection with the acquisition of CS Net B.V., VersaTel sold 130,000
ordinary shares to the former shareholders of CS Net B.V. in November 1998.
These shares were sold in reliance on Regulation S under the Securities Act. As
of the date of this Registration Statement none of these 130,000 shares have
been issued. These shares are expected to be issued following the completion of
this offering.
In connection with the acquisition of Amstel Alpha B.V. (the parent of
SpeedPort N.V.), VersaTel sold 375,000 ordinary shares to the former
shareholders of Amstel Alpha B.V. in May 1999. These shares were sold in
reliance on Regulation S under the Securities Act. In addition, VersaTel has
earn-out obligations to these former shareholders covering an additional 100,000
ordinary shares. As of the date of this Registration Statement, none of these
475,000 shares have been issued. These shares are expected to be issued
following the completion of this offering.
In connection with the acquisition of ITinera Services N.V., VersaTel sold
50,000 ordinary shares to the former shareholders of ITinera Services N.V. in
May 1999. These shares were sold in reliance on Regulation S under the
Securities Act. In addition, VersaTel has earn-out obligations to these
shareholders covering an additional 30,000 ordinary shares. As of the date of
this Registration Statement, none of these 80,000 shares have been issued. These
shares are expected to be issued following the completion of this offering.
II-2
<PAGE> 184
On July 20, 1999, VersaTel issued and sold 200,000 ordinary shares to
Cromwilld Limited at a price of NLG 7.50 per ordinary share. These shares were
sold in reliance on Regulation S under the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
The following exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
1.1 Form of U.S. Underwriting Agreement
3.1(1) Deed of Incorporation of the Company
3.2 Articles of Association of the Company
4.1(2) Form of Deposit Agreement among the Company, The Bank of New
York, as Depositary, and each holder from time to time of
American Depositary Receipts representing ordinary shares of
the Company
5.1 Opinion of Shearman & Sterling regarding the legality of the
securities being registered
5.2 Opinion of Stibbe Simont Monahan Duhot regarding the
legality of the securities being registered
8.1 Opinion of Shearman & Sterling regarding tax matters
10.1(1) Indenture, dated May 27, 1998, between the Company and
United States Trust Company of New York, as Trustee
10.2(3) Indenture, dated December 3, 1998, between the Company and
United States Trust Company of New York, as Trustee
10.3* Warrant Agreement, dated May 27, 1998, between the Company
and United States Trust Company of New York as Warrant Agent
10.4* Warrant Agreement, dated December 3, 1998, between the
Company and United States Trust Company of New York as
Warrant Agent
10.5(1) Escrow Agreement, dated May 27, 1998, among the Company and
United States Trust Company of New York as Trustee and
Escrow Agent
10.6(3) Escrow Agreement, dated December 3, 1998, among the Company
and United States Trust Company of New York as Trustee and
Escrow Agent
10.7* Participation and Shareholders Agreement, dated December 27,
1996, among Telecom Founders B.V., NeSBIC C.V., Cromwilld
Limited, VersaTel Telecom B.V., R. Gary Mesch and Open Skies
International, Inc.
10.8* Loan Agreement, dated May 26, 1999, among VersaTel Telecom
Europe B.V., as Borrower, the Company, as Guarantor, and
Nortel Networks International Finance & Holding B.V., as
Agent and Security Agent
10.9(4) Agreement for the Sale and Purchase of Shares of Svianed
B.V., dated June 11, 1999, among VersaTel Telecom Europe
B.V., Gak Holding B.V. and Svianed B.V.
10.10 Form of International Underwriting Agreement
21.1* List of subsidiaries
23.1 Consent of Shearman & Sterling (included in Exhibit 5.1)
23.2 Consent of Stibbe Simont Monahan Duhot (included as part of
Exhibit 5.2)
</TABLE>
II-3
<PAGE> 185
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
23.3 Consent of Arthur Andersen
23.4 Consent of KPMG Accountants N.V.
24.1 Powers of attorney (included in the signature page hereof)
</TABLE>
- -------------------------
* Previously filed
(1) Previously filed as an exhibit to the Company's Registration Statement on
Form F-4 (File number 333-59979) initially filed with the Securities and
Exchange Commission on July 27, 1998 and incorporated herein by reference.
(2) Previously filed as an exhibit to the Company's Registration Statement on
Form F-6 (File number 333-10516) filed with the Securities and Exchange
Commission July 13, 1999 and incorporated by reference herein.
(3) Previously filed as an exhibit to the Company's Registration Statement on
Form F-4 (File Number 333-70449) initially filed with the Securities and
Exchange Commission on January 12, 1999 and incorporated herein by
reference.
(4) Previously filed as an exhibit to the Company's report on Form 6-K, filed
with the Securities and Exchange Commission on June 21, 1999 and
incorporated herein by reference.
(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
Schedules are omitted because they are either not required, are not
applicable or because equivalent information has been included in the financial
statements, the notes thereto or elsewhere herein.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under "Item 14, Indemnification
of Directors and Officers" above, or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment to 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 Securities Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant pursuant to
II-4
<PAGE> 186
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was
declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus 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) It will provide to the Underwriters at the closing specified in the
Underwriting Agreement, certificates in such denominations and
registered in such names as required by the Underwriters to permit
prompt delivery to each purchaser.
II-5
<PAGE> 187
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 of the
requirements for filing on a Form F-1 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 22nd day
of July, 1999.
VersaTel Telecom International N.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, either in person or by power of attorney, on the 22nd day
of July, 1999.
<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
- ---------------------------------------------------
Leo W.A.M. van Doorne
Supervisory Director
- ---------------------------------------------------
Denis O'Brien
* Supervisory Director
- ---------------------------------------------------
Johan G. Wackwitz
* Supervisory Director
- ---------------------------------------------------
James Meadows
- ---------------------------------------------------
* By Raj Raithatha by power of attorney
</TABLE>
II-6
<PAGE> 188
AUTHORIZED REPRESENTATIVE
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the undersigned in the capacity
indicated on the 22nd day of July, 1999.
<TABLE>
<CAPTION>
NAME CAPACITY
---- --------
<C> <S>
/s/ DONALD J. PUGLISI Managing Director of Puglisi & Associates
- ---------------------------------------------------
Donald J. Puglisi
</TABLE>
II-7
<PAGE> 189
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.1 Form of U.S. Underwriting Agreement
3.1(1) Deed of Incorporation of the Company
3.2 Articles of Association of the Company
4.1(2) Form of Deposit Agreement among the Company, The Bank of New
York, as Depositary, and each holder from time to time of
American Depositary Receipts representing ordinary shares of
the Company
5.1 Opinion of Shearman & Sterling regarding the legality of the
securities being registered
5.2 Opinion of Stibbe Simont Monahan Duhot regarding the
legality of the securities being registered
8.1 Opinion of Shearman & Sterling regarding tax matters
10.1(1) Indenture, dated May 27, 1998, between the Company and
United States Trust Company of New York, as Trustee
10.2(3) Indenture, dated December 3, 1998, between the Company and
United States Trust Company of New York, as Trustee
10.3* Warrant Agreement, dated May 27, 1998, between the Company
and United States Trust Company of New York, as Warrant
Agent
10.4* Warrant Agreement, dated December 3, 1998, between the
Company and United States Trust Company of New York, as
Warrant Agent
10.5(1) Escrow Agreement, dated May 27, 1998, among the Company and
United States Trust Company of New York, as Trustee and
Escrow Agent
10.6(3) Escrow Agreement, dated December 3, 1998, among the Company
and United States Trust Company of New York, as Trustee and
Escrow Agent
10.7* Participation and Shareholders Agreement, dated December 27,
1996, among Telecom Founders B.V., NeSBIC C.V., Cromwilld
Limited, VersaTel Telecom B.V., R. Gary Mesch and Open Skies
International, Inc.
10.8* Loan Agreement, dated May 26, 1999, among VersaTel Telecom
Europe B.V., as Borrower, the Company, as Guarantor, and
Nortel Networks International Finance & Holding B.V., as
Agent and Security Agent
10.9(4) Agreement for the Sale and Purchase of Shares of Svianed
B.V., dated June 11, 1999, among VersaTel Telecom Europe
B.V., Gak Holding B.V. and Svianed B.V.
10.10 Form of International Underwriting Agreement
21.1* List of subsidiaries
23.1 Consent of Shearman & Sterling (included in Exhibit 5.1)
23.2 Consent of Stibbe Simont Monahan Duhot (included as part of
Exhibit 5.2)
23.3 Consent of Arthur Andersen
23.4 Consent of KPMG Accountants N.V.
24.1 Powers of attorney (included in the signature page hereof)
</TABLE>
- -------------------------
* Previously filed
(1) Previously filed as an exhibit to the Company's Registration Statement on
Form F-4 (File number 333-59979) initially filed with the Securities and
Exchange Commission on July 27, 1998 and incorporated herein by reference.
<PAGE> 190
(2) Previously filed as an exhibit to the Company's Registration Statement on
Form F-6 (File number 333-10516) filed with the Securities and Exchange
Commission on July 13, 1999 and incorporated by reference herein.
(3) Previously filed as an exhibit to the Company's Registration Statement on
Form F-4 (File Number 333-70449) initially filed with the Securities and
Exchange Commission on January 12, 1999 and incorporated herein by
reference.
(4) Previously filed as an exhibit to the Company's report on Form 6-K, filed
with the Securities and Exchange Commission on June 21, 1999 and
incorporated herein by reference.
<PAGE> 1
EXHIBIT 1.1
VersaTel Telecom International N.V.
- Ordinary Shares in the form of
Shares or American Depositary Shares
U.S. UNDERWRITING AGREEMENT
July 22, 1999
Lehman Brothers Inc.
As U.S. Representative of the several
U.S. Underwriters named in Schedule I
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Dear Sirs:
VersaTel Telecom International N.V., a public company organized under
the laws of The Netherlands, and having its corporate seat in Amsterdam, The
Netherlands (the "Company"), proposes to sell to the several underwriters listed
on Schedule I hereto (the "U.S. Underwriters") an aggregate of - ordinary
shares, par value NLG 0.05 per share, of the Company (the "Ordinary Shares"),
and each of Cromwilld Limited ("Cromwilld") and the holders of warrants (the
"Warrants") to purchase Ordinary Shares listed in Schedule II hereto (together
with Cromwilld, the "Selling Shareholders") propose severally to sell to the
U.S. Underwriters an aggregate of Ordinary Shares on the First Delivery Date (as
defined herein) (such - Ordinary Shares to be sold by the Company and the
Selling Shareholders being hereinafter referred to as the "Firm Shares"). The
U.S. Underwriters may elect to have all or a portion of the Firm Shares
deposited by the Company and the Selling Shareholders pursuant to the Deposit
Agreement (as defined herein) and to receive such Firm Shares in the form of
American Depositary Shares ("ADSs") in lieu of receiving such shares in the form
of Ordinary Shares. References herein to "Firm Shares", "Option Shares" (as
defined) or "Shares" (as defined) shall be deemed to include ADSs representing
any such Firm Shares, Option Shares or Shares, respectively, and references to
ADSs include the ADRs (as defined herein) evidencing such ADSs, in each case
unless the context otherwise requires.
In addition, the Company [and Cromwilld Limited] propose to grant to
the U.S. Underwriters an option to purchase up to - additional Ordinary Shares
(the "Option Shares"), on the terms and for the purposes set forth in Section 3
hereof. The Firm Shares and the Option Shares, if purchased, are hereinafter
collectively called the "Shares", unless the context otherwise requires. This is
to confirm the agreement concerning the purchase of the Shares from the Company
and the Selling Shareholders by the U.S. Underwriters.
The ADSs, evidenced by American Depositary Receipts ("ADRs"), will be
issued in accordance with the Deposit Agreement (the "Deposit Agreement"), among
the Company, The Bank of New York, as depositary (the "Depositary"), and the
holders and beneficial owners from time to time of ADRs issued thereunder. Each
ADS will represent one Ordinary
<PAGE> 2
2
Share deposited pursuant to the Deposit Agreement and delivered to Mees Pierson
N.V., (the "Correspondent Bank"), the custodian for the Depositary.
It is understood by all parties that the Company and the Selling
Shareholders are concurrently entering into an agreement dated the date hereof
(the "International Underwriting Agreement") providing for the sale by the
Company of an aggregate of - Ordinary Shares in the form of Ordinary Shares or
ADSs (the "Firm International Shares") and the granting of an option by the
Company and one of the Selling Shareholders to purchase up to an additional -
Ordinary Shares in the form of Ordinary Shares or ADSs (the "Option
International Shares"; and together with the Firm International Shares, the
"International Shares") through arrangements with the several international
managers listed on Schedule I to the International Underwriting Agreement (the
"International Managers"), for whom Lehman Brothers International (Europe) is
acting as lead manager (the "Lead Manager"; and together with the U.S.
Representative, the "Representatives"). The U.S. Underwriters and the
International Managers simultaneously are entering into an agreement among the
U.S. Underwriters and the International Managers (the "Agreement Among U.S.
Underwriters and International Managers") which provides for, among other
things, the transfer of Shares between the two syndicates. Two forms of
prospectus are to be used in connection with the offering and sale of the Shares
contemplated by the foregoing, one relating to the Shares (in the form of
Ordinary Shares or ADSs) to be sold in the United States and Canada (the "U.S.
Prospectus") and the second relating to the Shares (in the form of Ordinary
Shares or ADSs) to be sold outside of the United States and Canada (the
"International Prospectus"). The International Prospectus will be identical to
the U.S. Prospectus except for certain substitute pages. This Agreement, the
International Underwriting Agreement, the Deposit Agreement and the Power of
Attorney and Custody Agreement (as defined) shall hereafter be referred to as
the "Operative Agreements". Except as used in Sections 3, 4, 5 and 11 herein,
and except as the context may otherwise require, references herein to Firm
Shares, Option Shares and Shares shall include Firm International Shares, Option
International Shares and International Shares, respectively (including, in each
case, ADSs representing any or all of such shares).
This is to confirm the agreement concerning the purchase of the Shares
from the Company and the Selling Shareholders by the U.S. Underwriters.
1. Representations, Warranties and Agreements of the Company.
The Company represents, warrants and agrees that:
(a) A registration statement on Form F-1 (File No.
333-81333), and amendments thereto, with respect to the Shares
have (i) been prepared by the Company in conformity with the
requirements of the United States Securities Act of 1933, as
amended (the "Securities Act"), and the rules and regulations
(the "Rules and Regulations") of the United States Securities
and Exchange Commission (the "Commission") thereunder, (ii)
been filed with the Commission under the Securities Act and
(iii) become effective under the Securities Act; a second
registration statement on Form F-1 with respect to
<PAGE> 3
3
the Shares (i) may also be prepared by the Company in
conformity with the Securities Act and the Rules and
Regulations and (ii) if to be so prepared, will be filed with
the Commission under the Securities Act pursuant to Rule
462(b) of the Rules and Regulations on the date hereof. Copies
of the first such registration statement and the amendments
thereto, together with the form of any such second
registration statement, have been delivered by the Company to
the U.S. Representative of the U.S. Underwriters. As used in
this Agreement, "Effective Time" means (i) with respect to
each of the Primary Registration Statement (as defined) and
the ADS Registration Statement (as defined herein), the date
and the time as of which such registration statement, or the
most recent post-effective amendment thereto, if any, was
declared effective by the Commission and (ii) with respect to
the 462(b) Registration Statement (as defined), the date of
the Effective Time of such second registration statement, and
"Effective Times" is the collective reference to both
Effective Times; "Effective Date" means (i) with respect to
each of the Primary Registration Statement and the ADS
Registration Statement, the date of the Effective Time of such
registration statement and (ii) with respect to the 462(b)
Registration Statement, the date of the Effective Time of such
registration statement, and "Effective Dates" is the
collective reference to both Effective Dates; "Preliminary
Prospectus" means each prospectus included in any such
registration statement, of amendments thereof, before it
became effective under the Securities Act and any prospectus
filed with the Commission by the Company with the consent of
the Representatives pursuant to Rule 424(a) of the Rules and
Regulations; "Primary Registration Statement" means the first
registration statement referred to in this Section 1(a), as
amended at its Effective Time, "Rule 462(b) Registration
Statement" means the second registration statement, if any,
referred to in this Section 1(a), as filed with the
Commission, and "Registration Statements" means both the
Primary Registration Statement and any Rule 462(b)
Registration Statement, including in each case all information
contained in the final prospectus filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations in
accordance with Section 7(a) hereof and deemed to be a part of
the Registration Statements as of the Effective Time of the
Registration Statements as of the Effective Time of the
Primary Registration Statement pursuant to paragraph (b) of
Rule 430A of the Rules and Regulations; and "Prospectus" means
such final prospectus, as first filed with the Commission
pursuant to paragraph (1) or (4) of Rule 424(b) of the Rules
and Regulations.
(b) A registration statement on Form F-6 (File No.
333--) with respect to the ADSs evidenced by the ADRs has (i)
been prepared by the Company and the Depositary in conformity
with the requirements of the Securities Act and the Rules and
Regulations, (ii) been filed with the Commission under the
Securities Act and (iii) become effective under the Securities
Act. Copies of such ADS Registration Statement, including all
amendments thereto, have been delivered by the Company to the
U.S. Representative. As used in this
<PAGE> 4
4
Agreement, "ADS Registration Statement" means such
registration statement, including all exhibits thereto, as
amended at the time such registration statement became
effective under the Securities Act.
(c) The Primary Registration Statement and the ADS
Registration Statement conform (and the Rule 462(b)
Registration Statement, if any, the Prospectus and any further
amendments or supplements to the Registration Statements, the
Prospectus or the ADS Registration Statement, when they become
effective or are filed with the Commission, as the case may
be, will conform) in all respects to the requirements of the
Securities Act and the Rules and Regulations and do not and
will not, as of the applicable effective date (as to the
Registration Statements, the ADS Registration Statement and
any amendments thereto) and as of the applicable filing date
(as to the Prospectus and any amendment or supplement thereto)
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;
provided that no representation or warranty is made as to
information contained in or omitted from the Registration
Statements or the Prospectus in reliance upon and in
conformity with the written information described in Section
10(f) furnished to the Company through the U.S. Representative
by or on behalf of any U.S. Underwriter or International
Manager, respectively, specifically for inclusion therein.
(d) The Company is a public company with limited
liability ("naamloze vennootschap"), duly incorporated and
validly existing under the laws of The Netherlands, is not in
bankruptcy, liquidation or receivership, is duly qualified to
do business and is in good standing in each jurisdiction, if
applicable, in which its ownership or lease of property or the
conduct of its business requires such qualification.
(e) Each of the subsidiaries (as defined in Section
17 hereof) of the Company has been duly organized and is
validly existing under the laws of its jurisdiction of
organization or incorporation, is not in bankruptcy,
liquidation or receivership, is duly qualified to do business
and is in good standing in the jurisdiction in which its
ownership or lease of property or the conduct of its business
requires such qualification; and each has all power and
authority necessary to own or hold its respective property and
to conduct the business in which it is engaged; and, other
than [VersaTel Netherlands B.V. and] Svianed B.V., none of the
subsidiaries of the Company is a "significant subsidiary", as
such term is defined in Rule 405 of the Rules and Regulations;
and all of the issued share capital of each subsidiary of the
Company has been duly and validly authorized and issued and is
fully paid and non-assessable and is wholly owned directly or
indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims (other than, in the case of
Svianed
<PAGE> 5
5
B.V., a lien granted in favor of Lehman Commercial Paper,
Inc.).
(f) The Company has an authorized and issued share
capital as set forth in the Prospectus; all outstanding shares
of capital stock of the Company have been duly and validly
authorized and issued; all outstanding shares of capital stock
of the Company are fully paid, and holders of such shares will
have no liability for any debt or other obligation of the
Company towards third parties in their capacity as holders
thereof; the outstanding shares of capital stock of the
Company conform in all material respects to the description
thereof contained in the Prospectus; except as described in
the Prospectus, there are no outstanding securities
convertible into or exchangeable for, or warrants, rights or
options to purchase from the Company and its subsidiaries, or
obligations of the Company and its subsidiaries to issue, any
class of share capital of the Company or any of its
subsidiaries; except as described in the Prospectus, there are
no restrictions on transfer or voting of any of the capital
stock of the Company pursuant to the Company's articles of
association (the "Articles of Association") or equivalent
constituent documents or any agreement to which the Company is
a party or by which it may be bound or to which any of its
property may be subject; and no depositary receipts have been
issued with respect to the capital stock of the Company.
(g) The Shares to be issued and sold by the Company
to the U.S. Underwriters hereunder and under the International
Underwriting Agreement have been duly and validly authorized
and, when issued and delivered against payment therefor as
provided herein and in the International Underwriting
Agreement, will be duly and validly issued, fully paid and
non-assessable and, when the Shares to be deposited pursuant
to the Deposit Agreement are so deposited and ADSs have been
issued and delivered against payment therefor as provided
herein and in the International Underwriting Agreement, such
ADSs will be duly and validly issued; the Shares to be sold by
the Selling Shareholders to the U.S. Underwriters hereunder
and to the International Managers under the International
Underwriting Agreement, (A) in the case of Selling
Shareholders other than Cromwilld, when issued upon exercise
of the warrants by the Selling Shareholders, will have been
duly and validly issued and will be fully paid and
non-assessable or (B) in the case of Cromwilld, have been duly
and validly issued and are fully paid and non-assessable, and
when such Shares to be deposited pursuant to the Deposit
Agreement are so deposited and ADSs have been issued and
delivered against payment therefor as provided herein and in
the International Underwriting Agreement, such ADSs will be
duly and validly issued; and there are no preemptive or other
rights to subscribe for or to purchase, nor any restriction
upon the voting or transfer of, any of the Shares or ADSs
pursuant to the Articles of Association or Netherlands law and
regulations, except as described in the Prospectus; the Shares
and the ADSs will conform to the descriptions thereof
contained in the Prospectus; and the certificate or
certificates evidencing the Shares will comply in all respects
with Netherlands law.
<PAGE> 6
6
(h) The execution, delivery and performance of the
Operative Agreements by the Company and the consummation of
the transactions contemplated hereby and thereby, and the
amendments to the Articles of Association of the Company will
not conflict with or result in a breach or violation of any of
the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement,
shareholders agreement or other material agreement or
instrument to which the Company or any of its subsidiaries is
a party or by which the Company or any of its subsidiaries is
bound or to which any of the properties or assets of the
Company or any of its subsidiaries is subject, nor will such
actions result in any violation of the provisions of the
Articles of Association or other constitutive documents of the
Company or any of its subsidiaries or any statute, license,
legislation, authorization, or any order, rule or regulation
of any court or governmental agency or body (including,
without limitation, any statutes, rules, orders or regulations
promulgated by the Minister van Verkeer en Waterstaat (the
"Transport Department"), the Onafhankelijke Post en
Telecommunicatie Autoriteit ("OPTA") or the Commission of the
European Union) having jurisdiction over the Company or any of
its subsidiaries or any of their properties or assets; and
except for the registration of the Shares and the ADSs under
the Securities Act and such consents, approvals,
authorizations, registrations or qualifications as may be
required under the United States Securities Exchange Act of
1934, as amended (the "Exchange Act") and applicable state
securities laws in connection with the purchase and
distribution of the Shares and the ADSs by the U.S.
Underwriters, no consents, approvals, authorizations or orders
of, or filing or registration with, any court or governmental
agency or body (including, without limitation, any statutes,
rules, orders or regulations promulgated by the Transport
Department, OPTA or the Commission of the European Union) is
required for the execution, delivery and performance of the
Operative Agreements by the Company and the consummation of
the transactions contemplated hereby and thereby.
(i) Except as disclosed in the Prospectus, there are
no contracts, agreements or understandings between the Company
and any person granting such person the right to require the
Company to file a registration statement under the Securities
Act with respect to any securities of the Company owned or to
be owned by such person or, other than obligations of the
Company to register the Shares being sold pursuant to this
Agreement and the International Underwriting Agreement by the
Selling Shareholders, to require the Company to include any
such securities in the securities registered pursuant to
either Registration Statement or the ADS Registration
Statement or in any securities being registered pursuant to
any other registration statement filed by the Company under
the Securities Act except as have been irrevocably waived,
until the date 180 days after the date hereof.
(j) Except as disclosed in the Prospectus, the
Company has not sold
<PAGE> 7
7
or issued any Ordinary Shares, ADSs or other share capital of
the Company or securities convertible or exercisable or
exchangeable for any such securities, during the six-month
period preceding the date of the Prospectus, including without
limitation any sales pursuant to Rule 144A under, or
Regulations D or S of, the Securities Act.
(k) The Company has full power and authority to enter
into this Agreement and the International Underwriting
Agreement.
(l) The Company has full power and authority to enter
into the Deposit Agreement; each of the Deposit Agreement has
been duly authorized by the Company, enforceable in accordance
with its terms, except that the enforcement thereof may be
subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing;
upon the due and valid issuance of the ADRs evidencing ADSs
against the deposit of Shares in respect thereof and against
payment therefor in accordance with the provisions of this
Agreement, such ADRs will be duly and validly issued and the
persons in whose names the ADRs are registered will be
entitled to the rights specified in the ADRs and in the
Deposit Agreement; the ADRs conform in all material respects
to the descriptions thereof contained in the Prospectus.
(m) The Company had full power and authority to enter
into the settlement agreement, dated July 21, 1999, among the
parties thereto (the "Settlement Agreement"); and the
Settlement Agreement is a valid and binding obligation of the
Company, enforceable against the Company and the other parties
thereto in accordance with its terms.
(n) The Operative Agreements conform in all material
respects to the descriptions thereof contained in the
Prospectus.
(o) No stamp, capital or other issuance or transfer
taxes or duties and no capital gains, income, withholding or
other taxes are payable by or on behalf of the U.S.
Underwriters or the International Managers in connection with
(i) the sale of the Shares (in the form of Ordinary Shares or
ADSs) by the Company to the U.S. Underwriters in accordance
with this Agreement and to the International Managers in
accordance with the International Underwriting Agreement, (ii)
the deposit with the Depositary or its nominee of Shares
against the issuance of ADRs evidencing ADSs, (iii) the
delivery of the Shares (in the form of Ordinary Shares or
ADSs) to or for the respective accounts of the U.S.
Underwriters or the International Managers in the manner
contemplated in this Agreement and the International
Underwriting Agreement, respectively, or (iv) the sale and
delivery by the U.S. Underwriters and the International
Managers to the initial purchasers therefrom.
<PAGE> 8
8
(p) Neither the Company nor any of its subsidiaries
has sustained, since the date of the latest audited financial
statements included in the Prospectus, any material loss or
interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or
decree, otherwise than as set forth in the Prospectus; and,
since such date, there has not been any change in the share
capital or long-term debt of the Company or any of its
subsidiaries or any material adverse change, or any
development involving a prospective material adverse change,
in or affecting the general affairs, management, financial
position, shareholders' equity or results of operations of the
Company and its subsidiaries, otherwise than as set forth in
the Prospectus.
(q) The financial statements (including the related
notes) included in the Prospectus were prepared in accordance
with generally accepted accounting principles in the United
States ("U.S. GAAP") consistently applied throughout the
periods involved and present fairly the financial condition
and results of operations of the entities purported to be
shown thereby, at the dates and for the periods indicated. The
summary financial data and selected financial and other data
included in the Prospectus have been accurately extracted from
the financial statements of the Company. The pro forma
financial information contained in the Prospectus has been
prepared on a basis consistent with the historical financial
statements contained in the Prospectus (except for the pro
forma adjustments specified therein), includes all material
adjustments to the historical financial information required
by Rule 11-02 of Regulation S-X under the Securities Act and
the Exchange Act to reflect the transactions described in the
Prospectus, gives effect to assumptions made on a reasonable
basis and fairly presents the historical and proposed
transactions contemplated by the Prospectus, the Operative
Agreements and the High Yield Offering.
(r) Arthur Andersen, who have certified certain
financial statements of the Company, whose report appears in
the Prospectus and who will deliver the initial letter
referred to in Section 6(t) hereof dated the date of the
Prospectus, are independent public accountants as required by
the Securities Act and the Rules and Regulations; and KPMG
Accountants N.V., who have certified certain financial
statements of Svianed B.V., whose report appears in the
Prospectus and who will deliver the initial letter referred to
in Section 6(t) hereof dated the date of the Prospectus, are
independent public accountants as required by the Securities
Act and the Rules and Regulations.
(s) The Company and each of its subsidiaries have
good title to all personal property owned by them, in each
case free and clear of all liens,
<PAGE> 9
9
encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of
such property and do not materially interfere with the use
made and proposed to be made of such property by the Company
and its subsidiaries. Except as otherwise described in the
Prospectus, neither the Company nor its subsidiaries owns any
title to real property or buildings, and all real property and
buildings held under lease by the Company and its subsidiaries
are held by them under valid, subsisting and enforceable
leases, with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such
property and buildings by the Company and its subsidiaries.
(t) The Company and each of its subsidiaries carry,
or are covered by, insurance in such amounts and covering such
risks as is adequate for the conduct of their respective
businesses and the value of their respective properties and as
is customary for companies engaged in similar businesses in
similar industries.
(u) The Company and each of its subsidiaries own or
possess adequate rights to use all material patents, patent
applications, trademarks, service marks, trade names,
trademark registrations, service mark registrations,
copyrights and licenses necessary for the conduct of their
respective businesses and have no reason to believe that the
conduct of their respective businesses will conflict with, and
have not received any notice of any claim of conflict with,
any such rights of others, other than such that the Company
believes will not have a material adverse effect on the
financial position, shareholders' equity, results of
operations, business or prospects of the Company and its
subsidiaries.
(v) There are no legal or governmental proceedings
pending to which the Company or any of its subsidiaries is a
party or of which any property or asset of the Company or any
of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries, might
have a material adverse effect on the financial position,
shareholders' equity, results of operations, business or
prospects of the Company and its subsidiaries; and to the best
of the Company's knowledge, no such proceedings are threatened
or contemplated by governmental authorities or threatened by
others.
(w) The Shares have been approved for a listing on
the Official Market of the stock exchange of Amsterdam
Exchanges N.V. (the "AEX") and the ADSs have been approved for
listing on the National Association of Securities Dealers,
Inc. Automated Quotation National Market System (the "Nasdaq
National Market System"), in each case with trading scheduled
to begin on a when, as and if issued basis, on the First
Delivery Date.
(x) The conditions for use of Form F-1, as set forth
in the General Instructions thereto, have been satisfied.
<PAGE> 10
10
(y) There are no contracts or other documents which
are required to be described in the Prospectus or filed as
exhibits to either Registration Statement or the ADS
Registration Statement by the Securities Act or by the Rules
and Regulations which have not been described in the
Prospectus or filed as exhibits to either Registration
Statement or the ADS Registration Statement.
(z) No relationship, direct or indirect, exists
between or among the Company on the one hand, and the
directors, officers, shareholders, customers or suppliers of
the Company on the other hand, which is required to be
described in the Prospectus and is not so described.
(aa) No labor disturbance by the employees of the
Company or any of its subsidiaries exists or to the knowledge
of the Company is imminent which might be expected to have a
material adverse effect on the consolidated financial
position, shareholders' equity, results of operations,
business or prospects of the Company and its subsidiaries.
(bb) The Company is in compliance in all material
respects with all applicable provisions of Netherlands and
Belgian laws relating to employees (including, without
limitation, laws relating to pension obligations).
(cc) The Company and its subsidiaries have duly filed
with the appropriate taxing authorities all tax returns,
reports and other information required to be filed through the
date hereof and have paid all taxes due thereon (except as are
being disputed in good faith and for which reserves in
accordance with U.S. GAAP have been set aside); each such tax
return, report or other information was, when filed, accurate
and complete in all material respects; nor does the Company
have any knowledge of any tax deficiency which, if determined
adversely to the Company or any of its subsidiaries, might
have a material adverse effect on the consolidated financial
position, shareholders' equity, results of operations,
business or prospects of the Company and its subsidiaries.
(dd) Except as disclosed in the Prospectus, under
current laws and regulations of The Netherlands and any
political subdivision thereof, all dividends and other
distributions declared and payable in respect of Ordinary
Shares may be paid by the Company in Dutch Guilders, euros or
another currency that, in each case, may be converted into
foreign currency and may be freely transferred out of The
Netherlands, and all such payments made to holders thereof who
are non-residents of The Netherlands will not be subject to
income, withholding or other taxes under laws and regulations
of The Netherlands or any political subdivision or taxing
authority thereof or therein and will otherwise be free and
clear of any other tax, duty, withholding or
<PAGE> 11
11
deduction in The Netherlands or any political subdivision or
taxing authority thereof or therein and without the necessity
of obtaining any governmental authorization in The Netherlands
or any political subdivision or taxing authority thereof or
therein.
(ee) No stamp or other taxes or duties are payable by
or on behalf of the U.S. Underwriters in The Netherlands upon
or in connection with the sale and delivery to or by the U.S.
Underwriters of the Shares and ADSs as contemplated by the
Prospectus.
(ff) As of the date hereof, and except as may
otherwise be disclosed in the Prospectus, the Company has not
(i) issued or granted any securities, including, without
limitation, any options or warrants, (ii) incurred any
liability or obligation, direct or contingent, other than
liabilities and obligations which were incurred in the
ordinary course of business, (iii) entered into any
transaction not in the ordinary course of business or (iv)
declared or paid any dividend on its issued share capital.
(gg) The Company (i) makes and keeps books and
records which are accurate in all material respects and (ii)
maintains internal accounting controls which provide
reasonable assurance that (A) transactions are executed in
accordance with management's authorization, (B) transactions
are recorded as necessary to permit preparation of its
financial statements and to maintain accountability for its
assets, (C) access to its assets is permitted only in
accordance with management's authorization and (D) the
reported accountability for its assets is compared with
existing assets at reasonable intervals.
(hh) Neither the Company nor any of its subsidiaries
is (i) in violation of its respective articles of association
or by-laws or equivalent constitutive documents, (ii) in
default in any material respect, and no event has occurred
which, with notice or lapse of time or both, would constitute
such a default, in the due performance or observance of any
term, covenant or condition contained in any material
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which it is a party or by which it
is bound or to which any of its properties or assets is
subject or (iii) is in violation in any material respect of
any law, ordinance, governmental rule, regulation or court
decree to which it or its properties or assets may be subject
or has failed to obtain any material license, permit,
certificate, franchise or other governmental authorization or
permit necessary to the ownership of its properties or assets
or to the conduct of its business.
(ii) Except as otherwise described in the Prospectus,
each of the Company and its subsidiaries possesses all
licenses, permits, certificates, franchises, approvals and
other authorizations necessary to the conduct of their
respective businesses and the ownership, lease and operation
of their
<PAGE> 12
12
respective properties; all such licenses, permits,
certificates, franchises, approvals and other authorizations
are in full force and effect and each of the Company and its
subsidiaries is in compliance therewith in all material
respects, except where the failure to possess such licenses,
permits, certificates, franchises, approvals and other
authorizations would not, in the aggregate, have a material
adverse effect on the business, properties, financial
condition, results of operations or prospects of the Company
and its subsidiaries, taken as a whole; and none of the
Company and any of its subsidiaries has received any notice of
any proceedings relating to the revocation or modification of
any such license, permit, certificate, franchise, approval or
authorization which, individually or in the aggregate, if the
subject of an unfavorable decision, ruling or result, might
have a material adverse effect on the business, properties,
financial condition, results of operations or prospects of the
Company and its subsidiaries, taken as a whole.
(jj) Neither the Company nor any of its subsidiaries,
nor any director, officer, agent, employee or other person
associated with or acting on behalf of the Company or any of
its subsidiaries, has (i) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful
expense relating to political activity, (ii) made any direct
or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds, (iii)
violated or is in violation of any provision of the United
States Foreign Corrupt Practices Act of 1977, as amended, or
(iv) made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment.
(kk) To the best of the Company's knowledge after due
inquiry, there has been no violation of any applicable
environmental law, ordinance, rule, regulation, order,
judgment, decree or permit in any jurisdiction with respect to
the properties of the Company or its subsidiaries.
(ll) There are no material acquisitions of businesses
or assets by the Company or any of its subsidiaries pending or
currently being negotiated.
(mm) Each of the Company and its subsidiaries has
undertaken a review of all of its computer hardware and
software ("Computer Equipment") and determined that such
Computer Equipment is not in need of replacement or
reprogramming to function correctly from January 1, 2000,
except where such replacement or reprogramming would not have
a material adverse effect on the Company and its subsidiaries.
(nn) The Company is not an open-end investment
company, unit investment trust or face-amount certificate
company that is or is required to be registered under Section
8 of the United States Investment Company Act of 1940, as
amended (the "Investment Company Act"), nor is it a closed-end
investment company required to be registered, but not
registered, thereunder; and the Company is not and, after
giving effect to the offering and sale of the
<PAGE> 13
13
Shares and the High Yield Offering, and the application of the
proceeds thereof as described in the Prospectus, will not be
an "investment company" as defined in the Investment Company
Act and the rules and regulations of the Commission
thereunder.
(oo) Neither the Company nor any subsidiary has
incurred any liability for a fee, commission, or other
compensation on account of the employment of a broker or
finder in connection with the transactions contemplated by
this Agreement, the International Underwriting Agreement or
the Deposit Agreement.
(pp) Neither the Company nor any subsidiary has
taken, directly or indirectly, any action which is designed to
or which has constituted or which might reasonably have been
expected to cause or result in stabilization or manipulation
of the price of any security of the Company in connection with
the offering of the Shares.
(qq) The Company owns no capital stock of, or other
equity interests in, any person or entity (other than VersaTel
Telecom Belgium N.V., VersaTel Telecom Europe B.V., Versatel
Telecom Netherlands B.V., Bizztel Telematica B.V., CS Net
B.V., CS Engineering B.V., Amstel Alpha B.V., 7-Klapper Beheer
B.V., ITinera Services N.V. and Svianed B.V.)
(rr) Taking into account the receipt of proceeds from
the offering and sale of the Shares and the High Yield
Offering, the Company does not expect to qualify as a passive
foreign investment company ("PFIC") as defined in Section
1296(a) of the United States Internal Revenue Code of 1986, as
amended (the "Code"), a "foreign personal holding company" as
defined in Section 552 of the Code or a "controlled foreign
corporation" as defined in Section 957 of the Code, for its
current taxable year or for future taxable years.
(ss) All of the representations, warranties and
agreements of the Company contained it the underwriting
agreement relating to the Company's concurrent offering of
Senior Dollar Notes due 2009 and Senior Euro Notes due 2009
(the "High Yield Offering") are true and correct in all
material respects.
2. Representations, Warranties and Agreements of the Selling
Shareholders. Each Selling Shareholder severally represents, warrants and agrees
that:
(a) (A) In the case of Selling Shareholders other
than Cromwilld, the Selling Shareholder has good and valid
title to the Warrants, each entitling the holder thereof to
purchase 13.334 Ordinary Shares and, immediately prior to
<PAGE> 14
14
the time at which the Shares to be sold by it in the offering
(the "Warrant Shares") are delivered to the U.S. Underwriters
and the International Managers, the Selling Shareholder will
have good and valid title to such Warrant Shares to be sold by
the Selling Shareholder pursuant to this Agreement on such
date, free and clear of all liens, encumbrances, equities or
claims; and upon delivery of such Warrant Shares and payment
therefor pursuant to this Agreement and the International
Underwriting Agreement, good and valid title to such Warrant
Shares, free and clear of all liens, encumbrances, equities or
claims, will pass to the several U.S. Underwriters or the
several International Managers, as the case may be; or (B) in
the case of Cromwilld, it has good and valid title to the
Shares to be sold by it, and, immediately prior to the time at
with the Shares to be sold by it in the Offering are delivered
to the U.S Underwriters, it will have good and valid title to
such Shares, free and clear of all liens, encumbrances,
equities or claims; and upon delivery of such Shares and
payment therefor pursuant to this Agreement and the
International Underwriting Agreement, good and valid title to
such Shares, free and clear of all liens, encumbrances,
equities or claims, will pass to the several U.S. Underwriters
or the several International Managers, as the case may be.
(b) (A) In the case of all Selling Shareholders other
than Cromwilld, the Selling Shareholder has placed in custody
under the irrevocable power of attorney and custody agreement
dated as of July 7, 1999 (together with the power of attorney
and custody agreement of Cromwilld referred to below, the
"Power of Attorney and Custody Agreement) with United States
Trust Company of New York, as custodian (together with the
custodian referred to in (B) below, the "Custodian"), a number
of Warrants that will become exercisable, upon the closing of
this offering contemplated hereby, into the Warrant Shares to
be delivered and sold by the Selling Shareholder pursuant to
this Agreement and the International Underwriting Agreement;
and (B) in the case of Cromwilld, it has placed in custody
under the irrevocable power of attorney and custody agreement
dated as of July 21, 1999 with the Company, acting in its
capacity as custodian, a number of Shares to be delivered and
sold by it pursuant to this Agreement and the International
Underwriting Agreement.
(c) Pursuant to the Power of Attorney and the Custody
Agreement, the Selling Shareholder has duly and irrevocably
executed and delivered a power of attorney appointing any of
R. Gary Mesch, Raj Raithatha and Leo van der Veen, as
attorneys-in-fact, with full power of substitution, and with
full authority (exercisable by any one or more of them) to (i)
(in the case of all Selling Shareholders other than Cromwilld)
elect to exercise a number of Warrants held by the Selling
Shareholder into Warrant Shares and (ii) execute and deliver
this Agreement and the International Underwriting Agreement
and to take such other action as may be necessary or desirable
to carry out the provisions thereof, in each case on behalf of
the Selling Shareholder.
<PAGE> 15
15
(d) The Selling Shareholder has full right, power and
authority to enter into this Agreement and the International
Underwriting Agreement and the Power of Attorney and Custody
Agreement; the execution, delivery and performance of this
Agreement and the International Underwriting Agreement, the
Power of Attorney and the Custody Agreement of the Selling
Shareholder and the consummation by the Selling Shareholder of
the transactions contemplated hereby and thereby will not
conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Selling Shareholder is a
party or by which the Selling Shareholder is bound or to which
any of the property or assets of the Selling Shareholder are
subject, nor will such actions result in any violation of the
provisions of the charter or by-laws, articles of partnership,
deed of trust or other equivalent constituent documents of
such Selling Shareholder or any statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Selling Shareholder or the property or
assets of the Selling Shareholder; upon execution and delivery
thereof by the attorney-in-fact, this Agreement and the
International Underwriting Agreement will be duly authorized,
executed and delivered by the Selling Shareholder; and, except
for the registration of the Warrant Shares (in the case of
Selling Shareholders other than Cromwilld) or the Shares (in
the case of Cromwilld) under the Securities Act and such
consents, approvals, authorizations, registrations or
qualifications as may be required under the Exchange Act and
applicable U.S. or Netherlands securities laws in connection
with the purchase and distribution of the Warrant Shares (in
the case of Selling Shareholders other than Cromwilld) or the
Shares (in the case of Cromwilld) by the U.S. Underwriters,
the International Managers and the Representatives, no
consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or
body is required for the execution, delivery and performance
of this Agreement, the International Underwriting Agreement
and the Power of Attorney and Custody Agreement by the Selling
Shareholder and the consummation by the Selling Shareholder of
the transactions contemplated hereby and thereby.
(e) To the extent that any statements or omissions
made in the Registration Statements, the Prospectus or any
amendment or supplement thereto are made in reliance upon and
in conformity with written information furnished to the
Company by the Selling Shareholders specifically for use
therein, the Primary Registration Statement did not, and the
Rule 462(b) Registration Statement, if any, the Prospectus and
any amendments or supplements to the Registration Statement or
the Prospectus will not, when they become effective or are
filed with the Commission, as the case may be, 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.
<PAGE> 16
16
(f) The Selling Shareholder has not taken and will
not take, directly or indirectly, any action which is designed
to or which has constituted or which might reasonably be
expected to cause or result in the stabilization or
manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares.
(g) (A) In the case of Selling Shareholders other
than Cromwilld, the information provided by the Selling
Shareholder in the Instruction to Purchase Warrant Shares in
Connection with, and Request to Include Warrant Shares for
Sale in, the initial public offering of the Company (attached
to the Power of Attorney and Custody Agreement) was true and
correct as of the date on which it was made, and as of the
date hereof; and, except as disclosed in the Prospectus,
within the past three years the Selling Shareholder has held
no position or office or had any other material relationship
with the Company, or (B) in the case of Cromwilld, the
information provided by it in the Selling Shareholder
Information Schedule (Exhibit B to the Settlement Agreement)
was true and correct when made and as of the date hereof.
(h) In the case of Cromwilld, it had full power and
authority to enter into the Settlement Agreement; the
Settlement Agreement has been duly authorized, executed and
delivered by it and constitutes a legally binding obligation
of Cromwilld, enforceable in accordance with its terms.
3. Purchase of the Shares and ADSs by the U.S. Underwriters.
On the basis of the representations and warranties contained in, and subject to
the terms and conditions of, this Agreement, (i) the Company agrees to sell -
Firm Shares (in the form of Ordinary Shares or ADSs) and (ii) each Selling
Shareholder agrees, severally but not jointly, to sell the number of Firm Shares
set forth opposite its name on Schedule II hereto, to the several U.S.
Underwriters, and each U.S. Underwriter, severally and not jointly, agrees to
purchase the number of Firm Shares (in the form of Ordinary Shares or ADSs) set
opposite such U.S. Underwriter's name in Schedule I hereto, from the Company and
the Selling Shareholders. Each U.S. Underwriter shall be obligated to purchase,
from the Company and from each Selling Shareholder, that number of Firm Shares
which represents the same proportion of the number of Firm Shares to be sold by
the Company and by each Selling Shareholder, as the number of Firm Shares set
forth opposite the name of such U.S. Underwriter in Schedule I represents of the
total number of Firm Shares to be purchased by all of the U.S. Underwriters
pursuant to this Agreement. The respective purchase obligations of the U.S.
Underwriters with respect to the Firm Shares (including Firm ADSs) shall be
rounded among the U.S. Underwriters to avoid fractional shares, as the
Representative may determine.
In addition, the Company grants to the U.S. Underwriters an
option to purchase up to an aggregate - Option Shares [and Cromwilld grants to
the U.S. Underwriters an option to purchase up to an aggregate - Option Shares]
(in each case in the form of Ordinary Shares or ADSs). Such option is granted
solely for the purpose of covering over-allotments in the sale of Firm Shares
and is exercisable as provided in Section 5 hereof.
<PAGE> 17
17
Option Shares shall be purchased severally for the account of the U.S.
Underwriters in proportion to the number of Firm Shares set opposite the name of
such U.S. Underwriters in Schedule I hereto. The respective purchase obligations
of the U.S. Underwriters with respect to the Option Shares shall be rounded
among the U.S. Underwriters to avoid fractional shares, as the Representatives
may determine.
The price of both the Firm Shares and any Option Shares
purchased from the Company and/or the Selling Shareholders in the form of
Ordinary Shares shall be - per Firm Share or Option Share, and the price of both
the Firm Shares and any Option Shares purchased from the Company and/or the
Selling Shareholders in the form of ADSs shall be $- per Firm ADS or Option ADS,
in each case net of underwriting discounts and commissions.
The Company and the Selling Shareholders shall not be
obligated to deliver any of the Shares to be delivered on the First Delivery
Date or the Second Delivery Date (each as defined herein), as the case may be,
except upon payment for all the Shares to be purchased on such Delivery Date as
provided herein and in the International Underwriting Agreement.
4. Offering of Shares and ADSs by the U.S. Underwriters. Upon
authorization by the U.S. Representative of the release of the Firm Shares, the
several U.S. Underwriters propose to offer the Firm Shares for sale upon the
terms and conditions set forth in the Prospectus; provided, however, that no
Shares registered pursuant to the 462(b) Registration Statement, if any, shall
be offered prior to the Effective Time thereof.
It is understood that - Firm Shares will initially be reserved
by the several U.S. Underwriters and the several International Managers for
offer and sale upon the terms and conditions set forth in the Prospectus to
employees and persons having business relationships with the Company and its
subsidiaries (the "Directed Share Program") who have heretofore delivered to the
Representatives offers or indications of interest to purchase Firm Shares in
form satisfactory to the Representatives, and that any allocation of such Firm
Shares among such persons will be made in accordance with timely directions
received by the Representatives from the Company; provided, that under no
circumstances will the Representatives or any U.S. Underwriter or any
International Manager be liable to the Company or to any such person for any
action taken or omitted in good faith in connection with such offering to
employees and persons having business relationships with the Company and its
subsidiaries. It is further understood that any Firm Shares which are not
purchased by such persons will be offered by the U.S. Underwriters and the
International Managers to the public upon the terms and conditions set forth in
the Prospectus.
Each U.S. Underwriter agrees that, except to the extent
permitted by the Agreement Among U.S. Underwriters and International Managers,
it will not offer or sell any of the Shares or ADSs outside of the United States
or Canada.
5. Delivery of and Payment for the Shares. Delivery of and
payment for the Firm Shares shall be made at the offices of [Stibbe Simont
Monahan Duhot, Amsterdam], at [time], on the [fourth] full business day
following the Date of this Agreement or at such other
<PAGE> 18
18
date or place as shall be determined by agreement between the Representatives
and the Company. This date and time are sometimes referred to as the "First
Delivery Date." On the First Delivery Date, (a) with respect to the Firm Shares
to be sold by the Company and the Selling Shareholders to be delivered in the
form of Ordinary Shares, the Company and the Custodian, on behalf of the Selling
Shareholders, shall deliver or cause to be delivered to the U.S. Representative
for the account of each U.S. Underwriter such Firm Shares by book entry transfer
through Nederlands Centraal Instituut voor Giraal Effectenverkeer B.V.
("NECIGEF"), in Amsterdam, The Netherlands, for credit (i) to the designated
account of the U.S. Representative or its nominee at NECIGEF or further credit
to designated accounts with the Euroclear System ("Euroclear") or Cedel Bank,
societe anonyme ("Cedel"), as the case may be, in such respective portions as
the U.S. Representative may designate by notice to the Company and the Custodian
given at least two full business days prior to the First Delivery Date, and (ii)
to such other NECIGEF accounts as the U.S. Representative may so designate and
(b) with respect to the Firm Shares to be sold by the Company and the Selling
Shareholders to be delivered in the form of ADSs, if any, the Company and the
Custodian, on behalf of the Selling Shareholders, shall (i) deliver or cause to
be delivered such Firm Shares by book entry transfer through NECIGEF for credit
to the account of the Correspondent Bank of the Depositary, (ii) cause the
Depositary to issue one or more ADRs evidencing the ADSs representing such Firm
Shares to be registered in such names as specified below and (iii) deliver or
cause to be delivered such ADRs to the U.S. Representative for the account of
each U.S. Underwriter, in each case against payment to or upon the order of (A)
the Company of the purchase price therefor by wire transfer in same-day funds to
the account or accounts specified by the Company to the U.S. Representative and
(B) the Custodian, on behalf of the Selling Shareholders, of the purchase price
therefor by wire transfer in same-day funds to the account or accounts specified
by the Custodian to the U.S. Representative, in each case upon two business
days' prior notice. Time shall be of the essence, and delivery at the time and
place specified pursuant to this Agreement is a further condition of the
obligation of each U.S. Underwriter hereunder. Upon delivery, the Firm Shares
shall be registered in such names and in such denominations as the U.S.
Representative shall request in writing not less than two full business days
prior to the First Delivery Date.
The U.S. Representative, on behalf of the several U.S.
Underwriters, may elect to have Firm Shares delivered in the form of either
Ordinary Shares or ADSs in such portions as they may elect, in satisfaction of
the Company's and the Selling Shareholders' obligations to sell to the several
U.S. Underwriters, and the several U.S. Underwriters' obligations to purchase,
such Firm Shares. Notice of such election with respect to the First Delivery
Date shall be given by the U.S. Representative to the Custodian and the Company
upon two business days' prior notice. Upon delivery, the ADRs evidencing the
ADSs representing the Firm Shares shall be registered in such names and in such
denominations as the U.S. Representative shall request in writing not less than
two full business days prior to the First Delivery Date. For the purpose of
expediting the checking and packaging of the ADRs evidencing the ADSs
representing the Firm Shares, the Company and the Custodian, on behalf of the
Selling Shareholders, shall make such ADRs available for inspection by the U.S.
Representative in New York, New York, on the business day prior to the First
Delivery Date.
At any time on or before the thirtieth day after the date of
this Agreement, the
<PAGE> 19
19
option granted in Section 3 may be exercised by written notice being given to
the Company [and Cromwilld] by the Representatives. Such notice shall set forth
the aggregate number of Option Shares as to which the option is being exercised,
whether all or a portion of such shares are to be delivered in the form of ADRs
evidencing ADSs representing such Option Shares, the denominations in which the
shares of Option Shares and ADRs, if any, are to be issued and the date and
time, as determined by the Representatives, when the Option Shares and ADRs, if
any, are to be delivered; provided, however, that this date and time shall not
be earlier than the First Delivery Date nor earlier than the second business day
after the date on which the option shall have been exercised nor later than the
fifth business day after the date on which the option shall have been exercised.
The date and time the Option Shares are delivered are sometimes referred to as
the "Second Delivery Date" and the First Delivery Date and the Second Delivery
Date are sometimes each referred to as the "Delivery Date".
Delivery of and payment for the Option Shares shall be made at
the place specified in the first sentence of the first paragraph of this Section
5 (or at such other place as shall be determined by agreement between the
Representatives and the Company) at [time], on the Second Delivery Date. On the
Second Delivery Date, (a) with respect to the Option Shares to be delivered in
the form of Ordinary Shares, the Company [and the Custodian on behalf of
Cromwilld] shall deliver or cause to be delivered to the U.S. Representative for
the account of each U.S. Underwriter such Option Shares by book entry transfer
through NEGIGEF in Amsterdam, The Netherlands, for credit (i) to the designated
account of the U.S. Underwriter and for further credit to designated accounts at
Euroclear or Cedel, as the case may be, in such respective portions as the U.S
Representative may designate by notice to the Company given at least two full
business days prior to the Second Delivery Date, and (ii) to such other NECIGEF
accounts as the U.S Representative may so designate and (b) with respect to the
Option Shares to be delivered in the form of ADSs, if any, the Company [and the
Custodian on behalf of Cromwilld] shall (i) deliver or cause to be delivered
such Option Shares by book entry transfer through NECIGEF for credit to the
account of the Correspondent Bank of the Depositary, (ii) cause the Depositary
to issue one or more ADRs evidencing the ADSs representing such Option Shares to
be registered in such names as specified below and (iii) deliver or cause to be
delivered such ADRs to the U.S. Representative for the account of each U..S.
Underwriter, in each case, against payment to or upon the order of the Company
[and the Custodian on behalf of Cromwilld] of the purchase price therefor by
wire transfer in (same day) funds to the account or accounts specified by the
Company to the U.S. Representative upon two business days' prior notice. Time
shall be of the essence, and delivery at the time and place specified pursuant
to this Agreement is a further condition of the obligation of each U.S.
Underwriter hereunder. Upon delivery, the Option Shares shall be registered in
such names and in such denominations as the U.S. Representative shall request in
the aforesaid written notice.
The U.S. Representative, on behalf of the several U.S.
Underwriters, may elect to have Option Shares delivered in the form of either
Ordinary Shares or ADSs in such portions as they may elect in satisfaction of
the Company's [and Cromwilld's] obligation to sell to the several U.S.
Underwriters, and the several U.S. Underwriters' obligations to purchase, such
Option Shares. Notice of such election with respect to the Second Delivery Date
shall be given by the U.S. Representative to the Company [and the Custodian on
behalf
<PAGE> 20
20
of Cromwilld] in accordance with the provisions of the second preceding
paragraph. Upon delivery, the ADRs evidencing the ADSs representing the Option
Stock shall be registered in such names and in such denominations as the Lead
Manager shall request in accordance with the provisions of the second preceding
paragraph. For the purpose of expediting the checking and packaging of the ADRs
evidencing the ADSs representing Option Shares, the Company shall make such ADRs
available for inspection by the U.S. Representative in New York, New York, on
the business day prior to the Second Delivery Date.
With respect to all or any portion of Shares and ADSs to be
purchased and sold hereunder, the U.S. Representative, on behalf of the U.S.
Underwriters and for the purposes of effecting reallocations of Shares and ADSs,
may elect to have such Shares and ADSs delivered to and paid for by the
International Managers in satisfaction of the obligation of the Company and the
Selling Shareholders to sell to the U.S. Underwriters, and the U.S.
Underwriters' obligations to purchase, such Shares and ADSs. Notice of such
election shall be given by the U.S. Representative to the Company and the
Selling Shareholders two business days prior to the relevant Delivery Date.
With respect to all or any portion of the Shares and ADSs to
be purchased and sold pursuant to the International Underwriting Agreement, the
International Representative, on behalf of the International Managers and for
purposes of effecting reallocations of Shares and ADSs, may elect to have such
Shares and ADSs delivered to and paid for by the U.S. Underwriters in
satisfaction of the obligation of the Company and the Selling Shareholders to
sell to the International Managers, and the obligations of the International
Managers to purchase, such Shares and ADSs. Notice of such election shall be
given by the International Representative to the Company and the Selling
Shareholders two business days prior to the relevant Delivery Date.
6. Further Agreements of the Company. The Company agrees:
(a) To prepare the Rule 462(b) Registration
Statement, if necessary, in a form approved by the
Representatives and to file such 462(b) Registration Statement
with the Commission on the date hereof; to prepare the
Prospectus in a form approved by the Representatives and to
file such Prospectus pursuant to Rule 424(b) under the
Securities Act not later than 5:00 p.m., New York City time,
on the day following the execution and delivery of this
Agreement; to make no further amendment or any supplement to
either Registration Statement, the ADS Registration Statement
or to the Prospectus except as permitted herein; to advise the
Representatives, promptly after it receives notice thereof, of
the time when each Registration Statement or the ADS
Registration Statement or any amendment thereto has been filed
or becomes effective or any supplement to the Prospectus or
any amended Prospectus has been filed and to furnish the
Representatives with copies thereof; to advise the
Representatives, promptly after it receives notice thereof, of
the issuance by the Commission of any stop order or of any
order preventing or suspending
<PAGE> 21
21
the use of any Preliminary Prospectus or the Prospectus, of
the suspension of the qualification of the Shares or ADSs for
offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any
request by the Commission for the amending or supplementing of
either Registration Statement, the ADS Registration Statement
or the Prospectus or for additional information; and, in the
event of the issuance of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus
or the Prospectus or suspending any such qualification, to use
promptly its best efforts to obtain its withdrawal;
(b) To furnish promptly to each of the
Representatives and to U.S. counsel to the U.S. Underwriters
and the International Managers a signed copy of each of the
Registration Statements and the ADS Registration Statement as
originally filed with the Commission, and each amendment
thereto filed with the Commission, including all consents and
exhibits filed therewith;
(c) To deliver promptly to the Representatives such
number of the following documents as the Representatives shall
reasonably request: (i) conformed copies of the Registration
Statements as originally filed with the Commission and each
amendment thereto (in each case excluding exhibits other than
this Agreement and the computation of per share earnings) and
(ii) each Preliminary Prospectus, the Prospectus (not later
than 5:00 p.m., New York City time, on the day following the
execution and delivery of this Agreement) and any amended or
supplemented Prospectus (not later than 10:00 a.m., New York
City time, on the day following the date of such amendment or
supplement), as the Representatives may reasonably request;
and, if the delivery of a prospectus is required at any time
after the Effective Time of the Primary Registration Statement
in connection with the offering or sale of the Shares or ADSs
(or any other securities relating thereto) and if at such time
any event shall have occurred as a result of which the
Prospectus as then amended or supplemented would include any
untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made when such Prospectus is delivered, not misleading,
or, if for any other reason it shall be necessary to amend or
supplement the Prospectus in order to comply with the
Securities Act, to notify the Representatives and, upon their
request, to prepare and furnish without charge to each U.S.
Underwriter and to any dealer in securities as many copies as
the Representatives may from time to time reasonably request
of an amended or supplemented Prospectus which will correct
such statement or omission or effect such compliance;
(d) To file promptly with the Commission any
amendment to the Registration Statements or the ADS
Registration Statement, or the Prospectus or any supplement to
the Prospectus, that may, in the reasonable judgment of the
Company or the Representatives, be required by the Securities
Act or requested by the Commission;
<PAGE> 22
22
(e) Prior to filing with the Commission any amendment
to either Registration Statement or the ADS Registration
Statement, or supplement to the Prospectus, or any Prospectus
pursuant to Rule 424 of the Rules and Regulations, to furnish
a copy thereof to the Representatives and counsel to the U.S.
Underwriters and the International Managers and not to file
any such document to which the Representative shall reasonably
object after having been given reasonable notice of the
proposed filing thereof;
(f) As soon as practicable after the Effective Date
of the Primary Registration Statement, to make generally
available to the Company's security holders and to deliver to
the Representatives an earning statement of the Company and
its subsidiaries (which need not be audited) complying with
Section 11(a) of the Securities Act and the Rules and
Regulations (including, at the option of the Company, Rule
158);
(g) For a period of five years following the
Effective Date of the Primary Registration Statement, to
furnish to the Representatives copies of all materials
furnished by the Company to its shareholders and all public
reports and all reports and financial statements furnished by
the Company to the principal national securities exchange or
automatic quotation system upon which the Shares or ADSs may
be listed or quoted pursuant to requirements of or agreements
with such exchange or system or to the Commission pursuant to
the Exchange Act or any rule or regulation of the Commission
thereunder;
(h) Promptly from time to time to exercise best
efforts to take such action as the Representatives may
reasonably request, in cooperation with the U.S. Underwriters
and the International Managers, to qualify the Shares and ADSs
for offering and sale under the securities laws of such
jurisdictions as the Representatives may request and to comply
with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be
necessary to complete the distribution of the Shares and ADSs;
provided that, in connection therewith, the Company shall not
be required to qualify as a foreign corporation or otherwise
subject itself to taxation in any jurisdiction in which it is
not otherwise so qualified or subject, except as may be
provided in the Operative Agreements.
(i) For a period of 180 days from the date of the
Prospectus, not to, directly or indirectly, issue, offer,
pledge, sell, contract to sell or sell or grant any contract,
option, right or warrant to purchase, purchase any option to
sell, or otherwise transfer or dispose of (or enter into any
transaction or device which is designed to, or could be
expected to, result in the disposition, transfer or purchase
by any person at any time in the future of) any Shares or
ADSs, Ordinary Shares (other than (x) Ordinary Shares issued
pursuant to employee stock option and incentive plans existing
on the date hereof and (y) Ordinary Shares or other share
capital used by the Company in connection with
<PAGE> 23
23
acquisitions or strategic alliances (provided in each such
case that the recipient of such shares executes a Lock-up
Letter (as defined below) in advance of any such transfer)) or
any other share capital of the Company or securities
convertible or exercisable or exchangeable for any such
securities, or sell or grant options, rights or warrants with
respect to any such securities (other than the grant of
options pursuant to employee stock option and incentive plans
existing on the date hereof) or enter into any swap or similar
agreement that transfers, in whole or in part, the economic
risk of ownership of any such securities, whether any of the
foregoing transactions is to be settled by delivery of any
such securities, in cash or otherwise, in each case without
the prior written consent of the U.S. Representative; and to
cause each shareholder of the Company, [each] holder of
options in securities of the Company and each person named in
the Prospectus to furnish to the Representatives, prior to the
First Delivery Date, a letter or letters (the "Lock-up
Letters"), in form and substance satisfactory to counsel to
the U.S. Underwriters, pursuant to which each such person
shall agree not to, directly or indirectly, offer, pledge,
sell, contract to sell or sell or grant any contract, option,
right or warrant to purchase, purchase any option to sell, or
otherwise transfer or dispose of (or enter into any
transaction or device which is designed to, or could be
expected to, result in the disposition, transfer or purchase
by any person at any time in the future of) any Shares, ADSs
or other share capital of the Company or securities
convertible or exercisable or exchangeable for any such
securities, or sell or grant options, rights or warrants with
respect to any such securities or enter into any swap or
similar agreement that transfers, in whole or in part, the
economic risk of ownership of any such securities (other than
(x) any exercise of any stock option granted to such person
pursuant to the Company's stock option plans prior to the date
hereof (although such sentence shall apply to any subsequent
sale of shares received upon any such exercise) or (y) if such
person is a shareholder of the Company, the transfer of any
Ordinary Shares to an affiliate of such person, provided that
the Representatives are notified in advance of any such
proposed transfer and are furnished in advance of such
transfer with a copy of the Lock-up Letter duly executed by
the transferee), whether any of the foregoing transactions is
to be settled by delivery of any such securities, in cash or
otherwise, for a period of 180 days from the date of the
Prospectus;
(j) To use all reasonable efforts to maintain the
listing of the Shares on the AEX and of the ADSs on the Nasdaq
National Market System until none of the Shares and ADSs is
outstanding;
(k) To comply in all material respects with the
Deposit Agreement so that ADRs evidencing ADSs will be
executed by the Depositary and delivered to the U.S.
Underwriters on each Delivery Date;
<PAGE> 24
24
(l) To comply in all material respects with all
covenants and agreements of the Company contained in
underwriting agreement relating to the High Yield Offering;
(m) To apply the net proceeds from the sale of the
Shares and ADSs being sold by the Company as set forth in the
Prospectus, and to apply the net proceeds from the Third High
Yield Offering as set forth in the Prospectus and in each
prospectus relating to such Offering;
(n) Between the date hereof and the First Delivery
Date (both dates inclusive), to notify and consult with the
Representatives, and to cause its subsidiaries and all other
parties acting on its or their behalf to notify and consult
with the Representatives, prior to issuing any announcement
which could be material in the context of the distribution of
the Shares and ADSs;
(o) Promptly to inform the Representatives of any
communications received by the Company from any governmental
or regulatory agency or authority, including, without
limitation, any Netherlands or Belgian regulatory authority,
the Luxembourg Stock Exchange, or the Commission, relating to
the offering of the Shares and ADSs and to furnish the
Representatives with copies thereof;
(p) To take such steps as shall be necessary to
ensure that neither the Company nor any subsidiary shall
become an "investment company" within the meaning of such term
under the Investment Company Act, and the rules and
regulations of the Commission thereunder;
(q) To not take, directly or indirectly, any action
which is designed to stabilize or manipulate, or which
constitutes or which might reasonably be expected to cause or
result in stabilization or manipulation, of the price of any
security of the Company in connection with the offering of the
Shares and ADSs;
(r) To take reasonable steps to minimize its
accumulation of passive income and passive assets and the risk
of the Company qualifying as a PFIC for 1999 and for future
years; provided that such steps are consistent with the
Company's general business plan and other business
considerations (which are subject to change);
(s) To monitor its status as a PFIC and, in the event
the Company is a PFIC, to provide the requisite information to
enable shareholders to make qualified electing fund (as such
term is used in the Code) elections;
(t) To cause each of Arthur Andersen and KPMG
Accountants N.V. to
<PAGE> 25
25
deliver an initial comfort letter, with respect to the
financial statements of the Company and Svianed B.V.,
respectively, dated the date of the Prospectus, to the U.S.
Underwriters and the International Managers, in form and
substance reasonably satisfactory to the Representatives at or
prior to the time copies of the Prospectus are furnished to
the Representatives; and
(u) In advance of registering any transfers of its
Ordinary Shares from Telecom Founders B.V. to a holder of
depositary receipts in Telecom Founders, to provide (or cause
Telecom Founders to provide) to the Representatives and their
counsel evidence satisfactory to the Representatives that such
transfers may be made pursuant to a valid exemption under the
Securities Act.
7. Further Agreements of the Selling Shareholders. Each
Selling Shareholder agrees:
(a) That the Shares to be sold by the Selling
Shareholder under this Agreement and the International
Underwriting Agreement, and the Warrants (in the case of
Selling Shareholders other than Cromwilld) or the Shares (in
the case of Cromwilld) that have been placed in custody by the
Selling Shareholder with the Custodian, are subject to the
interest of the U.S. Underwriters, the International Managers
and the other Selling Shareholders thereunder, that the
arrangements made by the Selling Shareholder for such custody
are irrevocable (except as otherwise explicitly provided in
the Power of Attorney and Custody Agreement), and that the
obligations of the Selling Shareholder under each this
Agreement and the International Underwriting Agreement shall
not be terminated by any act of the Selling Shareholder, by
operation of law or, in the case of a trust, by the death or
incapacity of any executor or trustee or the termination of
such trust, or the occurrence of any other event.
(b) To deliver to the Representatives prior to the
Delivery Date a properly completed and executed United States
Treasury Department Form W-8 (if the Selling Shareholder is a
non-United States person) or Form W-9 (if the Selling
Shareholder is a United States person.)
(c) To cooperate with the Company, the U.S.
Underwriters and the International Managers and to execute and
deliver, or use its best efforts to cause to be executed and
delivered, all such other instruments, and take all such other
actions as such party may reasonably be requested to take by
the Company, the U.S. Underwriters and the International
Managers from time to time, in order to effectuate the
exercise of Warrants and the sale of Warrant Shares (in the
case of Selling Shareholders other than Cromwilld) or the
Shares (in the case of Cromwilld) in the offering contemplated
hereby.
<PAGE> 26
26
8. Expenses. The Company agrees to pay or cause to be paid:
(a) the costs incident to the authorization, issuance, sale and delivery of the
Shares and ADSs and any taxes payable in that connection; (b) the costs incident
to the preparation, printing and distributing of the Registration Statements,
the ADS Registration Statement, each Preliminary Prospectus, each Prospectus and
any amendments, supplements and exhibits thereto; (c) the costs of distributing
the Registration Statements and the ADS Registration Statement as originally
filed and each amendment thereto and any post-effective amendments thereto
(including, in each case, exhibits), each Preliminary Prospectus, the
Prospectus, the International Prospectus and any amendment or supplement to the
Prospectus or the International Prospectus, all as provided in this Agreement
and the International Underwriting Agreement; [(d) the costs of producing and
distributing this Agreement, the International Underwriting Agreement, the
Agreement Among U.S. Underwriters and International Managers, the Agreement
Among International Managers and the Supplemental Agreement Among U.S.
Underwriters;] (e) the filing fees incident to securing any required review by
the National Association of Securities Dealers, Inc. of the terms of sale of the
Shares and ADSs; (f) the fees and expenses of qualifying the Shares and ADSs
under the securities laws of the several jurisdictions as provided in Section
6(h) and of preparing, printing and distributing a Blue Sky Memorandum
(including reasonable related fees and expenses of counsel to the U.S.
Underwriters[, including Canadian counsel]); [(g) (i) all costs and expenses
incident to the preparation of the "road show" presentation materials and (ii)
all costs and expenses incident to the road show travelling expenses of the
Company]; (h) the costs of preparing ADR certificates evidencing the ADSs; (i)
all expenses and fees in connection with the application for inclusion of the
Shares on the AEX and the ADSs on the Nasdaq National Market System, or the
obtaining of any approvals in connection with the sale of the Shares and ADSs
from relevant authorities in The Netherlands or Belgium; (j) the costs and
expenses of depositing any Shares under the Deposit Agreement against issuance
of ADRs evidencing the ADSs; (k) the fees and expenses (including fees and
disbursements of counsel) of the Depositary and any nominee or custodian
appointed under the Deposit Agreement, other than the fees and expenses to be
paid by holders of ADRs (except the U.S. Underwriters and the International
Managers, in connection with the initial purchase of the ADSs); (l) the fees and
expenses of any Authorized Agent (as defined in Section 19 hereof); (m) the cost
and charges of any transfer agent or registrar; (n) all stamp or other issuance
or transfer taxes or governmental duties, if any, payable by the U.S.
Underwriters in connection with the offer and sale of the Shares and ADSs to the
U.S. Underwriters and by the U.S. Underwriters to the initial purchasers
therefrom; and (o) all other costs and expenses incident to the performance of
the obligations of the Company under this Agreement not otherwise specifically
provided for in this Section 8, including, without limitation, the fees and
expenses of Arthur Andersen, the Company's independent accountants, KPMG
Accountants N.V., the accountants of Svianed B.V., Shearman & Sterling, U.S.
counsel to the Company, and Stibbe Simont Monahan Duhot, Netherlands counsel to
the Company; provided that, except as provided in this Section 8 and in Section
11, the U.S. Underwriters shall pay their own costs and expenses, including the
costs and expenses of their counsel and any transfer taxes on the Shares and
ADSs which they may sell. The Company shall pay the expenses of the Selling
Shareholders hereunder, as provided in each Power of Attorney and Custody
Agreement; provided that in no event shall Cromwilld be liable to the Company
for any
<PAGE> 27
27
expenses incurred in connection with the transactions contemplated by this
Agreement and the International Underwriting Agreement.
9. Conditions of the U.S. Underwriters' Obligations. The
several obligations of the U.S. Underwriters hereunder are subject to the
accuracy, when made and on each Delivery Date, of the representations and
warranties of the Company contained herein, to the performance by the Company of
its obligations hereunder, and to each of the following additional terms and
conditions:
(a) The Rule 462(b) Registration Statement, if any,
and the Prospectus shall have been timely filed with the
Commission in accordance with Section 6(a); no stop order
suspending the effectiveness of any of either Registration
Statement or the ADS Registration Statement or any part
thereof shall have been issued and no proceeding for that
purpose shall have been initiated or threatened by the
Commission; and any request of the Commission for inclusion of
additional information in either of the Registration
Statements, the ADS Registration Statement or the Prospectus
or otherwise shall have been complied with.
(b) No U.S. Underwriter or International Underwriter
shall have discovered and disclosed to the Company on or prior
to such Delivery Date that either Registration Statement, the
ADS Registration Statement or the Prospectus or any amendment
or supplement thereto contain any untrue statement of a fact
which, in the opinion of counsel to the U.S. Underwriters and
the International Managers, is material or omits to state any
fact which, in the opinion of such counsel, is material and is
required to be stated therein or is necessary to make the
statements therein not misleading.
(c) All corporate proceedings and other legal matters
incident to the authorization, form and validity of this
Agreement, the International Underwriting Agreement, the
Deposit Agreement, the Shares, the ADSs and the ADRs and each
Registration Statement, the ADS Registration Statement and the
Prospectus or any amendment or supplement thereto, and all
other legal matters relating to this Agreement, the
International Underwriting Agreement, the Deposit Agreement,
the Power of Attorney and Custody Agreement and the
transactions contemplated hereby and thereby shall be
reasonably satisfactory in all material respects to counsel to
the U.S. Underwriters and the International Managers, and the
Company and the Selling Shareholders shall have furnished to
such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters.
(d) Shearman & Sterling shall have furnished to the
Representatives its written opinion, as U.S. counsel to the
Company, addressed to the U.S. Underwriters and the
International Managers and dated such Delivery Date, in
<PAGE> 28
28
form and substance satisfactory to the Representatives, to the
effect that:
(i) The Primary Registration Statement and
the ADS Registration Statement were declared
effective under the Securities Act as of the date and
time specified in such opinion, the Rule 462(b)
Registration Statement, if any, was filed with the
Commission on the date specified therein, the
Prospectus was filed with the Commission pursuant to
the subparagraph of Rule 424(b) of the Rules and
Regulations specified in such opinion on the date
specified therein and no stop order suspending the
effectiveness of either Registration Statement or the
ADS Registration Statement has been issued and no
proceeding for that purpose is pending or threatened
by the Commission;
(ii) The Registration Statements and the ADS
Registration Statement, as of their respective
Effective Dates, and the Prospectus, as of its date,
and any further amendments or supplements thereto, as
of their respective dates, made by the Company prior
to such Delivery Date (other than the financial
statements and other financial data contained
therein, as to which such counsel need express no
opinion) complied as to form in all material respects
with the requirements of the Securities Act and the
Rules and Regulations;
(iii) To the best of such counsel's knowledge,
there are no contracts or other documents which are
required to be described in the Prospectus or filed
as exhibits to the Registration Statements or the ADS
Registration Statement by the Securities Act or by
the Rules and Regulations which have not been
described or filed as exhibits to the Registration
Statements or the ADS Registration Statement or
incorporated therein by reference as permitted by the
Rules and Regulations;
(iv) Assuming due authorization, execution
and delivery by the Company under the laws of The
Netherlands, each of this Agreement and the
International Underwriting Agreement has been duly
executed and delivered by the Company insofar as New
York law is concerned;
(v) Assuming due authorization, execution
and delivery by the Company under the laws of The
Netherlands, the Deposit Agreement has been duly
executed and delivered by the Company insofar as New
York law is concerned and, assuming due
authorization, execution and delivery of the Deposit
Agreement by the Depositary and that each of the
Depositary and (under the laws of The Netherlands)
the Company has full power, authority and legal right
to enter into and perform its obligations thereunder,
constitutes a valid
<PAGE> 29
29
and legally binding agreement of the Company, except as
enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar
laws affecting enforcement of creditors' rights generally
and to general principles of equity (regardless of whether
in a proceeding in equity or at law);
(vi) Assuming due authorization, execution and delivery
of the Deposit Agreement by the Depositary, upon due
issuance by the Depositary of the ADRs evidencing ADSs being
delivered by the Company at such Delivery Date against the
deposit of Ordinary Shares to be deposited by the Company in
respect thereof in accordance with the provisions of the
Deposit Agreement, such ADRs will be duly and validly issued
and will entitle the persons in whose names the ADRs are
registered to the rights specified therein and in the
Deposit Agreement;
(vii) Assuming the validity of such actions under the
laws of The Netherlands, under the laws of the State of New
York relating to submission to personal jurisdiction, the
Company has, pursuant to Section 19 of this Agreement,
legally, validly and irrevocably submitted to the personal
jurisdiction of any state or federal court located in the
Borough of Manhattan, The City of New York, New York in any
action arising out of or relating to this Agreement or the
transactions contemplated hereby, and has legally, validly
and effectively appointed the Authorized Agent as its
authorized agent for the purposes described in Section 19 of
this Agreement, and the Company has validly and irrevocably
waived (A) the defense of an inconvenient forum to the
maintenance of any such suit or proceeding and (B) any
immunity to jurisdiction to which it may otherwise be
entitled in any such suit or proceeding;
(viii) The issue and sale of the Shares and ADSs being
delivered by the Company at such Delivery Date, the deposit
with the Depositary of the Ordinary Shares to be delivered
in the form of ADSs against the issuance of ADRs evidencing
ADSs pursuant to the Deposit Agreement and the compliance by
the Company with all of the provisions of this Agreement,
the International Underwriting Agreement, the Deposit
Agreement and the Power of Attorney and Custody Agreement
and the consummation by the Company of the transactions
contemplated herein and therein, do not and will not
conflict with or result in a breach or violation of any of
the terms or provisions of, or constitute a default under,
(A) any existing applicable law, rule or regulation of any
court or governmental agency or body of the United States or
the State of New York (other than state securities or Blue
Sky laws as to which we have not been requested to express
<PAGE> 30
30
any opinion) or (B) any order, known to us, of any
government, governmental instrumentality or court of the
United States or the State of New York having jurisdiction
over the Company or any of their properties or assets; and,
except for the registration of the Shares and the ADSs under
the Securities Act and such consents, approvals,
authorizations, registrations or qualifications as may be
required under the Exchange Act and applicable state
securities laws in connection with the purchase and
distribution of the Shares and the ADSs by the U.S.
Underwriters and the International Managers, no consent,
approval, authorization or order of, or filing or
registration with, any such court, governmental agency or
body is required for the execution, delivery and performance
of this Agreement, the U.S. Underwriting Agreement or the
Deposit Agreement by the Company and the consummation of the
transactions contemplated hereby and thereby;
(ix) The statements set forth in the Prospectus under
the captions "Description of American Depositary Receipts,"
insofar as such statements purport to constitute a summary
of the terms of the Deposit Agreement, the ADSs and the
ADRs, fairly summarize such terms, laws, agreements and
other documents in all material respects;
(x) The statements set forth in the Prospectus under
the caption "Tax Considerations -- U.S. Federal Income Tax
Considerations" accurately summarize, subject to limitations
and qualifications stated therein, the material U.S. federal
income tax consequences to a U.S. Holder of the purchase,
ownership and disposition of Ordinary Shares or ADSs;
(xi) The Company is not and, after giving effect to the
offering and sale of the Shares and ADSs and the High Yield
Offering, will not be an "investment company" or an entity
"controlled" by an "investment company," as such terms are
defined in the United States Investment Company Act of 1940;
and
(xii) The opinion of such counsel delivered pursuant to
Section 6(d) of the High Yield Underwriting Agreement is
confirmed and the U.S. Underwriters may rely upon such
opinion as if it were addressed to them.
In rendering such opinion, such counsel may (i) state that their
opinion is limited to matters governed by the federal laws of the
United States of America and the laws of the State of New York and
(ii) rely (to the extent such counsel deems proper), as to matters
involving the application of the
<PAGE> 31
31
laws of The Netherlands upon the opinion of Stibbe Simont Monahan
Duhot referred to in Section 9(e) below if so specified in its
opinion. Such counsel shall also have furnished to the Representatives
a written statement, addressed to the U.S. Underwriters and dated such
Delivery Date, in form and substance satisfactory to the
Representatives, to the effect that (x) such counsel has acted as
counsel to the Company in connection with the preparation of the
Registration Statements and the ADS Registration Statement and (y)
based on the foregoing, no facts have come to the attention of such
counsel which lead it to believe that (I) each Registration Statement
and the ADS Registration Statement, as of their respective Effective
Dates, and the Prospectus, as of its date, contained any untrue
statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading or, (II) as of such Delivery Date,
that the Prospectus or International Prospectus contains any untrue
statement of a material fact or, omits to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. The foregoing opinion and statement may be
qualified by a statement to the effect that such counsel does not
assume any responsibility for the accuracy, completeness or fairness
of the statements contained in each Registration Statement, the ADS
Registration Statement or the Prospectus except for the statements
made in the Prospectus under the captions "Description of American
Depositary Shares" and "Tax Considerations - Certain U.S. Federal
Income Tax Considerations" insofar as such statements relate to the
provisions of the ADSs, the ADRs and the Deposit Agreement or concern
legal matters.
(e) Stibbe Simont Monahan Duhot shall have furnished to the
Representatives its written opinion, as Netherlands counsel to the
Company, addressed to the U.S. Underwriters, the International
Managers and the Company and dated such Delivery Date, in form and
substance satisfactory to the Representatives and the Company, to the
effect that:
(i) The Company has been duly incorporated and is validly
existing under the laws of The Netherlands as a legal entity in
the form of a naamloze vennootschap, is duly qualified to do
business in each jurisdiction in which its ownership or lease of
property or the conduct of its businesses requires such
qualification, and has all power and authority necessary to own
or hold its properties and to conduct the businesses in which it
is engaged;
(ii) Each of the Company's Netherlands subsidiaries has been
duly incorporated and is validly existing under the laws of The
Netherlands, is duly qualified to do business in each
jurisdiction in which its ownership or lease of property or the
conduct of its businesses requires such qualification, and has
all power and authority necessary to own or hold its properties
and to conduct the businesses
<PAGE> 32
32
in which it is engaged;
(iii) The Company has an authorized and issued
capitalization as set forth in the Prospectus, and all of the
issued shares of capital stock of the Company (including the
Shares being delivered by the Company and the Selling
Shareholders on such Delivery Date) have been duly and validly
authorized and issued, are fully paid and non-assessable and
conform to the description thereof contained in the Prospectus
and when the Shares to be sold by the Company and the Selling
Shareholders hereunder and under the International Underwriting
Agreement are delivered, or in the case of Shares to be deposited
pursuant to the Deposit Agreement, when such Shares are so
deposited, in each case against payment therefor as provided
herein and in the International Underwriting Agreement, such
Shares will be duly and validly issued, fully paid and
non-assessable and the subscription and deposit of such Shares
will not be subject to any preferential subscription rights or
preemptive rights pursuant to the Articles of Association,
Netherlands law or otherwise; except as disclosed in the
Prospectus, there are no outstanding securities convertible into
or exchangeable for, or warrants, rights or options to purchase
from the Company or obligations of the Company to issue, any
class of capital stock of, or other form of ownership interest
in, the Company; and all of the issued shares of capital stock
of, or other form of ownership interest in, each subsidiary of
the Company have been duly and validly authorized and issued and
are fully paid, non-assessable and are wholly owned directly or
indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims;
(iv) There are no restrictions in the Articles of
Association that would prevent the Shares and ADSs from being
offered and sold by the Company to the U.S. Underwriters and the
International Managers;
(v) The shareholders register of the Company does not
contain, and, after the issuance of the Shares and ADSs, will not
contain, any registration of any pledges ("pandrecht") or rights
of usufruct ("vruchtgebruik") with respect to any shares of
capital stock of the Company;
(vi) Assuming the due execution by the Selling Shareholders
and the U.S. Underwriters of this Agreement, proportional
co-ownership of the Shares and ADSs, within the meaning of the
Dutch Securities Giro Administration and Transfer Act ("Wet
Giraal Effectenverkeer"), will have been acquired by the U.S.
Underwriters on whose behalf and in whose name such Shares and
ADSs will be held and administered by an associated institution
of NECIGEF, free
<PAGE> 33
33
and clear of all liens, claims or other encumbrances;
(vii) The descriptions in the Prospectus of statutes, legal
and governmental proceedings and contracts and other documents
are accurate in all material respects; the statements in the
Prospectus under the headings "Service of Process and
Enforceability of Civil Liabilities," "Summary - Regulatory and
Competitive Environment," "Risk Factors Changes in the Regulatory
Environment Could Affect our Ability to Offer our Products and
Services," "Dividend Policy," "Business Regulation," "Business -
Intellectual Property," "Management Supervisory Board,"
"Management - Management Board," "Management - Executive
Compensation," "Description of Capital Stock," "Management -
Stock Option Plans," and "Shares Eligible for Future Sale," to
the extent that they constitute summaries of matters of law or
regulation or legal conclusions, have been reviewed by such
counsel and fairly summarize the matters described therein in all
material respects;
(viii) The Company, with respect to each of the Operative
Agreements, has full right, power and authority to execute and
deliver each of the Operative Agreements and to perform its
obligations thereunder; and all corporate action required to be
taken for the due and proper authorization, execution and
delivery of each of the Operative Agreements and the consummation
of the transactions contemplated thereby have been duly and
validly taken;
(ix) This Agreement and the International Underwriting
Agreement have been duly authorized, executed and delivered by
the Company and, assuming that this Agreement and the
International Underwriting Agreement constitute valid and legally
binding agreements under the laws of the State of New York,
constitute valid and legally binding agreements of the Company
enforceable against the Company in accordance with its terms;
(x) Each of the Deposit Agreement and the Power of Attorney
and Custody Agreement has been duly authorized, executed and
delivered by the Company and, assuming due authorization,
execution and delivery of the Deposit Agreement by the Depositary
and assuming that the Deposit Agreement constitutes a valid and
legally binding agreement under the laws of the State of New
York, constitutes a valid and legally binding agreement of the
Company enforceable against the Company in accordance with its
terms;
<PAGE> 34
34
(xi) The execution, delivery and performance of the Operative
Agreements by the Company, the issuance of the Shares and the
ADSs by the Company, the deposit with the Depositary of the
Shares to be delivered in the form of ADSs against the issuance
of ADRs pursuant to the Deposit Agreement, the offer and sale of
Shares and ADRs in the manner contemplated by this Agreement, the
International Underwriting Agreement and the Prospectus and the
compliance by the Company with all of the provisions of this
Agreement, the International Underwriting Agreement and the
Deposit Agreement, and the consummation of the transactions
contemplated hereby and thereby, will not conflict with or result
in a breach or violation of any of the terms or provisions of, or
constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any of its subsidiaries pursuant to
any material indenture, mortgage, deed of trust, loan agreement
or other material agreement or instrument to which the Company or
its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets
of the Company or its subsidiaries is subject, nor will such
actions result in any violation of the provisions of the articles
of association of the Company or any of its subsidiaries or any
statute or any judgment, order, decree, rule or regulation of any
court or arbitrator or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any
of their properties or assets; and, except for the registration
of the Shares and ADSs under the Securities Act and such
consents, approvals, authorizations, registrations or
qualifications as may be required under the Exchange Act and
applicable foreign or state securities laws in connection with
the purchase and distribution of the Shares and ADSs by the U.S.
Underwriters, no consent, approval, authorization or order of, or
filing or registration with, any such court or arbitrator or
governmental agency or body under any such statute, judgment,
order, decree, rule or regulation is required for the execution,
delivery and performance by the Company of this Agreement, the
International Underwriting Agreement or the Deposit Agreement by
the Company, the listing of the Shares on the AEX and the
consummation of the transactions contemplated hereby and thereby;
(xii) To the best knowledge of such counsel, there are no
pending actions or suits or judicial, arbitral, rule-making,
administrative or other proceedings to which the Company or any
of its subsidiaries is a party or of which any property or assets
of the Company or any of its subsidiaries is the subject which
(A) singularly or in the aggregate, if determined adversely to
the Company or any of its subsidiaries, could reasonably be
expected to have a material adverse effect on the Company and its
subsidiaries or (B) questions the
<PAGE> 35
35
validity or enforceability of the Operative Agreements or any
action taken or to be taken pursuant thereto; and to the best
knowledge of such counsel, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(xiii) Neither the Company nor any of its subsidiaries is
(A) in violation of its articles of association (B) in default in
any material respect, and no event has occurred which, with
notice or lapse of time or both, would constitute such a default,
in the due performance or observance of any term, covenant or
condition contained in any material indenture, mortgage, deed of
trust, loan agreement or other material agreement or instrument
to which they are a party or by which they are bound or to which
any of their property or assets is subject or (C) in violation in
any material respect of any law, ordinance, governmental rule,
regulation or court decree to which the Company or any of its
subsidiaries or their property or assets may be subject;
(xiv) Each of the Operative Agreements, and any other
document required to be furnished hereunder or thereunder is in
proper legal form under Netherlands law for the enforcement
thereof against the Company without further action on the part of
the U.S. Underwriters, the International Managers or the holders
of the Shares or ADSs, as the case may be; and to ensure the
legality, validity, enforceability, priority or admissibility in
evidence in The Netherlands of each of the Operative Agreements
or any other document required to be furnished hereunder or
thereunder, it is not necessary that the Operative Agreements or
any such document be submitted to, filed or recorded with any
Netherlands court or other authority. All formalities required in
The Netherlands for the validity and enforceability of the
Operative Agreements (including any necessary registration,
recording or filing with any Netherlands court or other
authority) have been accomplished, and no notarization is
required, for the validity and enforceability thereof;
(xv) The filing of each Registration Statement and the ADS
Registration Statement, the listing of the Shares on the AEX and
the listing of the ADSs on the Nasdaq National Market System have
been duly authorized by the Company;
(xvi) Any judgment obtained in a United States federal or
state court of competent jurisdiction sitting in New York City
arising out of or in relation to the obligations of the Company
under the Operative Agreements would be enforced against the
Company in the courts of The Netherlands;
<PAGE> 36
36
(xvii) The U.S. Underwriters and International Managers
would be permitted to commence proceedings against the Company in
Netherlands courts of competent jurisdiction based on the
Operative Agreements (to the extent that they have direct
contractual rights against the Company under such Operative
Agreements which arise as a result of valid and binding
obligations of the Company under such documents in accordance
with the laws of the State of New York), and (if they accepted
jurisdiction) such Netherlands courts would recognize the choice
of law provisions of the Operative Agreements;
(xviii) The Company can sue and be sued in its own name;
under Netherlands law, the agreement of the Company that
Operative Agreements shall be governed by the laws of the State
of New York will, if it constitutes a valid and legally binding
agreement under the laws of the State of New York, be recognized
by the courts of The Netherlands;
(xix) Under the laws of The Netherlands, the Company would
in the Courts of The Netherlands not be entitled to invoke
immunity from jurisdiction or immunity from execution on the
grounds of sovereignty in respect of any action arising out its
obligations under the Operative Agreements;
(xx) The indemnification and contribution provisions set
forth in Section 10 herein do not contravene the public policy or
laws of The Netherlands;
(xxi) The submission by the Company to the jurisdiction of
the United States federal or New York state courts sitting in New
York City, set forth in each of the Operative Agreements,
constitute valid and legally binding obligations of the Company,
and service of process effected in the manner set forth in, the
Operative Agreements, assuming validity under the laws of the
State of New York, will be effective, insofar as Netherlands law
is concerned; and
(xxii) The certificates used to evidence the Shares and ADSs
are in due and proper form and comply with all applicable
statutory requirements of Netherlands law.
(xxiii) The opinion of such counsel delivered pursuant to
Section 6(e) of the High Yield Underwriting Agreement is
confirmed and the U.S. Underwriters may rely upon such opinion as
if it were addressed to them.
Such counsel shall also have furnished to the Representatives a
written
<PAGE> 37
37
statement, addressed to the U.S. Underwriters and dated such Delivery Date,
in form and substance satisfactory to the Representatives, to the effect
that no facts have come to the attention of such counsel which lead it to
believe that (I) each Registration Statement and the ADS Registration
Statement, as of their respective Effective Dates, and the Prospectus, as
of its date, contained any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading or, (II) as of such
Delivery Date, that the Prospectus or International Prospectus contains any
untrue statement of a material fact or, omits to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. In rendering such opinion, such counsel may state that their
opinion is limited to matters governed by Netherlands law and shall state
that each of Shearman & Sterling and Simpson Thacher & Bartlett may rely
upon their opinion with respect to matters of Netherlands law.
(f) Cains Advocates, Solicitors and Notaries, counsel for Cromwilld,
shall have furnished to the Representatives its written opinion, as counsel
to such Selling Shareholder, addressed to the U.S. Underwriters and dated
such Delivery Date, in form and substance satisfactory to the
Representatives, to the effect that:
(i) The Selling Shareholder has full right, power and authority
to enter into this Agreement, the International Underwriting Agreement
and the Power of Attorney and Custody Agreement and had full power and
authority to enter into the Settlement Agreement; the execution,
delivery and performance of the Settlement Agreement by the Selling
Shareholder did not, the execution, delivery and performance of this
Agreement, the International Underwriting Agreement and the Power of
Attorney and Custody Agreement by the Selling Shareholder will not,
and the consummation by the Selling Shareholder of the transactions
contemplated hereby and thereby will not, conflict with or result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, any statute, any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument known to
such counsel to which the Selling Shareholder is a party or by which
the Selling Shareholder is bound or to which any of the property or
assets of the Selling Shareholder is subject, nor will such actions
result in any violation of the provisions of the charter or by-laws or
equivalent constitutive document of the Selling Shareholder, any
statute or any order, rule or regulation known to such counsel of any
court or governmental agency or body having jurisdiction over the
Selling Shareholder or the property or assets of the Selling
Shareholder; and, except for the registration of the Shares and ADSs
under the Securities Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under
<PAGE> 38
38
the Exchange Act and applicable foreign or state securities laws in
connection with the purchase and distribution of the Shares by the
U.S. Underwriters, no consent, approval, authorization or order of, or
filing or registration with, any such court or governmental agency or
body was or is required for the execution, delivery and performance of
this Agreement, the International Underwriting Agreement, the Power of
Attorney and Custody Agreement and the Settlement Agreement by the
Selling Shareholder and the consummation by the Selling Shareholder of
the transactions contemplated hereby and thereby;
(ii) This Agreement has been duly authorized, executed and
delivered by the Selling Shareholder;
(iii) The Settlement Agreement has been duly authorized, executed
and delivered by the Selling Shareholder and constitutes a valid and
binding agreement of the Selling Shareholder;
(iv) The Power of Attorney and Custody Agreement has been duly
authorized, executed and delivered by the Selling Shareholder and
constitutes a valid and binding agreement of the Selling Shareholder;
and
(v) Upon delivery of the Ordinary Shares of the Selling
Shareholder and payment therefor pursuant hereto, the U.S.
Underwriters will acquire all of the rights of the Selling Shareholder
in such Ordinary Shares and will acquire the interest of the Selling
Shareholder in such Shares free and clear of all liens, encumbrances,
equities or claims whatsoever.
In rendering the opinion in Section 9(f)(v) above, such counsel may rely
upon a certificate of the Selling Shareholder in respect of matters of fact
as to ownership of, and the absence of adverse claims regarding, the Shares
sold by the Selling Shareholder, provided that such counsel shall furnish
copies thereof to the Representatives and state that it believes that both
the U.S. Underwriters and it are justified in relying upon such
certificate. The foregoing opinion and statement may be qualified by a
statement to the effect that such counsel does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in either Registration Statement, the ADS Registration Statement
or the Prospectus.
(g) Arthur Andersen shall have furnished to the Representatives
written opinion, as special Netherlands tax counsel to the Company,
addressed to the U.S. Underwriters and the International Managers and dated
such Delivery Date, in form and substance satisfactory to the
Representatives, to
<PAGE> 39
39
the effect that:
(i) It is not necessary, prior to the U.S. Underwriters or the
International Managers seeking enforcement of the Operative
Agreements, in
(ii) The disclosure in the Prospectus under the caption "Tax
Considerations -- Netherlands Tax Considerations" accurately
summarizes, subject to the limitations and qualifications stated
therein, the material Netherlands income tax consequences of the
purchase, ownership and disposition of Shares or ADSs;
(iii) Except as disclosed in the Prospectus, under current laws
and regulations of The Netherlands and any political subdivision
thereof, all dividends and other distributions on the Shares and ADSs
may be paid by the Company in Dutch Guilders, euros or another
currency that may be converted into foreign currency that may be
freely transferred out of The Netherlands and, in each case, all such
payments made to holders thereof who are non-residents of The
Netherlands will not be subject to income, withholding or other taxes
under laws and regulations of The Netherlands or any political
subdivision or taxing authority thereof or therein and will otherwise
be free and clear of any other tax, duty, withholding or deduction in
The Netherlands or any political subdivision or taxing authority
thereof or therein and without the necessity of obtaining any
governmental authorization in The Netherlands or any political
subdivision or taxing authority thereof or therein; and
(iv) No stamp or other issuance or transfer taxes or duties and
no capital gains, income withholding or other taxes are payable in
accordance with Netherlands tax law, by or on behalf of the U.S.
Underwriters or the International Managers, to Netherlands taxation
authorities or other Netherlands agencies in connection with the
following:
(a) the issuance of the Shares by the Company;
(b) the deposit by the Company with the Depository or its
nominee, of the Shares against the issuance of ADRs
evidencing the ADSs pursuant to the Deposit Agreement;
(c) the delivery of the Shares or ADSs to or for the
respective accounts of the U.S. Underwriters and the
International Managers in the manner contemplated
herein and in the International Underwriting Agreement;
or
<PAGE> 40
40
(d) the sale and delivery by the U.S. Underwriters and the
International Managers of the Shares and ADSs to the
initial purchasers therefrom.
(h) Nauta Dutilh shall have furnished to the Representatives its
written opinion, as Netherlands counsel to the U.S. Underwriters, addressed
to the U.S. Underwriters and the International Managers and dated such
Delivery Date, in form and substance satisfactory to the Representatives.
(i) Emmet, Marvin & Martin LLP shall have furnished to the
Representatives its written opinion, as counsel to the Depositary,
addressed to the U.S. Underwriters and the International Managers and dated
such Delivery Date, in form and substance satisfactory to the U.S.
Representative, to the effect that:
(i) The Deposit Agreement has been duly authorized, executed and
delivered by the Depositary and constitutes a valid and legally
binding obligation of the Depositary enforceable in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equitable
principles; provided, however, that such counsel need express no
opinion as to Section 5.08 of the Deposit Agreement; and
(ii) When ADRs have been duly executed and, if applicable,
countersigned, and duly issued and delivered in accordance with the
Deposit Agreement, the ADSs evidenced by ADRs will be validly issued
and will entitle the registered holders thereof to the rights
specified in the ADRs and the Deposit Agreement.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction other than U.S. federal and New
York State law.
(j) Mark van der Heijden, special regulatory counsel to the Company,
shall have furnished his written opinion to U.S. Underwriters and the
International Managers and dated such Delivery Date, in form and substance
satisfactory to the Representatives.
(k) With respect to the letter of each of Arthur Andersen and KPMG
Accountants N.V. delivered to the Representatives and dated the date of the
Prospectus referred to in Section 6(r) (as used in this paragraph, the
"initial letter"), the Company shall have furnished to the Representatives
a letter (as used in this paragraph, the "bring-down letter") of each such
accounting firm, addressed to the U.S. Underwriters and the International
Managers and dated
<PAGE> 41
41
such Delivery Date (i) confirming that they are independent public
accountants within the meaning of the Securities Act and are in compliance
with the applicable requirements relating to the qualification of
accountants under Rule 2- 01 of Regulation S-X of the Commission, (ii)
stating, as of the date of the bring-down letter (or, with respect to
matters involving changes or developments since the respective dates as of
which specified financial information is given in the Prospectus, as of a
date not more than five days prior to the date of the bring- down letter),
the conclusions and findings of such firm with respect to the financial
information and other matters covered by the initial letter and (iii)
confirming in all material respects the conclusions and findings set forth
in the initial letter.
(l) The Company shall have furnished to the Representatives a
certificate, dated such Delivery Date, of R. Gary Mesch, Managing Director,
and Raj Raithatha, Chief Financial Officer, stating, on behalf of the
Company, that:
(i) The representations, warranties and agreements of the Company
in Section 1 are true and correct as of such Delivery Date; the
Company has complied with all its agreements contained herein; and
(ii) (A) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth in the Prospectus
or (B) since such date there shall not have been any change in the
share capital or long-term debt of the Company or any of its
subsidiaries or any change, or any development involving a prospective
change, in or affecting the general affairs, management, financial
position, shareholders' equity or results of operations of the Company
and its subsidiaries, otherwise than as set forth in the Prospectus;
and
(iii) They have carefully examined the Prospectus and, in their
opinion (A) the Prospectus, as of its date, did not include any untrue
statement of a material fact and did not omit to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading, and (B) since such date no event has occurred
which should have been set forth in a supplement or amendment to the
Prospectus so that the Prospectus, as so amended or supplemented,
would not include any untrue statement of a material fact and would
not omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances in which they were made, not misleading.
<PAGE> 42
42
(m) The Custodian or one or more attorneys-in-fact on
behalf of the Selling Shareholders shall have furnished to
the Representatives on such Delivery Date a certificate,
dated such Delivery Date, signed by, or on behalf of, the
Custodian or one or more attorneys-in-fact stating that the
representations, warranties and agreements of the Selling
Shareholder contained herein are true and correct as of such
Delivery Date and that the Selling Shareholder has complied
with all agreements contained herein to be performed by the
Selling Shareholder at or prior to such Delivery Date;
provided, that such representations, warranties and
agreements shall not have been changed in any material
respect from the forms thereof attached to the Power if
Attorney and Custody Agreement delivered by such Selling
Shareholder.
(n) (i) Neither the Company nor any of its subsidiaries
shall have sustained since the date of the latest audited
financial statements included in the Prospectus any loss or
interference with its business from fire, explosion, flood
or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth in the
Prospectus or (ii) since such date there shall not have been
any change in the share capital or long-term debt of the
Company or any of its subsidiaries or any change, or any
development involving a prospective change, in or affecting
the general affairs, management, financial position,
shareholders' equity or results of operations of the Company
and its subsidiaries, otherwise than as set forth in the
Prospectus, the effect of which, in any such case described
in clause (i) or (ii), is, in the judgment of the
Representatives, so material and adverse as to make it
impracticable or inadvisable to proceed with the offering of
the Shares and ADSs on the terms and in the manner
contemplated in the Prospectus.
(o) Subsequent to the execution and delivery of this
Agreement there shall not have occurred any of the
following: (i) trading in securities generally on the New
York Stock Exchange, Inc., the American Stock Exchange, the
Nasdaq National Market System, the AEX or in the U.S.
over-the-counter market, or trading in any securities of the
Company on any exchange or in the over-the-counter market,
shall have been suspended or minimum prices shall have been
established on any such exchange or such market by the
Commission, by such exchange or by any other regulatory body
or governmental authority having jurisdiction, (ii) any
downgrading in the rating of any debt securities of the
Company by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under
the Securities Act), or any public announcement that any
such organization has under surveillance or review its
rating of any debt securities of the Company (other than an
announcement with positive implications of a possible
upgrading, and no implication of a possible downgrading, of
such rating), (iii) a banking moratorium shall have been
declared by U.S. federal or state authorities in the United
States or by authorities in The Netherlands or by
<PAGE> 43
43
European Union authorities, (iv) the United States or The
Netherlands shall have become engaged in hostilities or
there shall have been a declaration of a national emergency
or war by the United States or The Netherlands or (v) there
shall have occurred such a material adverse change in
general or United States or Netherlands economic, political
or financial conditions or in currency exchange rates,
taxation, exchange controls or foreign investment
regulations (or the effect of international conditions on
the financial markets in the United States or The
Netherlands shall be such) as to make it, in the judgment of
a majority in interest of the several U.S. Underwriters,
impracticable or inadvisable to proceed with completion of
the offering or sale of and payment for the Shares and ADSs
on the terms and in the manner contemplated in the
Prospectus.
(p) The AEX and the Nasdaq National Market shall have
accepted the Shares and ADSs, respectively, for trading, in
each case subject only to official notice of issuance.
(q) The Ordinary Shares shall have been admitted for
the operations of NECIGEF, Euroclear and Cedel.
(r) The Company and the Depositary shall have executed
and delivered the Deposit Agreement (in form and substance
satisfactory to the Representatives) and the Deposit
Agreement shall be in full force and effect.
(s) The Depositary shall have furnished to the
Representatives a certificate, dated such Delivery Date, of
one of its authorized officers in a form satisfactory to the
Representatives.
(t) The Company shall have furnished to the
Representatives a copy of each Lock-up Letter.
(u) The closing under the International Underwriting
Agreement shall have occurred concurrently with the closing
hereunder on such Delivery Date.
(v) In the case of the First Delivery Date, the closing
of the High Yield Offering shall have occurred concurrently
with the closing hereunder on such Delivery Date.
(w) Each Power of Attorney and Custody Agreement is in
full force and effect on such Delivery Date.
(x) The Company shall have furnished to the
Representatives a copy of a letter or letters signed by each
current shareholder of the Company in favor of the AEX with
respect to the obligations relating to the disposition of
<PAGE> 44
44
Ordinary Shares by such shareholders, in form and substance
satisfactory to the Representatives.
(y) No action shall have been taken and no statute,
rule, regulation or order shall have been enacted, adopted
or issued by any governmental agency or body which would, as
of each Delivery Date, prevent the issuance or sale of the
Shares or ADSs; and no injunction, restraining order or
order of any other nature by any federal or state court of
competent jurisdiction shall have been issued as of each
Delivery Date which would prevent the issuance or sale of
the Shares or ADSs.
(z) The Company shall have furnished to the
Representatives such further information, certificates and
documents as the Representatives may reasonably request.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance satisfactory to counsel
to the Representatives.
10. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each U.S. Underwriter,
its officers and employees and each person, if any, who controls any U.S.
Underwriter 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
(including, but not limited to, any loss, claim, damage, liability or action
relating to purchases and sales of the Shares and ADSs), to which that U.S.
Underwriter, officer, employee 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,
either Registration Statement, the ADS Registration Statement or the Prospectus,
or in any amendment or supplement thereto, or (B) 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 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 in any Preliminary
Prospectus, either Registration Statement, the ADS Registration Statement or the
Prospectus, or in any amendment or supplement thereto, or in any Blue Sky
Application any material fact required to be stated therein or necessary to make
the statements therein not misleading, (iii) any act or failure to act, or any
alleged act or failure to act, by any U.S. Underwriter in connection with, or
relating in any manner to, the Shares and ADSs or the offering 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 and (iv) the Directed Share Program (provided that the
Company shall not be liable in the case of any matter covered by clauses (iii)
and (iv) to the extent that it is determined in a final judgment by a court of
competent jurisdiction that such loss, claim,
<PAGE> 45
45
damage, liability or action resulted directly from any such act or failure to
act undertaken or omitted to be taken by such U.S. Underwriter through its gross
negligence or wilful misconduct), and shall reimburse each U.S. Underwriter and
each such officer, employee and controlling person promptly upon demand for any
legal or other expenses reasonably incurred by that U.S. Underwriter, officer,
employee 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; 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 any Preliminary
Prospectus, either Registration Statement, the ADS Registration Statement or the
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 through the Representatives by or on behalf of any U.S.
Underwriter specifically for inclusion therein and described in Section 10(f);
provided, further, that as to any Preliminary Prospectus this indemnity
agreement shall not inure to the benefit of any U.S. Underwriter, its officers
or employees or any person controlling that U.S. Underwriter on account of any
loss, claim, damage, liability or action arising from the sale of Shares or ADSs
to any person by that U.S. Underwriter if that U.S. Underwriter failed to send
or give a copy of the Prospectus, as the same may be amended or supplemented, to
that person within the time required by the Securities Act, and the untrue
statement or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact in such Preliminary Prospectus was corrected
in the Prospectus, unless such failure resulted from non-compliance by the
Company with Section 6(c). The foregoing indemnity agreement is in addition to
any liability which the Company may otherwise have to any U.S. Underwriter or to
any officer, employee or controlling person of that U.S. Underwriter.
(b) The Selling Shareholders, severally in proportion to the number of
Shares and ADSs to be sold by each of them pursuant to the U.S. Underwriting
Agreement, shall indemnify and hold harmless each U.S. Underwriter, its officers
and employees and each person, if any, who controls any U.S. Underwriter 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 (including, but
not limited to, any loss, claim, damage, liability or action relating to
purchases and sales of Shares and ADSs), to which that U.S. Underwriter,
officer, employee 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, any untrue statement or alleged untrue
statement of a material fact contained in either Registration Statement, the ADS
Registration Statement or the Prospectus, or in any amendment or supplement
thereto, or the omission or alleged omission to state in either Registration
Statement, the ADS Registration Statement or the Prospectus, or in any amendment
or supplement thereto, 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 written
information furnished to the Company by or on
<PAGE> 46
46
behalf of the Selling Shareholders specifically for inclusion therein, and shall
reimburse each U.S. Underwriter, its officers and employees and each such
controlling person for any legal or other expenses reasonably incurred by such
U.S. Underwriter, its officers, employees 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.
(c) Each U.S. Underwriter, 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 and the Selling Shareholders, 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 or the
Selling Shareholders 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, either Registration Statement,
the ADS Registration Statement or the Prospectus, or in any amendment or
supplement thereto, or (B) in any Blue Sky Application or (ii) the omission or
alleged omission to state in any Preliminary Prospectus, either Registration
Statement, the ADS Registration Statement or the Prospectus, or in any amendment
or supplement thereto, or in any Blue Sky Application 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 through the
Representatives by or on behalf of that U.S. Underwriter specifically for
inclusion therein and described in Section 10(f), and shall reimburse the
Company and any such director, officer or controlling person and the Selling
Shareholders for any legal or other expenses reasonably incurred by the Company
or any such director, officer or controlling person or Selling Shareholder 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 U.S.
Underwriter may otherwise have to the Company or any such director, officer or
controlling person or the Selling Shareholders.
(d) Promptly after receipt by an indemnified party under this Section 10 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 10, 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 10 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 10. 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
<PAGE> 47
47
indemnifying party shall not be liable to the indemnified party under this
Section 10 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other 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 Representatives, if the indemnified parties under this Section 10 consist
of any U.S. Underwriters or any of their respective officers, employees or
controlling persons, 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 or the Selling Shareholders. Each indemnified
party, as a condition of the indemnity agreements contained in Sections 10(a),
10(b) and 10(c), shall use its best 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.
(e) If the indemnification provided for in this Section 10 shall for any
reason be unavailable to or insufficient to hold harmless an indemnified party
under Section 10(a), 10(b) or 10(c) 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
<PAGE> 48
48
proportion as shall be appropriate to reflect the relative benefits
received by the Company and the Selling Shareholders on the one hand, and the
U.S. Underwriters on the other, from the offering of the Shares and ADSs or (ii)
if the 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 and the Selling Shareholders on the one hand and the U.S. Underwriters
on the other with respect to the statements or omissions which resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by the
Company and the Selling Shareholders on the one hand and the U.S. Underwriters
on the other with respect to such offering shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Shares and ADSs
purchased under this Agreement (before deducting expenses but after deducting
underwriting discounts and commissions) received by the Company and the Selling
Shareholders, on the one hand, and the total underwriting discounts and
commissions received by the U.S. Underwriters with respect to the Shares and
ADSs purchased under this Agreement, on the other hand, bear to the total gross
proceeds from the offering of the Shares and ADSs under this Agreement, in each
case as set forth in the table on the cover page of the Prospectus. 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, the Selling Shareholders or
the U.S. Underwriters, the intent of the parties and their relative knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company, the Selling Shareholders and the U.S. Underwriters agree
that it would not be just and equitable if contributions pursuant to this
Section 10(e) were to be determined by pro rata allocation (even if the U.S.
Underwriters 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 10(e) shall be deemed to include, for purposes
of this Section 10(e), 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 10(e), (i) the
aggregate liability of the Selling Shareholders under this subsection (e) and
subsections (a) and (b) and Sections 10(a), 10(b) and 10(e) of the International
Underwriting Agreement shall in no event exceed the amount of the net proceeds
(before deducting expenses but after deducting underwriting discounts and
commissions) received by the Selling Shareholders from the sale of Shares and
ADSs sold by the Selling Shareholders hereunder and under the International
Underwriting Agreement and (ii) no U.S. Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Shares and ADSs underwritten by it and distributed to the public was offered
to the public exceeds the amount of any damages which such U.S. Underwriter 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 Selling Shareholders shall only be obligated
to contribute pursuant to this subsection (e) if the loss, claim, damage or
liability arose from an untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with
<PAGE> 49
49
written information furnished to the Company by or on behalf of the Selling
Shareholders specifically for inclusion therein. The Selling Shareholders'
respective obligations in this subsection (e) to contribute are several and not
joint. The U.S. Underwriters' obligations to contribute as provided in this
Section 10(e) are several in proportion to their respective underwriting
obligations and not joint.
(f) The U.S. Underwriters severally confirm that the statements with
respect to the offering of the Shares set forth in the last paragraph on page
(i) of, and under the caption "Underwriting" in, the Prospectus are correct in
all material respects and constitute the only information furnished in writing
to the Company by or on behalf of the U.S. Underwriters specifically for
inclusion in the Registration Statements, the ADS Registration Statement and the
Prospectus.
11. Defaulting U.S. Underwriters. If, on either Delivery Date, any U.S.
Underwriter defaults in the performance of its obligations under this Agreement,
the remaining non-defaulting U.S. Underwriters shall be obligated to purchase
the Shares and ADSs which the defaulting U.S. Underwriter agreed but failed to
purchase on such Delivery Date in the respective proportions which the number of
the Firm Shares and ADSs set opposite the name of each remaining non-defaulting
U.S. Underwriter in Schedule I hereto bears to the total number of the Firm
Shares and ADSs set opposite the names of all the remaining non-defaulting U.S.
Underwriters in Schedule I hereto; provided, however, that the remaining
non-defaulting U.S. Underwriters shall not be obligated to purchase any of the
Shares and ADSs on such Delivery Date if the total number of Shares and ADSs
which the defaulting U.S. Underwriter or U.S. Underwriters agreed but failed to
purchase on such date exceeds 9.09% of the total number of Shares and ADSs to be
purchased on such Delivery Date, and any remaining non-defaulting U.S.
Underwriter shall not be obligated to purchase more than 110% of the number of
Shares and ADSs which it agreed to purchase on such Delivery Date pursuant to
the terms of Section 3. If the foregoing maximums are exceeded, the remaining
non-defaulting U.S. Underwriters, or those other underwriters satisfactory to
the Representatives who so agree, shall have the right, but shall not be
obligated, to purchase, in such proportion as may be agreed upon among them, all
the Shares and ADSs to be purchased on such Delivery Date. If the remaining U.S.
Underwriters or other underwriters satisfactory to the Representatives do not
elect to purchase the Shares and ADSs which the defaulting U.S. Underwriter or
U.S. Underwriters agreed but failed to purchase on such Delivery Date, this
Agreement (or, with respect to the Second Delivery Date, the obligation of the
U.S. Underwriters to purchase, and the Company to sell, the Option Shares) shall
terminate without liability on the part of any non-defaulting U.S. Underwriter
or the Company or the Selling Shareholders, except that the Company will
continue to be liable for the payment of expenses to the extent set forth in
Sections 8 and 13. As used in this Agreement, the term "U.S. Underwriter"
includes, for all purposes of this Agreement unless the context requires
otherwise, any party not listed in Schedule I hereto who, pursuant to this
Section 11, purchases Firm Shares and ADSs which a defaulting U.S. Underwriter
agreed but failed to purchase.
<PAGE> 50
50
Nothing contained herein shall relieve a defaulting U.S. Underwriter of any
liability it may have to the Company and the Selling Shareholders for damages
caused by its default. If other underwriters are obligated or agree to purchase
the Shares or ADSs of a defaulting or withdrawing U.S. Underwriter, either the
Representatives or the Company may postpone the First Delivery Date for up to
seven full business days in order to effect any changes that in the opinion of
counsel to the Company or counsel to the U.S. Underwriters may be necessary in
either Registration Statement, the ADS Registration Statement, the Prospectus or
in any other document or arrangement.
12. Termination. The obligations of the U.S. Underwriters hereunder may be
terminated by the Representatives by notice given to and received by the Company
and the Selling Shareholders prior to delivery of and payment for the Firm
Shares if, prior to that time, any of the events described in Sections 9(n) or
9(o) shall have occurred or if the U.S. Underwriters shall decline to purchase
the Shares for any reason permitted under this Agreement.
13. Reimbursement of U.S. Underwriters' Expenses. If (a) the Company or any
Selling Shareholder shall fail to issue the Shares for delivery to the U.S.
Underwriters for any reason permitted under this Agreement or (b) the U.S.
Underwriters shall decline to purchase the Shares or ADSs for any reason
permitted under this Agreement (including the termination of this Agreement
pursuant to Section 12), the Company shall reimburse the U.S. Underwriters for
fees and expenses of their counsels and for such other out-of-pocket expenses as
shall have been incurred by them in connection with this Agreement and the
proposed purchase of the Shares and ADSs, and upon demand the Company shall pay
the full amount thereof to the Representatives. Notwithstanding the previous
sentence, if this Agreement is terminated pursuant to Section 11 by reason of
the default of one or more U.S. Underwriters, the Company shall not be obligated
to reimburse any defaulting U.S. Underwriter on account of those expenses.
14. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the U.S. Underwriters, shall be delivered or sent by mail,
telex or facsimile transmission to Lehman Brothers Inc., Three World
Financial Center, New York, New York 10285, Attention: Syndicate Department
(Fax: 212-528-8822);
With a copy to Simpson Thacher & Bartlett, 99 Bishopsgate, London, EC2M
3YH, Attention: William R. Dougherty (Fax: 011-44-171-422-4022);
(b) if to the Company, shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Prospectus, Attention: Raj Raithatha (Fax: 31-20-501-1011).
With a copy to Shearman & Sterling, 599 Lexington Avenue, New York, New
York 10022, Attention: John D. Morrison, Jr. (Fax: 212-848-7179)
<PAGE> 51
51
(c) if to any Selling Shareholder, shall be delivered or sent by mail,
telex or facsimile transmission to the address of such Shareholder set
forth on Schedule II hereto.
With a copy to United States Trust Company of New York, 770 Broadway, 13th
Floor, New York, NY 10003, Attention: Corporate Trust Services (Fax: 212-
780-0592)
provided, however, that any notice to a U.S. Underwriter pursuant to Section
10(d) shall be delivered or sent by mail, telex or facsimile transmission to
such U.S. Underwriter at its address set forth in its acceptance telex to the
U.S. Representative, which address will be supplied to any other party hereto by
the U.S. Representative upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Company and the
Selling Shareholders shall be entitled to act and rely upon any request,
consent, notice or agreement given or made on behalf of the U.S. Underwriters by
Lehman Brothers Inc. and the Company and the Underwriters shall be entitled to
act and rely upon any request, consent, notice or agreement given or made on
behalf of the Selling Shareholders by the Custodian.
15. Persons Entitled to Benefit of Agreement. This Agreement shall inure to
the benefit of and be binding upon the U.S. Underwriters, the Company, the
Selling Shareholders and their respective successors. This Agreement and the
terms and provisions hereof are for the sole benefit of only those persons,
except that (A) the representations, warranties, indemnities and agreements of
the Company and the Selling Shareholders contained in this Agreement shall also
be deemed to be for the benefit of the officers and employees of the U.S.
Underwriters and the person or persons, if any, who control the U.S.
Underwriters within the meaning of Section 15 of the Securities Act and (B) the
indemnity agreement of the U.S. Underwriters contained in Section 10 of this
Agreement shall be deemed to be for the benefit of directors, officers and
employees of the Company and any person controlling the Company within the
meaning of Section 15 of the Securities Act. Nothing in this Agreement is
intended or shall be construed to give any person, other than the persons
referred to in this Section 15, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
16. Survival. The respective indemnities, representations, warranties and
agreements of the Company, the Selling Shareholders and the U.S. Underwriters
contained in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall survive the delivery of and payment for the
Shares and ADSs and shall remain in full force and effect regardless of any
investigation made by or on behalf of any of them or any person controlling any
of them.
17. Definition of the Terms "Business Day" and "Subsidiary". For purposes
of this Agreement, (a) the term "business day" means any day on which the Nasdaq
National Market System is open for trading and (b) the term "subsidiary" has the
meaning set forth in Rule 405 of the Rules and Regulations.
<PAGE> 52
52
18. Governing Law. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.
19. Submission to Jurisdiction; Appointment of Agent for Service; Waiver;
Currency Indemnity. (a) To the fullest extent permitted by applicable law, the
Company and each Selling Shareholder irrevocably submit 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
agree that all claims in respect of such suit or proceeding may be determined in
any such court. The Company and each Selling Shareholder, to the fullest extent
permitted by applicable law, irrevocably and fully waive the defense of an
inconvenient forum to the maintenance of such suit or proceeding and hereby
irrevocably designate and appoint CT Corporation System (the "Authorized
Agent"), as their 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 and each Selling Shareholder hereby
irrevocably authorize and direct their Authorized Agent to accept such service.
The Company and each Selling Shareholder further agree that service of process
upon their Authorized Agent and written notice of said service to the Company
mailed by first class mail or delivered to their Authorized Agent shall be
deemed in every respect effective service of process upon the Company or such
Selling Shareholder, as the case may be, 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 and each Selling Shareholder agree 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 or any Selling
Shareholder arising out of or based on this Agreement or the transactions
contemplated hereby may also be instituted by the U.S. Underwriters, its
officers and employees or any person who controls the U.S. Underwriters within
the meaning of the Securities Act in any competent court in The Netherlands, and
the Company and the Selling Shareholders expressly accept the jurisdiction of
any such court in any such action.
The Company and the Selling Shareholders hereby irrevocably waive, to the
extent permitted by law, any immunity to jurisdiction to which they 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.
The provisions of this Section 19(a) are intended to be effective upon the
execution of this Agreement without any further action by the Company, the
Selling Shareholders or the U.S. Underwriters and the introduction of a true
copy of this Agreement into evidence shall be conclusive and final evidence as
to such matters.
(b) The Company and the Selling Shareholders, as the case may be, shall
indemnify the U.S. Underwriters against any loss incurred by them as a result of
any
<PAGE> 53
53
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 U.S. Underwriters
on the date of payment of such judgment or order are able to purchase U.S.
dollars with the amount of the Judgment Currency actually received by such U.S.
Underwriters. If the U.S. dollars so purchased are greater than the amount
originally due to such U.S. Underwriters hereunder, such U.S. Underwriters agree
to pay to the Company and/or the Selling Shareholders, as the case may be, an
amount equal to the excess of the U.S. dollars so purchased over the amount
originally due to such U.S. Underwriters hereunder. The U.S. Underwriters shall
indemnify the Company and the Selling Shareholders, as the case may be, against
any loss incurred by them as a result of any judgment or order being given or
made and expressed and paid in a 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 the Company and the Selling Shareholders, as the case may be, on the
date of payment of such judgment or order are able to purchase U.S. dollars with
the amount of the Judgment Currency actually received by the Company or such
Selling Shareholders. If the U.S. dollars so purchased are greater than the
amount originally due to the Company or the Selling Shareholders hereunder, the
Company and the Selling Shareholders, as the case may be, agree to pay to the
U.S. Underwriters an amount equal to the excess of the U.S. dollars so purchased
over the amount originally due to the Company and the Selling Shareholders, as
the case may be, hereunder. The foregoing shall constitute a separate and
independent obligation of the Company, the Selling Shareholders and the U.S.
Underwriters, 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.
20. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
21. Headings. The headings herein are inserted for convenience of reference
only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
<PAGE> 54
54
If the foregoing correctly sets forth the agreement among the Company, the
Selling Shareholders and the U.S. Underwriters, please indicate your acceptance
in the space provided for that purpose below.
Very truly yours,
VERSATEL TELECOM INTERNATIONAL N.V.
By:
--------------------------------
Name:
Title:
THE SELLING SHAREHOLDERS NAMED IN
SCHEDULE II TO THIS AGREEMENT
By:
--------------------------------
Attorney-in-Fact
Accepted:
LEHMAN BROTHERS INC.
For itself and as Representative
of the several U.S. Underwriters named
on Schedule I hereto
By:
-----------------------------
Authorized Representative
<PAGE> 55
SCHEDULE I
U.S. Underwriters Number of Shares and ADSs
- ----------------- -------------------------
Lehman Brothers Inc
ING Barings LLC
Bear, Stearns & Co Inc
Paribas Corporation
Hambrecht & Quist LLC
E*TRADE Securities, Inc
Total
<PAGE> 56
SCHEDULE II
Selling Shareholders Number of Firm Shares
- -------------------- ---------------------
Total
<PAGE> 1
Exhibit 3.2
DI/CA/685683.dlt
Begripsbepalingen
Artikel 1
In deze statuten moet worden verstaan onder
1. 1. vennootschap:
de vennootschap waarvoor deze statuten gelden;
1. 2. algemene vergadering:
het orgaan dat gevormd wordt door aandeelhouders met stemrecht en
andere personen met stemrecht;
1. 3. vergadering van aandeelhouders:
de vergadering van de algemene vergadering en andere
vergadergerechtigden;
1. 4. vergadergerechtigden:
- aandeelhouders met stemrecht;
- aandeelhouders zonder stemrecht;
- vruchtgebruikers en pandhouders met stemrecht;
- andere (houders van rechten die door de wet zijn toegekend
aan) houders van met medewerking van de vennootschap
uitgegeven certificaten van haar aandelen;
1. 5. Officiele Prijscourant:
de Officiele Prijscourant van de Amsterdam Exchanges N.V. of een
daarvoor in de plaats tredende officiele publicatie;
1. 6. accountant:
een accountant als bedoeld in artikel 393 Boek 2 van het Burgerlijk
Wetboek, dan wel een organisatie waarin zodanige accountants
samenwerken;
1. 7. jaarvergadering:
de vergadering van aandeelhouders, bestemd tot de behandeling van de
jaarrekening en het jaarverslag;
<PAGE> 2
-2-
1. 8. jaarrekening:
de balans en de winst- en verliesrekening met toelichting;
1. 9. jaarverslag:
verslag van de toestand van de vennootschap per de laatste dag van
het boekjaar en van de gang van zaken gedurende het boekjaar.
1. 10. dochtermaatschappij:
- een rechtspersoon waarin de vennootschap of een of meer van
haar dochtermaatschappijen, al dan niet krachtens overeenkomst
met andere stemgerechtigden, alleen of samen meer dan de helft
van de stemrechten in de algemene vergadering kunnen
uitoefenen;
- een rechtspersoon waarvan de vennootschap of een of meer van
haar dochtermaatschappijen lid of aandeelhouder zijn en, al
dan niet krachtens overeenkomst met andere stemgerechtigden,
alleen of samen meer dan de helft van de bestuurders of van de
commissarissen kunnen benoemen of ontslaan, ook indien alle
stemgerechtigden stemmen. Met een dochtermaatschappij wordt
gelijkgesteld een onder eigen naam optredende vennootschap
waarin de vennootschap of een of meer dochtermaatschappijen
als vennoot volledig jegens schuldeisers aansprakelijk is voor
de schulden. Het hiervoor bepaalde geldt onverminderd het
bepaalde in artikel 24a leden 3-4 Boek 2 van het Burgerlijk
Wetboek;
1. 11. groepsmaatschappij: een rechtspersoon of vennootschap, waarmee de
vennootschap in een groep is verbonden;
1. 12. prioriteit: de houder van het ene prioriteitsaandeel.
<PAGE> 3
-3-
1. 13. Wge:
Wet Giraal effectenverkeer.
1. 14. Necigef:
het centraal instituut in de zin van de Wge.
1. 15. aangesloten instelling:
aangesloten instelling in de zin van de Wge.
Naam, zetel en doel
Artikel 2
2. 1. De vennootschap draagt de naam: VersaTel Telecom International N.V..
2. 2. Zij heeft haar zetel te Amsterdam.
Doel
Artikel 3
De vennootschap heeft ten doel:
a. het verlenen van telecommunicatie-diensten;
b. het oprichten van, deelnemen in, het voeren van bestuur over en het zich
op enigerlei andere wijze financieel interesseren bij andere
vennootschappen en ondernemingen;
c. het verlenen van diensten op administratief, technisch, financieel,
economisch of bestuurlijk gebied aan andere vennootschappen, personen en
ondernemingen;
d. het verkrijgen, vervreemden, beheren en exploiteren van roerende en
onroerende zaken en andere goederen, daaronder begrepen patenten,
merkrechten, licenties, vergunningen en andere industriele
eigendomsrechten;
e. het ter leen opnemen of ter leen verstrekken van gelden, alsmede het
zekerheid stellen, zich op andere wijze sterk maken of zich hoofdelijk
naast of voor anderen verbinden,
het vorenstaande al of niet in samenwerking met derden en met inbegrip van het
verrichten en bevorderen van alle handelingen die daarmede direct of indirect
verband houden, alles in de ruimste zin van het woord.
<PAGE> 4
-4-
Kapitaal
Artikel 4
4. 1. Het maatschappelijk kapitaal van de vennootschap bedraagt negen
miljoen gulden vijf cent ((Function) 9.000.000,05) en is verdeeld in
- tachtig miljoen (80.000.000) gewone aandelen;
- twintig miljoen (20.000.000) preferente aandelen A,
- tachtig miljoen (80.000.000) preferente aandelen B en
- een (1) prioriteitsaandeel,
elk nominaal groot vijf cent (NLG 0,05).
4. 2. Waar in deze statuten wordt gesproken van "aandelen" of
"aandeelhouders", wordt daaronder verstaan aandelen van welke soort
dan ook respectievelijk houders van aandelen van welke soort dan
ook, tenzij het tegendeel uitdrukkelijk is vermeld of kennelijk uit
het zinsverband blijkt.
Uitgifte van aandelen
Artikel 5
5. 1. Uitgifte van aandelen kan slechts geschieden krachtens een besluit
van de algemene vergadering dat tevens de koers en de verdere
voorwaarden van de uitgifte bevat.
De algemene vergadering kan haar bevoegdheid als in de vorige zin
bedoeld voor een bepaalde duur van ten hoogste vijf jaar overdragen
aan een ander vennootschapsorgaan.
Bij die aanwijzing wordt bepaald hoeveel aandelen mogen worden
uitgegeven.
De aanwijzing kan telkens voor niet langer dan vijf jaar worden
verlengd.
Tenzij bij de aanwijzing anders is bepaald, kan zij niet worden
ingetrokken.
<PAGE> 5
-5-
Voor de geldigheid van het besluit van de algemene vergadering tot
uitgifte of tot aanwijzing is vereist een voorafgaand of
gelijktijdig goedkeurend besluit van elke groep van houders van
aandelen van eenzelfde soort aan wier rechten de uitgifte afbreuk
doet.
De vennootschap legt binnen acht dagen na een be-sluit van de
algemene vergadering tot uitgifte of tot aanwijzing een volledige
tekst daarvan neer ten kantore van het handelsregister met
vermelding van aantal en soort.
De vennootschap doet binnen acht dagen na elke uitgifte van aandelen
hiervan opgave ten kantore van het handelsregister met vermelding
van aantal en soort.
Dit lid is van overeenkomstige toepassing op het verlenen van
rechten tot het nemen van aandelen, maar is niet van toepassing op
het uitgeven van aandelen aan iemand die een voordien reeds
verkregen recht tot het nemen van aandelen uitoefent.
5. 2. Indien en voor zover de raad van bestuur is aangewezen als bevoegd
om tot uitgifte van aandelen te besluiten, is bij de uitgifte van
preferente aandelen B - daaronder begrepen het verlenen van een
recht tot het nemen van preferente aandelen B -:
a. de raad van bestuur verplicht, binnen vier weken na die
uitgifte een algemene vergadering bijeen te roepen, waarin de
motieven voor de uitgifte worden toegelicht, tenzij voordien
in een algemene vergadering een zodanige toelichting is
gegeven;
b. de voorafgaande goedkeuring van de algemene vergadering voor
het specifieke geval vereist indien (i) tengevolge van die
uitgifte (ii) en/of
<PAGE> 6
-6-
tengevolge van het eerder uitgeven van preferente aandelen B
door de raad van bestuur, zonder bedoelde goedkeuring, zoveel
preferente aandelen B kunnen worden genomen en/of zijn
geplaatst, dat het totale nominale bedrag van zonder bedoelde
goedkeuring van de algemene vergadering door de raad van
bestuur uitgegeven preferente aandelen meer bedraagt dan
eenhonderd procent (100%) van het totale nominale bedrag van
de geplaatste gewone aandelen en de preferente aandelen A voor
die uitgifte.
5. 3. Indien preferente aandelen B zijn geplaatst krachtens een besluit
tot uitgifte, dan wel een besluit tot het verlenen van een recht tot
het nemen van aandelen, genomen door de raad van bestuur zonder de
voorafgaande goedkeuring of andere medewerking van de algemene
vergadering, is de raad van bestuur verplicht een vergadering van
aandeelhouders bijeen te roepen binnen twee jaren na die plaatsing
en daarin een voorstel te doen omtrent inkoop casu quo intrekking
van bedoelde geplaatste preferente aandelen.
Indien in die vergadering niet het besluit wordt genomen dat strekt
tot inkoop casu quo intrekking van de preferente aandelen B is de
raad van bestuur verplicht telkens binnen twee jaar nadat
vorenbedoeld voorstel aan de orde is gesteld, wederom een algemene
vergadering bijeen te roepen, waarin een zodanig voorstel opnieuw
wordt gedaan, welke verplichting er niet meer is indien de bedoelde
aandelen niet langer door een ander dan de vennootschap worden
gehouden.
5. 4. Bij uitgifte van gewone aandelen heeft iedere houder van gewone
aandelen een recht van voorkeur naar
<PAGE> 7
-7-
evenredigheid van het gezamenlijk bedrag van zijn aandelen,
behoudens het bepaalde in de wet.
Bij uitgifte van aandelen bestaat geen voorkeursrecht op aandelen
die worden uitgegeven tegen inbreng anders dan in geld, noch op
aandelen die worden uitgegeven aan werknemers van de vennootschap of
van een groepsmaatschappij.
De houders van preferente aandelen hebben geen voorkeursrecht bij de
uitgifte van gewone aandelen.
Houders van gewone aandelen hebben geen voorkeursrecht bij uitgifte
van preferente aandelen en het prioriteitsaandeel.
De vennootschap kondigt de uitgifte met voorkeursrecht en het
tijdvak waarin dat kan worden uitgeoefend aan in de Staatscourant,
in een landelijk verspreid dagblad en in de Officiele Prijscourant.
Het voorkeursrecht kan worden beperkt of uitgesloten bij besluit van
de algemene vergadering.
In het voorstel hiertoe moeten de redenen voor het voorstel en de
keuze van de voorgenomen koers van uitgifte schriftelijk worden
toegelicht.
Het voorkeursrecht kan ook worden beperkt of uitgesloten door het
ingevolge lid 1 aangewezen vennootschapsorgaan, indien dit bij
besluit van de algemene vergadering voor een bepaalde duur van ten
hoogste vijf jaren is aangewezen als bevoegd tot het beperken of
uitsluiten van het voorkeursrecht.
De aanwijzing kan telkens voor niet langer dan vijf jaren worden
verlengd; zij houdt in ieder geval op te gelden indien de aanwijzing
van het als tot uitgifte bevoegde vennootschapsorgaan als bedoeld in
artikel 5, lid 1, niet meer van kracht is.
Tenzij bij de aanwijzing anders is bepaald, kan zij -onverminderd
het bepaalde in de vorige zin - niet
<PAGE> 8
-8-
worden ingetrokken.
Voor een besluit van de algemene vergadering tot beperking of
uitsluiting van het voorkeursrecht of tot aanwijzing is een
meerderheid van ten minste twee derden van de uitgebrachte stemmen
vereist, indien minder dan de helft van het geplaatste kapitaal in
de vergadering is vertegenwoordigd.
De vennootschap legt binnen acht dagen na het besluit een volledige
tekst daarvan neer ten kantore van het handelsregister.
Bij het verlenen van rechten tot het nemen van gewone aandelen
hebben de houders van gewone aandelen een voorkeursrecht; het
hiervoor in dit lid bepaalde is van overeenkomstige toepassing.
Aandeelhouders hebben geen voorkeursrecht op aandelen die worden
uitgegeven aan iemand die een voordien reeds verkregen recht tot het
nemen van aandelen uitoefent.
5. 5. De koers waartegen de aandelen worden uitgegeven mag niet beneden
pari zijn,
onverminderd het bepaalde in artikel 80 lid 2 Boek 2 van het
Burgerlijk Wetboek.
5. 6. Storting moet geschieden in geld voorzover niet inbreng anders dan
in geld is overeengekomen.
Storting in vreemd geld kan slechts geschieden met toestemming van
de vennootschap.
Alsdan wordt aan de stortingsplicht voldaan voor het bedrag
waartegen het gestorte bedrag vrijelijk in Nederlands geld dan wel
in euro's kan worden omgewisseld.
Bepalend is de wisselkoers op de dag van storting.
In afwijking van het in de vorige zin bepaalde kan de vennootschap
storting verlangen tegen de wisselkoers op een bepaalde dag binnen
twee maanden voor
<PAGE> 9
-9-
de laatste dag waarop moet worden gestort, mits de aandelen of
certificaten van die aandelen onverwijld na de uitgifte zullen
worden opgenomen in de prijscourant van een beurs buiten Nederland.
Eigen aandelen
Artikel 6
6. 1. De vennootschap kan bij uitgifte geen eigen aandelen nemen.
6. 2. Verkrijging door de vennootschap van niet volgestorte eigen aandelen
is nietig.
6. 3. De vennootschap mag, na daartoe verkregen goedkeuring van de raad
van commissarissen, volgestorte eigen aandelen onder bezwarende
titel verkrijgen indien
a. het eigen vermogen, verminderd met de verkrijgingsprijs, niet
kleiner is dan het gestorte en opgevraagde deel van het
kapitaal, vermeerderd met de reserves die krachtens de wet
moeten worden aangehouden;
b. het nominale bedrag van de aandelen in haar kapitaal die de
vennootschap verkrijgt, houdt of in pand houdt of die worden
gehouden door een dochtermaatschappij niet meer beloopt dan
een tiende van het geplaatste kapitaal, en
c. machtiging tot de verkrijging is verleend door de algemene
vergadering.
Verkrijging van aandelen in strijd met het in dit lid bepaalde is
nietig.
6. 4. Voor het vereiste onder a van het vorige lid is bepalend de grootte
van het eigen vermogen volgens de laatst vastgestelde balans,
verminderd met de verkrijgingsprijs voor aandelen in het kapitaal
van de vennootschap en uitkeringen uit winst of reserves aan
anderen, die zij en haar dochtermaatschappijen
<PAGE> 10
-10-
na de balansdatum verschuldigd werden.
Is een boekjaar meer dan zes maanden verstreken zonder dat de
jaarrekening is vastgesteld, dan is verkrijging overeenkomstig lid 3
niet toegestaan.
6. 5. De algemene vergadering moet in de machtiging bepalen hoeveel
aandelen mogen worden verkregen, hoe zij mogen worden verkregen en
tussen welke grenzen de prijs moet liggen.
De machtiging geldt voor ten hoogste achttien maanden.
6. 6. De vorige leden gelden niet voor aandelen die de vennootschap onder
algemene titel verkrijgt.
6. 7. Tot vervreemding van door de vennootschap gehouden eigen aandelen is
de raad van bestuur bevoegd.
6. 8. Het hiervoor in dit artikel bepaalde is van overeenkomstige
toepassing op certificaten van aandelen in het kapitaal van de
vennootschap.
Kapitaalvermindering
Artikel 7
7. 1. De algemene vergadering van aandeelhouders kan besluiten tot
vermindering van het geplaatste kapitaal door intrekking van
aandelen of door het bedrag van de aandelen bij statutenwijziging te
verminderen.
In dit besluit moeten de aandelen waarop het besluit betrekking
heeft, worden aangewezen en moet de uitvoering van het besluit zijn
geregeld.
Het gestorte en opgevraagde deel van het kapitaal mag niet kleiner
worden dan het ten tijde van het besluit ingevolge de wet
voorgeschreven minimumkapitaal.
7. 2. Een besluit tot intrekking van aandelen kan slechts betreffen
- aandelen die de vennootschap zelf houdt of waarvan zij de
certificaten houdt;
<PAGE> 11
-11-
- alle preferente aandelen van een bepaalde soort of beide
soorten met terugbetaling.
7. 3. Vermindering van het bedrag van aandelen zonder terugbetaling en
zonder ontheffing van de verplichting tot storting moet naar
evenredigheid op alle aandelen van een zelfde soort geschieden.
Van het vereiste van evenredigheid mag worden afgeweken met
instemming van alle betrokken aandeelhouders.
7. 4. Gedeeltelijke terugbetaling op aandelen of ontheffing van de
verplichting tot storting is slechts mogelijk ter uitvoering van een
besluit tot vermindering van het bedrag van de aandelen.
Zulk een terugbetaling of ontheffing moet geschieden
- hetzij naar evenredigheid op alle aandelen;
- hetzij naar evenredigheid van alleen de preferente aandelen
van een bepaalde soort of beide soorten.
Van het vereiste van evenredigheid mag worden afgeweken met
instemming van alle betrokken aandeelhouders.
7. 5. Voor een besluit tot kapitaalvermindering met betrekking tot
preferente aandelen van een bepaalde soort of beide soorten is een
voorafgaand of gelijktijdig goedkeurend besluit vereist van de
vergadering van houders van de aandelen van die soort(en).
7. 6. De oproeping tot een vergadering waarin een in dit artikel genoemd
besluit wordt genomen, vermeldt het doel van de kapitaalvermindering
en de wijze van uitvoering.
Voor een besluit tot kapitaalvermindering is een meerderheid van
tenminste twee derden van de uitgebrachte stemmen vereist, indien
minder dan de helft van het geplaatste kapitaal vertegenwoordigd is.
7. 7. De vennootschap is verplicht tot publikatie van de
<PAGE> 12
-12-
in dit artikel bedoelde besluiten overeenkomstig het in de wet
bepaalde.
Een besluit tot vermindering van het geplaatste kapitaal wordt niet
van kracht zolang door crediteuren van de vennootschap verzet kan
worden gedaan overeenkomstig het in de wet bepaalde.
Aandelen
Artikel 8
De gewone aandelen luiden ter keuze van de houder op naam of aan toonder; de
preferente aandelen en het prioriteitsaandeel kunnen slechts op naam luiden.
Aandelen aan toonder
Artikel 9
9. 1. Alle aandelen aan toonder worden belichaamd in een aandeelbewijs.
In bijzondere gevallen kan de raad van bestuur onder goedkeuring van
de raad van commissarissen en Negicef besluiten dat aandelen aan
toonder op andere wijze zullen worden belichaamd dan in het
verzamelbewijs vermeld in de vorige zin.
9. 2. Dit aandeelbewijs worden getekend op de wijze als in deze statuten
bepaald omtrent vertegenwoordiging van de vennootschap.
9. 3. De vennootschap doet het in lid 1 bedoelde aandeelbewijs voor de
rechthebbende(n) bewaren door Necigef.
9. 4. De vennootschap kent aan een rechthebbende een recht terzake van een
gewoon aandeel aan toonder toe doordat (a) Necigef de vennootschap
in staat stelt een aandeel op het aandeelbewijs bij te schrijven en
(b) de rechthebbende een aangesloten instelling aanwijst die hem
dienovereenkomstig als deelgenoot (hierna te noemen: een deelgenoot)
in haar verzameldepot crediteert.
<PAGE> 13
-13-
9. 5. Onverminderd het bepaalde in artikel 27, lid 3, van deze statuten is
het beheer over het aandeelbewijs onherroepelijk aan Necigef
opgedragen en is Necigef onherroepelijk gevolmachtigd namens de
rechthebbende(n) ter zake van desbetreffende gewone aandelen al het
nodige te doen, waaronder aanvaarden, leveren en medewerken aan
bijschrijving op en afschrijving van het aandeelbewijs.
9. 6. Als houder van aandelen zal voor de toepassing van deze statuten
eveneens gelden de als deelgenoot gerechtigde in een verzameldepot
van gewone aandelen aan toonder als bedoeld in de Wge.
De vennootschap is bevoegd ter zake van het aandeelbewijs nadere
regels vast te stellen.
Artikel 10
10. 1. Indien een deelgenoot in een depot ten name van een aangesloten
instelling uitlevering wenst van een of meer aandelen aan toonder,
zal, als een onlosmakelijk geheel, (a) Necigef bij akte het
aandeel/de aandelen aan de gerechtigde leveren, (b) de vennootschap
de levering erkennen, (c) Necigef de vennootschap in staat stellen
het aandeel/de aandelen van het aandeelbewijs af te schrijven, (d)
de desbetreffende aangesloten instelling de rechthebbende
dienovereenkomstig als deelgenoot in haar verzameldepot debiteren en
(e) de vennootschap de houder als houder van het aandeel/de aandelen
op naam in het register van aandeelhouders inschrijven.
10. 2. Een houder van een gewoon aandeel op naam kan dit te allen tijde aan
toonder doen stellen doordat (a) de rechthebbende dit aandeel bij
akte aan Necigef levert, (b) de vennootschap de levering erkent, (c)
Necigef de vennootschap in staat stelt een aandeel
<PAGE> 14
-14-
op het aandeelbewijs bij te schrijven, (d) een door de rechthebbende
aangewezen aangesloten instelling de rechthebbende
dienovereenkomstig als deelgenoot in haar verzameldepot crediteert
en (e) de vennootschap de rechthebbende als houder van het
desbetreffende aandeel uit het register schrijft.
Aandelen op naam
Artikel 11
11. 1. Voor de aandelen op naam worden geen aandeelbewijzen afgegeven.
11. 2. De raad van bestuur houdt een aandeelhoudersregister waarin ten
aanzien van houders van aandelen op naam en vruchtgebruikers en
pandhouders van zodanige aandelen, de namen en adressen alsmede de
overige door de wet voorgeschreven gegevens worden vermeld.
11. 3. Iedere houder van aandelen op naam en iedere vruchtgebruiker of
pandhouder van zodanige aandelen, is verplicht zijn adres
schriftelijk aan de vennootschap door te geven.
11. 4. Het register wordt regelmatig bijgehouden.
Alle aantekeningen in het register worden getekend op de wijze als
in deze statuten bepaald omtrent vertegenwoordiging van de
vennootschap.
11. 5. Het register ligt ten kantore van de vennootschap ter inzage van
vergadergerechtigden.
De vorige zin is niet van toepassing op het gedeelte van het
register dat buiten Nederland wordt gehouden, indien dat nodig is
ter voldoening aan aldaar geldende wetgeving of beursvoorschriften.
11. 6. De raad van bestuur verstrekt aan een houder van aandelen op naam en
aan een vruchtgebruiker en pandhouder van zodanige aandelen
kosteloos een uittreksel uit het register omtrent hun recht op een
<PAGE> 15
-15-
aandeel en de daaraan verbonden vergaderrechten.
Dit uittreksel wordt getekend op de wijze als in deze statuten
bepaald omtrent vertegenwoordiging van de vennootschap.
Vruchtgebruik en pandrecht
Artikel 12
12. 1. Op aandelen kan een recht van vruchtgebruik worden gevestigd.
12. 2. De aandeelhouder heeft het stemrecht op aandelen waarop een
vruchtgebruik is gevestigd.
In afwijking van het in de vorige zin bepaalde komt het stemrecht
verbonden aan gewone aandelen toe aan de vruchtgebruiker indien dat
bij de vestiging van het recht is bepaald.
Het stemrecht verbonden aan preferente aandelen komt slechts toe aan
de vruchtgebruiker indien dat bij de vestiging van dat recht is
bepaald en zowel deze bepaling als - bij overdracht van het
vruchtgebruik - de overgang van het stemrecht is goedgekeurd door de
raad van commissarissen.
Het stemrecht verbonden aan het prioriteitsaandeel kan niet aan de
vruchtgebruiker worden toegekend.
12. 3. De aandeelhouder die geen stemrecht heeft en de vruchtgebruiker die
stemrecht heeft, hebben de rechten die de wet toekent aan houders
van met medewerking van de vennootschap uitgegeven certificaten.
De vruchtgebruiker die geen stemrecht heeft, heeft de in de vorige
zin bedoelde rechten niet.
Artikel 13
13. 1. Aandelen, met uitzondering van het prioriteitsaandeel, kunnen worden
verpand.
13. 2. Het bepaalde in de leden 2 en 3 van artikel 12 is van
overeenkomstige toepassing op het stemrecht op
<PAGE> 16
-16-
de verpande aandelen en op vergaderrechten van de pandhouders.
Raad van bestuur
Artikel 14
14. 1. De vennootschap heeft een raad van bestuur.
14. 2. De raad van bestuur is, behoudens de beperkingen volgens deze
statuten, belast met het besturen van de vennootschap.
14. 3. De raad van bestuur is - na daartoe verkregen goedkeuring van de
raad van commissarissen - bevoegd tot het aangaan van
rechtshandelingen als bedoeld in artikel 94 lid 1 Boek 2 van het
Burgerlijk Wetboek.
Artikel 15
15. 1. De raad van bestuur bestaat uit een of meer leden.
Het aantal leden van de raad van bestuur wordt vastgesteld door de
raad van commissarissen.
15. 2. Leden van de raad van bestuur worden benoemd door de algemene
vergadering.
Indien het prioriteitsaandeel geplaatst is geschiedt die benoeming
uit een bindende voordracht van ten minste twee personen voor elke
vacature op te maken door de prioriteit.
Tot het opmaken van een bindende voordracht wordt de prioriteit door
de raad van bestuur uitgenodigd.
De bindende voordracht wordt opgemaakt binnen twee maanden, na het
verzenden van de in de vorige zin bedoelde uitnodiging.
Maakt de prioriteit geen of niet tijdig gebruik van zijn recht een
bindende voordracht op te maken, dan is de algemene vergadering van
aandeelhouders vrij in haar benoeming.
De algemene vergadering van aandeelhouders kan aan een bindende
voordracht steeds het bindende karak-
<PAGE> 17
-17-
ter ontnemen bij besluit genomen met ten minste twee derden van de
uitgebrachte stemmen, die meer dan de helft van het geplaatste
kapitaal vertegenwoordigen.
Het bepaalde in artikel 120 lid 3 van Boek 2 van het Burgerlijk
Wetboek is niet van toepassing.
15. 3. Leden van de raad van bestuur kunnen te allen tijde door de algemene
vergadering worden geschorst en ontslagen.
Een besluit tot schorsing of ontslag van leden van de raad van
bestuur kan door de algemene vergadering slechts worden genomen met
ten minste twee derden van de uitgebrachte stemmen, die meer dan de
helft van het geplaatste kapitaal vertegenwoordigen tenzij het
betreffende voorstel is gedaan door de raad van commissarissen.
Leden van de raad van bestuur kunnen bovendien door de raad van
commissarissen worden geschorst.
Een schorsing als bedoeld in de vorige zin kan door de algemene
vergadering worden opgeheven.
15. 4. Een schorsing kan een of meermalen worden verlengd, maar kan in
totaal niet langer duren dan drie maanden.
15. 5. De bezoldiging en de verdere arbeidsvoorwaarden worden voor ieder
lid van de raad van bestuur afzonderlijk bepaald door de raad van
commissarissen.
Interne organisatie raad van bestuur
Artikel 16
16. 1. De raad van bestuur kan nadere regels vaststellen omtrent haar
werkwijze en interne organisatie waaronder begrepen die omtrent het
houden van-, de oproeping tot- en de besluitvorming in zijn
vergaderingen danwel buiten vergadering alsmede omtrent
<PAGE> 18
-18-
verdeling van de taken.
De vaststelling van zodanige regels behoeft de voorafgaande
goedkeuring van de raad van commissarissen.
16. 2. De raad van bestuur is - onverminderd haar eigen
verantwoordelijkheid - bevoegd om functionarissen aan te stellen met
zodanige bevoegdheden en zodanige titulatuur als door de raad van
bestuur te bepalen.
16. 3. Onverminderd het elders in deze statuten bepaalde zijn aan de
goedkeuring van de raad van commissarissen onderworpen alle
besluiten van de raad van bestuur omtrent
zodanige rechtshandelingen als door de raad van commissarissen
duidelijk omschreven en schriftelijk ter kennis van de raad van
bestuur zijn gebracht.
Voor de toepassing van dit lid wordt met een besluit als bedoeld in
de vorige zin gelijkgesteld een besluit van de raad van bestuur tot
het nemen of goedkeuren van een besluit van enig orgaan van een
vennootschap waarin de vennootschap deelneemt, mits het besluit tot
het aangaan van zo een rechtshandeling aan de goedkeuring van de
raad van bestuur als hiervoor bedoeld in dit lid is onderworpen.
Ontstentenis of belet
Artikel 17
17. 1. Ingeval van ontstentenis of belet van een of meer leden van de raad
van bestuur berust het bestuur van de vennootschap tijdelijk bij de
overige leden van de raad van bestuur.
17. 2. Ingeval van ontstentenis of belet van alle leden van de raad van
bestuur, berust het bestuur van de vennootschap tijdelijk bij een
door de raad van
<PAGE> 19
-19-
commissarissen daartoe -al dan niet uit zijn midden - aan te wijzen
persoon.
Vertegenwoordiging
Artikel 18
18. 1. De raad van bestuur vertegenwoordigt de vennootschap voor zover uit
de wet niet anders voortvloeit.
De bevoegdheid tot vertegenwoordiging komt mede toe aan twee
gezamenlijk handelende personen en wel
- hetzij twee leden van de raad van bestuur;
- hetzij een lid van de raad van bestuur tezamen met een
procuratiehouder;
- hetzij twee gezamenlijk handelende procuratiehouders,
voor wat betreft die procuratiehouders, mits handelende binnen de
grenzen van de verleende bevoegdheid.
18. 2. Ingeval van tegenstrijdig belang tussen de vennootschap en een of
meer leden van de raad van bestuur wordt de vennootschap
vertegenwoordigd op de wijze als bepaald in lid 1.
In alle gevallen waarin de vennootschap een tegenstrijdig belang
heeft met een lid van de raad van bestuur in prive behoeft het
besluit tot het aangaan van de betreffende rechtshandeling de
voorafgaande goedkeuring van de raad van commissarissen.
Het ontbreken van de goedkeuring als bedoeld in de vorige zin tast
de vertegenwoordigingsbevoegdheid van de raad van bestuur of de
leden van de raad van bestuur niet aan.
Raad van commissarissen
Artikel 19
19. 1. De vennootschap heeft een raad van commissarissen.
19. 2. De raad van commissarissen is belast met het toe-
<PAGE> 20
-20-
zicht op het beleid van de raad van bestuur en op de algemene gang
van zaken van de vennootschap en de met haar verbonden onderneming.
De raad van commissarissen staat de raad van bestuur met raad
terzijde.
Hij is verder belast met hetgeen hem overigens bij de wet en deze
statuten is opgedragen.
Bij de vervulling van hun taak richten de commissarissen zich op de
belangen van de vennootschap en de met haar verbonden onderneming.
19. 3. De raad van bestuur verschaft de raad van commissarissen tijdig de
voor de juiste uitoefening van zijn taak noodzakelijke gegevens.
19. 4. De raad van commissarissen kan voor de juiste uitoefening van zijn
taak op kosten van de vennootschap adviezen inwinnen.
Artikel 20
20. 1. De raad van commissarissen bestaat uit drie of meer natuurlijke
personen.
Het aantal commissarissen wordt met in achtneming van het in de
vorige zin bepaalde vastgesteld door de algemene vergadering.
20. 2. Indien te eniger tijd minder dan drie leden van de raad van
commissarissen in functie zijn, vormen de overblijvende leden van
die raad casu quo vormt het overgebleven lid een bevoegd college,
onverminderd de verplichting van de raad om zo spoedig mogelijk in
de vacatures te doen voorzien.
20. 3. De commissarissen genieten een bezoldiging.
Deze bezoldiging wordt door de algemene vergadering vastgesteld.
Artikel 21.
21. 1. De commissarissen worden benoemd door de algemene vergadering.
<PAGE> 21
-21-
Indien het prioriteitsaandeel geplaatst is geschiedt die benoeming
uit een bindende voordracht van ten minste twee personen voor elke
vacature op te maken door de prioriteit.
Tot het opmaken van een bindende voordracht wordt de prioriteit door
de raad van bestuur uitgenodigd.
De bindende voordracht wordt opgemaakt binnen twee maanden, na het
verzenden van de in de vorige zin bedoelde uitnodiging.
Maakt de prioriteit geen of niet tijdig gebruik van zijn recht een
bindende voordracht op te maken, dan is de algemene vergadering van
aandeelhouders vrij in haar benoeming.
De algemene vergadering van aandeelhouders kan aan een bindende
voordracht steeds het bindende karakter ontnemen bij besluit genomen
met ten minste twee derden van de uitgebrachte stemmen, die meer dan
de helft van het geplaatste kapitaal vertegenwoordigen.
Het bepaalde in artikel 120 lid 3 van Boek 2 van het Burgerlijk
Wetboek is niet van toepassing.
21. 2. Degene die de leeftijd van tweeenzeventig jaren heeft bereikt kan
niet tot commissaris worden benoemd.
21. 3. Commissarissen kunnen te allen tijde door de algemene vergadering
worden geschorst en ontslagen.
Artikel 22.
22. 1. Een commissaris treedt uiterlijk af na afloop van de algemene
vergadering van aandeelhouders waarin de jaarrekening wordt
behandeld in het boekjaar waarin hij de leeftijd van tweeenzeventig
jaren bereikt.
22. 2. Elke commissaris treedt voorts af volgens een door de raad van
commissarissen vast te stellen rooster.
<PAGE> 22
-22-
Aftredende commissarissen zijn terstond herbenoembaar, onverminderd
het bepaalde in de wet omtrent de leeftijdsgrens.
Interne organisatie raad van commissarissen
Artikel 23
23. 1. De raad van commissarissen benoemt uit zijn midden een voorzitter en
een plaatsvervangend voorzitter.
23. 2. De raad van commissarissen kan nadere regels vaststellen omtrent
zijn interne organisatie waaronder begrepen die omtrent het houden
van-, de oproeping tot- en de besluitvorming in zijn vergaderingen
danwel buiten vergadering alsmede omtrent verdeling van de taken.
23. 3. De raad van commissarissen heeft te allen tijde recht van toegang
tot alle bedrijfsruimten van de vennootschap en is zijn bevoegd
inzage te nemen in alle correspondentie, boeken, bescheiden en
andere gegevensdragers en de kas en andere vermogenswaarden van de
vennootschap te controleren.
23. 4. Indien moet blijken van een besluit van de raad van commissarissen
is een daartoe strekkende schriftelijke mededeling van de
(fungerend) voorzitter van die raad voldoende.
Algemene vergadering en vergaderingen van aandeelhouders
Artikel 24
Aan de algemene vergadering behoren, binnen de door de wet en deze statuten
gestelde grenzen, alle bevoegdheden die niet aan anderen zijn toegekend.
Artikel 25
25. 1. De jaarvergadering wordt gehouden binnen zes maanden na afloop van
elk boekjaar.
25. 2. In die vergadering wordt - tenzij de termijn als bedoeld in artikel
31 lid 2 van deze statuten overeenkomstig het aldaar bepaalde is
verlengd -
<PAGE> 23
-23-
onder meer aan de orde gesteld
- het jaarverslag;
- de jaarrekening en de bestemming van de winst, en
- decharge van de raad van bestuur en de raad van
commissarissen.
Indien de termijn bedoeld in artikel 31 lid 2 is verlengd, worden de
in de vorige zin genoemde onderwerpen aan de orde gesteld in een
vergadering van aandeelhouders te houden uiterlijk een maand na het
verstrijken van die termijn.
25. 3. Onverminderd het bepaalde in artikel 108a Boek 2 van het Burgerlijk
Wetboek worden buitengewone vergaderingen van aandeelhouders
gehouden zo dikwijls de raad van bestuur of de raad van
commissarissen zulks nodig acht.
Voorts worden buitengewone vergaderingen van aandeelhouders gehouden
zo dikwijls de vergadergerechtigden, die ten minste een tiende
gedeelte van het geplaatste kapitaal vertegenwoordigen, zulks
schriftelijk met nauwkeurige opgave van de te behandelen onderwerpen
aan de raad van bestuur en/of de raad van commissarissen verzoeken.
Artikel 26
26. 1. De oproeping tot de vergaderingen van aandeelhouders geschiedt door
de raad van bestuur of de raad van commissarissen en wel niet later
dan op de vijftiende dag voor die van de vergadering.
26. 2. De oproeping geschiedt door aankondiging in een landelijk verspreid
dagblad in Nederland alsmede in zodanige bladen in het buitenland
als door de raad van bestuur te bepalen.
26. 3. Bij de oproeping worden de te behandelen punten vermeld of wordt
meegedeeld dat vergadergerechtigden er ten kantore van de
vennootschap, alsmede op
<PAGE> 24
-24-
zodanige plaatsen waaronder een bankinstelling te Amsterdam die is
geregistreerd ingevolge de Wet toezicht kredietwezen en eventueel
elders als in de oproeping bepaald, kennis van kunnen nemen en
kosteloos afschriften van kunnen verkrijgen.
26. 4. De oproeping vermeldt tevens de plaats(en) waar en de datum waarop
uiterlijk door diegenen die hun vergaderrecht ontlenen aan aandelen
aan toonder bewijsstukken van hun recht moeten worden gedeponeerd
tegen een ontvangstbewijs dat als toegangsbewijs voor de vergadering
kan dienen.
De datum bedoeld in de vorige zin kan niet vroeger worden gesteld
dan op de zevende dag voor die van de vergadering.
Als toegangsbewijs als bedoeld in de voorlaatste zin kan tevens
dienen een verklaring van een aangesloten instelling of een andere
door de raad van bestuur aan te wijzen buitenlandse bankinstelling
die is onderworpen aan bedrijfseconomisch toezicht van
overheidswege, dat de in die verklaring genoemde hoeveelheid
aandelen aldaar ten name van de in die verklaring genoemde persoon
in (haar verzamel-)depot berust en tot en met de dag van de
vergadering aldus in depot zal blijven.
De oproeping vermeldt tevens dat met betrekking tot aandelen op naam
in de vergadering slechts rechten kunnen worden uitgeoefend indien
de betreffende vergadergerechtigden uiterlijk op de dag voor die van
de vergadering schriftelijk aan de raad van bestuur hebben
meegedeeld dat zij voornemens zijn de vergadering bij te (doen)
wonen.
Artikel 27
27. 1. De vergaderingen van aandeelhouders worden gehouden
<PAGE> 25
-25-
te Amsterdam.
27. 2. Als voorzitter van de vergaderingen van aandeelhouders fungeert de
voorzitter van de raad van commissarissen en bij diens afwezigheid
de plaatsvervangend voorzitter van de raad van commissarissen en
indien ook deze afwezig is door een door de ter vergadering
aanwezige commissarissen aan te wijzen commissaris.
Indien als voormeld niet in de leiding van de vergadering wordt
voorzien, wijst de vergadering zelf een voorzitter aan.
27. 3. Toegang tot de vergaderingen van aandeelhouders hebben alle
vergadergerechtigden die voorzien zijn van een toegangsbewijs of die
hun voornemen om aanwezig te zijn hebben aangekondigd, een en ander
zoals hiervoor bepaald in artikel 26 lid 3, alsmede de leden van de
raad van bestuur en de commissarissen.
Omtrent toelating van anderen beslist de voorzitter van de
vergadering.
27. 4. Vergadergerechtigden kunnen zich ter vergadering doen
vertegenwoordigen door een schriftelijk gevolmachtigde.
27. 5. Van het verhandelde in vergaderingen van aandeelhouders worden door
een door de voorzitter van de vergadering aangewezen secretaris
notulen gehouden, die ter vaststelling door de voorzitter en
secretaris worden getekend.
In afwijking van het in de eerste zin van dit lid bepaalde kunnen de
voorzitter van de vergadering en/of de raad van bestuur besluiten
tot het doen opmaken van een notarieel proces-verbaal.
De hiervoor in dit lid genoemde stukken liggen ten kantore van de
vennootschap ter inzage van verga-
<PAGE> 26
-26-
dergerechtigden.
Aan ieder van dezen wordt desgevraagd afschriften of uittreksels van
die stukken verstrekt tegen ten hoogste de kostprijs.
Artikel 28
28. 1. Ieder aandeel geeft recht op het uitbrengen van een stem.
Voor een aandeel dat toebehoort aan de vennootschap of aan een
dochtermaatschappij daarvan kan in de algemene vergadering van
aandeelhouders geen stem worden uitgebracht; evenmin voor een
aandeel waarvan een hunner de certificaten houdt.
Vruchtgebruikers en pandhouders van aandelen die aan de vennootschap
en haar dochtermaatschappijen toebehoren zijn evenwel niet van hun
stemrecht uitgesloten, indien het vruchtgebruik of pandrecht was
gevestigd voordat het aandeel aan de vennootschap of een
dochtermaatschappij daarvan toebehoorde.
De vennootschap of een dochtermaatschappij daarvan kan geen stem
uitbrengen voor een aandeel waarop zij een recht van vruchtgebruik
of een pandrecht heeft.
Bij de vaststelling in hoeverre de aandeelhouders stemmen, aanwezig
of vertegenwoordigd zijn, of in hoeverre het aandelenkapitaal
verschaft wordt of vertegenwoordigd is, wordt geen rekening gehouden
met aandelen waarvan de wet bepaalt dat daarvoor geen stem kan
worden uitgebracht.
Leden van de raad van bestuur en commissarissen hebben als zodanig
een raadgevende stem.
28. 2. Alle stemmingen geschieden mondeling, tenzij de voorzitter van de
vergadering besluit dat schriftelijk wordt gestemd.
<PAGE> 27
-27-
28. 3. De voorzitter van de vergadering kan besluiten dat bij acclamatie
wordt gestemd, tenzij een van de stemgerechtigden daartegen bezwaar
maakt.
28. 4. Blanco stemmen en ongeldig uitgebrachte stemmen gelden als niet
uitgebracht.
28. 5. Alle besluiten worden genomen met volstrekte meerderheid van de
uitgebrachte stemmen voor zover de wet of deze statuten geen grotere
meerderheid voorschrijven.
28. 6. Het ter vergadering uitgesproken oordeel van de voorzitter omtrent
de uitslag van een stemming, is beslissend.
Hetzelfde geldt voor de inhoud van een genomen besluit, voorzover
gestemd werd over een niet schriftelijk vastgelegd voorstel.
28. 7. Wordt echter onmiddellijk na het uitspreken van het in het
voorgaande lid bedoelde oordeel de juistheid daarvan betwist, dan
vindt een nieuwe stemming plaats, wanneer de meerderheid van de
algemene vergadering of indien de oorspronkelijke stemming niet
hoofdelijk of schriftelijk geschiedde, een stemgerechtigde dit
verlangt.
Door deze nieuwe stemming vervallen de rechtsgevolgen van de
oorspronkelijke stemming.
Vergaderingen van houders van aandelen van een bepaalde soort
Artikel 29
29. 1. Op vergaderingen van houders van aandelen van een bepaalde soort is
het hiervoor omtrent vergadering van aandeelhouders zoveel mogelijk
van toepassing.
29. 2. In afwijking van het in het vorige lid bepaalde is de
oproepingstermijn voor de vergadering van de houders van preferente
aandelen van een bepaalde soort tenminste zeven werkdagen en
behoeven houders
<PAGE> 28
-28-
van die aandelen hun komst niet aan te kondigen.
Voorts kan besluitvorming van houders van preferente aandelen van
een bepaalde soort ook op andere wijze dan in een vergadering van
aandeelhouders plaatsvinden, mits de stemrechtigde aandeelhouders
zich schriftelijk (waaronder begrepen alle vormen van
tekstoverdracht) met algemene stemmen voor het voorstel hebben
verklaard.
Het in de vorige zin bepaalde is niet van toepassing indien naast
houders van aandelen van de betreffende soort nog andere personen
zijn die aan die aandelen vergaderrechten ontlenen.
Oproepingen en kennisgevingen
Artikel 30
30. 1. Alle oproepingen en kennisgevingen vanwege de vennootschap bestemd
voor vergadergerechtigden geschieden voor wat betreft aandelen op
naam per brief gericht aan de adressen zoals opgenomen in het
aandeelhoudersregister en overigens per advertentie in ten minste
een landelijk dagblad alsmede in de Officiele Prijscourant.
30. 2. Deponering van stukken ter inzage van vergadergerechtigden geschiedt
ten kantore van de vennootschap alsmede op zodanige plaatsen
waaronder een bankinstelling te Amsterdam als in een oproeping of
kennisgeving te vermelden.
30. 3. Mededelingen welke krachtens de wet of deze statuten aan de algemene
vergadering moeten worden gericht kunnen geschieden door opneming
hetzij in de oproeping, hetzij in het stuk dat ter kennisneming ten
kantore van de vennootschap is neergelegd, mits daarvan in de
oproeping melding wordt gemaakt.
Boekjaar; jaarrekening; jaarverslag
<PAGE> 29
-29-
Artikel 31
31. 1. Het boekjaar is gelijk aan het kalenderjaar.
31. 2. Binnen vijf maanden na afloop van het boekjaar, behoudens verlenging
van deze termijn door de algemene vergadering met ten hoogste zes
maanden op grond van bijzondere omstandigheden, maakt de raad van
bestuur een jaarrekening en een jaarverslag op.
De opgemaakte jaarrekening wordt overgelegd aan de raad van
commissarissen die daarover een pre-advies uitbrengt aan de algemene
vergadering.
De jaarrekening wordt ondertekend door alle leden van de raad van
bestuur en alle commissarissen.
Ontbreken een of meer handtekeningen dan dient de reden daarvan te
worden vermeld.
31. 3. De raad van commissarissen brengt omtrent de jaarrekening pre-advies
uit aan de algemene vergadering.
31. 4. De vennootschap geeft aan een door de algemene vergadering aan te
wijzen accountant opdracht om de door de raad van bestuur opgemaakte
jaarrekening en jaarverslag te onderzoeken en daarover verslag uit
te brengen aan de raad van bestuur en de raad van commissarissen en
om een verklaring af te leggen, een en ander als bedoeld in artikel
393 lid 1 van Boek 2 van het Burgerlijk Wetboek.
Gaat de algemene vergadering niet over tot benoeming als voormeld
dan is de raad van commissarissen bevoegd of, zo deze in gebreke
blijft, de raad van bestuur.
Artikel 32
32. 1. De vennootschap zorgt er voor dat de jaarrekening, het jaarverslag
en daaraan ingevolge de wet toe te voegen gegevens en het
prae-advies van de raad van commissarissen vanaf de oproeping tot de
jaarverga-
<PAGE> 30
-30-
dering tot na afloop van die vergadering ten kantore van de
vennootschap alsmede bij een in de oproeping te vermelden
bankinstelling te Amsterdam ter inzage liggen van
vergadergerechtigden.
De vennootschap stelt een afschrift van de in de vorige zin bedoelde
stukken kosteloos ter beschikking van vergadergerechtigden.
Indien deze stukken worden gewijzigd geldt het in de vorige zin
bepaalde mede ten aanzien van de gewijzigde stukken.
32. 2. De jaarrekening wordt vastgesteld door de algemene vergadering.
32. 3. Indien de raad van bestuur wordt gedechargeerd voor het door haar in
enig boekjaar gevoerd bestuur en de raad van commissarissen voor het
door hem gehouden toezicht, dan beperkt die decharge zich tot
hetgeen uit de jaarrekening blijkt of aan de algemene vergadering
bekend is gemaakt, onverminderd hetgeen in de wet is bepaald.
Openbaarmaking
Artikel 33
33. 1. De jaarrekening, het jaarverslag en de daaraan ingevolge de wet toe
te voegen gegevens worden binnen acht dagen na de vaststelling van
de jaarrekening openbaar gemaakt.
De openbaarmaking geschiedt door nederlegging van een volledig in de
Nederlandse taal gesteld exemplaar of, als dat niet is vervaardigd,
een exemplaar in het Frans, Duits of Engels, ten kantore van het
handelsregister te Amsterdam.
Op het exemplaar moet de dag van vaststelling zijn aangetekend.
Is de jaarrekening niet binnen zeven maanden na afloop van het
boekjaar overeenkomstig de wette-
<PAGE> 31
-31-
lijke voorschriften vastgesteld, dan maakt de directie onverwijld de
opgemaakte jaarrekening op de in lid 1 voorgeschreven wijze
openbaar; op de jaarrekening wordt vermeld dat zij nog niet is
vastgesteld.
Heeft de algemene vergadering overeenkomstig artikel 31, lid 2 de
termijn voor het opmaken van de jaarrekening verlengd, dan geldt de
vorige zin met ingang van twee maanden na afloop van die termijn.
Gelijktijdig met en op dezelfde wijze als de jaarrekening wordt een
in de zelfde taal gesteld exemplaar van het jaarverslag en van de
overige in artikel 392 van Boek 2 van het Burgerlijk Wetboek
bedoelde gegevens openbaar gemaakt.
Het voorafgaande geldt, behalve voor de in artikel 392, lid 1 onder
a, c, f en g van Boek 2 van het Burgerlijk Wetboek genoemde
gegevens, niet, indien de stukken ten kantore van de vennootschap
ter inzage van een ieder worden gehouden en op verzoek een volledig
of gedeeltelijk afschrift daarvan ten hoogste tegen de kostprijs
wordt verstrekt; hiervan doet de vennootschap opgaaf ter
inschrijving in het handelsregister.
Indien op grond van de omvang van het bedrijf van de vennootschap de
vrijstelling van artikel 396, leden 3 tot en met 8 van Boek 2 van
het Burgerlijk Wetboek of van artikel 397, leden 3 tot en met 6 van
Boek 2 van het Burgerlijk Wetboek voor de vennootschap geldt,
geschiedt openbaarmaking met inachtneming van de toepasselijke
vrijstellingen.
33. 2. Een besluit tot uitkering op aandelen en besluiten tot tussentijdse
uitkering alsmede de (wijze van) betaalbaarstelling van uitkeringen
en de samenstel-
<PAGE> 32
-32-
ling van de uitkeringen worden onverwijld openbaar gemaakt.
Reserves, reserveringen en uitkeringen
Artikel 34
34. 1. Ten behoeve van zowel de gewone aandelen als de preferente aandelen
A worden in de boeken van de vennootschap afzonderlijke agioreserves
gevormd.
34. 2. Ten laste van de in het vorige lid bedoelde reserves kunnen slechts
uitkeringen worden gedaan op respectievelijk afboekingen of
afschrijvingen gedaan ten laste van aandelen van de betreffende
soort.
Tot onttrekking aan de agioreserve behorende bij de preferente
aandelen kan worden besloten door de raad van bestuur onder
voorafgaande goedkeuring van de vergadering van houders van die
aandelen.
Artikel 35
35. 1. De vennootschap kan aan de aandeelhouders slechts uitkeringen doen
voor zover het eigen vermogen van de vennootschap groter is dan het
bedrag van het gestorte kapitaal van de vennootschap, vermeerderd
met de reserves die krachtens de wet moeten worden aangehouden.
35. 2. Uit de winst - het positieve saldo van de winst- en verliesrekening
- wordt allereerst, zo mogelijk, op de preferente aandelen B een
dividend uitgekeerd waarvan het percentage gelijk is aan het
gemiddelde van de depositorente van de Europese Centrale Bank,
verhoogd met een op- of afslag, gewogen naar het aantal dagen
waarover de uitkering geschiedt.
De op- en afslag zal maximaal drie procent (3%) bedragen en wordt
vastgesteld door de raad van bestuur onder goedkeuring van de raad
van commissarissen ten tijde van de eerste uitgifte van een
<PAGE> 33
-33-
preferent aandeel B.
Het dividend wordt berekend over het gestorte deel van het nominaal
bedrag.
Indien de winst behaald in enig boekjaar de in de vorige volzin
bedoelde uitkering niet (volledig) toelaat, wordt aan de houders van
preferente aandelen B het tekort uitgekeerd ten laste van de winst
van een of meer van de opvolgende boekjaren.
Uit de resterende winst wordt op de preferente aandelen A een
dividend uitgekeerd waarvan het bedrag dan wel de wijze van
berekening wordt vastgesteld door het tot uitgifte bevoegde orgaan
bij de eerste uitgifte van preferente aandelen A.
Uit de resterende winst wordt, zo mogelijk, op het
prioriteitsaandeel een dividend uitgekeerd ter grootte van twintig
procent (20%) van het nominaal bedrag van dit aandeel.
Vervolgens wordt door de raad van bestuur onder goedkeuring van de
raad van commissarissen vastgesteld welk deel van de na toepassing
van het hiervoor in dit lid bepaalde overblijvende winst wordt
gereserveerd.
35. 3. De na toepassing van het hiervoor in dit lid bepaalde resterende
winst staat ter beschikking van de algemene vergadering, met dien
verstande dat die alsdan resterende winst alleen aan houders van
gewone aandelen ten goede komt.
35. 4. Aan de uitkeerbare reserves kunnen onttrekkingen worden gedaan
krachtens besluit van de algemene vergadering.
Het in de vorige zin bepaalde is niet van toepassing op de
agioreserve behorende bij de preferente aandelen.
35. 5. De vennootschap mag tussentijds slechts uitkeringen
<PAGE> 34
-34-
doen, indien blijkens een tussentijdse vermogensopstelling als
bedoeld in artikel 105 lid 4 Boek 2 van het Burgerlijk Wetboek aan
het vereiste van lid 1 van dit artikel is voldaan en mits na
voorafgaande goedkeuring van de raad van commissarissen.
Uitkeringen op gewone aandelen bedoeld in dit lid kunnen betaalbaar
worden gesteld in aandelen of verhandelbare rechten daarop.
35. 6. Onverminderd het hiervoor bepaalde kan de algemene vergadering
besluiten om uitkeringen op gewone aandelen (al dan niet ter keuze
van aandeelhouders) in plaats van in geld, geheel of gedeeltelijk
(al dan niet ter keuze van aandeelhouders) betaalbaar te stellen in
gewone aandelen (desverlangd en indien mogelijk ten laste van de
agioreserve) of verhandelbare rechten daarop.
Een besluit als bedoeld in de vorige zin kan slechts worden genomen
op voorstel van de raad van bestuur dat is goedgekeurd door de raad
van commissarissen.
35. 7. Op door de vennootschap verkregen aandelen in haar kapitaal en op
aandelen waarvan de vennootschap certificaten houdt vindt geen
uitkering ten behoeve van de vennootschap plaats.
35. 8. Bij de berekening van de winstverdeling tellen de aandelen, waarop
ingevolge het in lid 6 bepaalde geen uitkering ten behoeve van de
vennootschap plaatsvindt, niet mee.
35. 9. Uitkeringen waartoe is besloten, zijn betaalbaar binnen twee weken
na vaststelling van de jaarrekening waaruit blijkt dat deze
geoorloofd is worden uiterlijk na veertien dagen betaalbaar gesteld.
De vordering tot uitkering vervalt door een tijdsverloop van vijf
jaren te rekenen vanaf de dag van
<PAGE> 35
-35-
betaalbaarstelling.
Statutenwijziging, Ontbinding, Juridische Fusie en Splitsing
Artikel 36
36. 1. De algemene vergadering kan besluiten tot statutenwijziging,
ontbinding, juridische fusie en splitsing.
Indien het prioriteitsaandeel geplaatst is kan een besluit bedoeld
in de vorige zin slechts worden genomen op voorstel van de
prioriteit.
Een besluit tot wijziging van een bepaling in de statuten waarbij
aan houders van de preferente aandelen of het prioriteitsaandeel
enig recht is toegekend of tot een wijziging waarbij aan zodanig
recht afbreuk wordt gedaan, is slechts geldig na voorafgaande
goedkeuring van de vergadering van houders van die aandelen.
36. 2. Wanneer aan de algemene vergadering een voorstel als in de vorige
zin bedoeld zal worden gedaan, moet dat steeds bij de oproeping tot
de betreffende vergadering worden vermeld.
36. 3. Gelijktijdig met de oproeping tot de vergadering waarin wijziging
van de statuten aan de orde wordt gesteld, wordt een afschrift van
het voorstel waarin de voorgestelde wijziging woordelijk is
opgenomen ter inzage gelegd van vergadergerechtigden, tot de afloop
van die vergadering.
Vergadergerechtigden kunnen kosteloos een afschrift van voormeld
voorstel verkrijgen.
Artikel 37
37. 1. Ingeval tot ontbinding is besloten geschiedt de vereffening door de
raad van bestuur, tenzij de algemene vergadering andere vereffenaars
benoemt, onder toezicht van de raad van commissarissen.
<PAGE> 36
-36-
De algemene vergadering stelt de beloning voor de vereffenaars vast.
37. 2. Tijdens de vereffening blijven deze statuten zoveel mogelijk van
kracht.
37. 3. Van hetgeen na voldoening van alle schulden, waaronder die met
betrekking tot de vereffening, van het vermogen van de vennootschap
resteert, wordt allereerst - in na te melden volgorde - aan de
houders van de preferente aandelen B en A en aan de houder van het
prioriteitsaandeel uitgekeerd het op die aandelen gestorte bedrag
(waaronder begrepen de eventueel gestorte agio) vermeerderd met -
naar tijdsgelang over het lopende boekjaar en voor wat betreft de
preferente aandelen B eventueel over vorige boekjaren, het dividend
als bepaald in artikel 35 lid 2 -.
Hetgeen daarna resteert wordt aan houders van gewone aandelen en
andere gerechtigden tot die aandelen uitgekeerd in verhouding tot
ieders recht.
37. 4. Nadat de vennootschap heeft opgehouden te bestaan blijven de boeken,
bescheiden en andere gegevensdragers gedurende de door de wet
voorgeschreven periode berusten onder degene die daartoe door de
vereffenaars wordt aangewezen.
Slotbepaling
Tot de dag dat sinds de totstandkoming van de onderhavige statutenwijziging vijf
jaren zijn verstreken is de raad van bestuur onder voorafgaande goedkeuring van
de raad van commissarissen bevoegd tot uitgifte van zowel gewone als preferente
aandelen A en B, tot maximaal het aantal als vermeld in artikel 4 lid 1 van de
statuten,
alsmede tot het bij uitgifte van gewone aandelen uitsluiten of beperken van het
aan houders van gewone aandelen toekomende voorkeursrecht.
<PAGE> 37
-37-
Slotverklaringen
Tenslotte verklaarde de comparant
1. Per de totstandkoming van de onderhavige statutenwijziging is elk
van de (voorheen) geplaatste aandelen A omgezet in een gewoon
aandeel zodat het geplaatste kapitaal thans bedraagt een miljoen
negenhonderd tweeenveertigduizend zevenhonderd veertig gulden
vijfentwintig cent ((Function) 1.942.740,25) verdeeld in
achtendertig miljoen achthonderd vierenvijftigduizend achthonderd
tien (38.854.810) gewone aandelen.
./. 2. De Minister van Justitie heeft blijkens de aan deze akte te hechten
verklaring op
onder nummer N.V. 538.638, medegedeeld dat hem ten aanzien van de
onderhavige statutenwijziging van bezwaren niet is gebleken.
<PAGE> 38
- 1 -
TRANSLATION
DEFINITIONS
ARTICLE 1
In the present articles of association the following shall be understood to
mean:
1. 1. company:
the company to which the present articles of association will apply;
1. 2. general meeting:
the body formed by shareholders holding voting rights and other persons
holding voting rights;
1. 3. meeting of shareholders:
the meeting of the general meeting and other parties entitled to attend
meetings;
1. 4. parties entitled to attend meetings:
- shareholders with voting rights;
- shareholders without voting rights;
- usufructuaries and pledgees with voting rights;
- other (holders of rights granted by law to) holders of depository
receipts of its shares issued with the co-operation of the company;
1. 5. Official Price List:
the Official Price List of Amsterdam Exchanges N.V. or an official
publication taking its place;
1. 6. accountant:
an accountant as referred to in article 393, Volume 2 of the Civil Code
or an organisation in which such accountants are associated;
1. 7. annual meeting:
the meeting of shareholders destined for the consideration of the
annual account and the annual report;
1. 8. annual account:
<PAGE> 39
- 2 -
the balance sheet and the profit and loss account with explanatory
memorandum;
1. 9. annual report:
report of the position of the company as at the last day of the
financial year and the course of affairs during the financial year.
1. 10. subsidiary:
- a legal entity in which the company or one or several of its
subsidiaries, whether or not by virtue of an agreement with other
parties entitled to vote, alone or jointly may exercise more than
fifty per cent of the voting rights in the general meeting;
- a legal entity of which the company or one or several of its
subsidiaries is/are a member/members or shareholder(s) and, whether
or not by virtue of an agreement with other parties entitled to
vote, alone or jointly may appoint or dismiss more than fifty per
cent of the managing directors or of the supervisory directors,
also in case all parties entitled to vote will be voting.
A subsidiary will be equated with a company acting under its own
name in which the company or one or several subsidiaries as a
partner will be fully liable for the debts towards creditors.
The provisions laid down hereinbefore will apply without prejudice
to the provisions in article 24a paragraphs 3-4, Volume 2 of the
Civil Code;
1. 11. group company:
a legal entity or company with which the company is associated in a
group;
1. 12. the priority:
the holder of the sole priority share;
1. 13. Wge:
the Act on securities transfer by giro;
1. 14. Necigef:
the central institute in the sense of the Wge;
1. 15. associated institution:
<PAGE> 40
- 3 -
an associated institution in the sense of the Wge.
NAME, REGISTERED OFFICE
ARTICLE 2
2. 1. The company bears the name: Versatel Telecom International N.V.
2. 2. It has its registered office in Amsterdam.
OBJECT
ARTICLE 3 The object of the company is:
a. to provide telecommunication services;
b. to incorporate, to participate in, to manage and to be financially involved
in any other way in other companies and enterprises;
c. to provide administrative, technical, financial, economic and management
services to other companies, persons and enterprises;
d. to acquire, to dispose of, to manage and to exploit movable and immovable
properties and other properties, including but not limited to patents,
trade marks, licenses, permits and other industrial ownership rights;
e. to borrow or to lend money, to grant security-rights, to warrant
performances by third parties or to undertake joint and several liability
for third parties, all such acts as mentioned above, whether or not
performed in co-operation with third parties and including the performance
and promotion of all such acts connected therewith, whether directly or
indirectly, and all in the widest sense of the word.
CAPITAL
ARTICLE 4
4. 1. The authorized capital of the company amounts to nine million Dutch
Guilders five Dutchcent (NLG 9,000,000.05) and is divided into
- eighty million (80,000,000) ordinary shares;
- twenty million (20,000,000) preference shares A,
- eighty million (80,000,000) preference shares B, and
- one (1) priority share,
each share to a nominal amount of five Dutchcent (NLG 0.05).
<PAGE> 41
- 4 -
4. 2. Whenever in the present articles of association reference is made to
"shares" or "shareholders", these terms will be understood to mean
shares of whatever category respectively holders of shares of whatever
category, unless the contrary will have been explicitly stated or will
clearly be evident from the context.
ISSUE OF SHARES
ARTICLE 5
5. 1. Shares may only be issued by virtue of a resolution of the general
meeting, which resolution will also include the price and the further
conditions of the issue.
The general meeting may transfer its competence as referred to in the
preceding sentence to an other company body for a specified period not
exceeding five years.
The number of shares that may be issued will be fixed in said
designation.
The designation may each time be extended for a maximum period of five
years.
Unless laid down otherwise in said designation, it cannot be withdrawn.
The validity of the resolution of the general meeting for the issue of
shares or for designation will require a prior or simultaneous
resolution of approval of each group of holders of shares of a similar
category whose rights will be prejudiced by the issue.
Within eight days after a resolution of the general meeting for the
issue of shares or for designation, the company will deposit a full
text of said resolution at the office of the Trade Register with
additional statement of the number and category.
Within eight days after each issue of shares, the company will deposit
a relative statement at the office of the Trade Register with
additional statement of the number and category.
The present paragraph will be correspondingly applicable to the
granting of rights to take shares but will not be applicable to the
issue of shares to a party
<PAGE> 42
- 5 -
exercising an already previously acquired right to take shares.
5. 2. If and insofar as the board of management has been designated as
being competent to resolve to issue shares, in case of preference
shares B being issued, which will be understood to include the granting
of a right to subscribe for preference shares B:
a. the board of management shall, within four weeks after such issue,
convene a general meeting in which the motives for the issue will
be elucidated, unless such an elucidation has previously been given
in a general meeting;
b. the previous approval of the general meeting is required for the
specific case if (i) in consequence of such issue (ii) and/or in
consequence of the earlier issue of preference shares B by the
board of management, without the approval referred to, so many
preference shares B can be taken and/or have been issued that the
total nominal amount of the preference shares, issued by the board
of management without the said approval of the general meeting,
exceeds one hundred per cent (100%) of the total nominal amount of
the issued ordinary shares and the preference shares A prior to
said issue.
5. 3. In case preference shares A have been issued by virtue of a resolution
to issue shares or a resolution to grant a right to subscribe for
shares, passed by the board of management without the previous approval
or other collaboration of the general meeting, the board of management
shall convene a meeting of shareholders within two years after such
issue and make a proposal in said meeting as regards purchase by the
company or (as the case may be) withdrawal of such preference shares
issued.
In case in said meeting no resolution will be passed to the effect that
the preference shares B will be purchased by the company or (as the
case may be) will be withdrawn, the board of management shall, every
time within two years after the proposal referred to above has been
brought up for consideration, convene a general meeting again in which
such a proposal will again be
<PAGE> 43
- 6 -
made, which obligation will no longer exist if the shares referred to
will no longer be held by a party other than the company.
5. 4. In case of ordinary shares being issued, each holder of ordinary shares
will hold a pre-emptive right in proportion of the aggregate amount of
his shares, without prejudice to the provisions in the law.
In case of shares being issued, there will be a pre-emptive right
neither to the shares issued against contribution other than in money
nor to the shares issued to employees of the company or of a group
company.
Holders of preference shares will not hold a pre-emptive right in case
of ordinary shares being issued.
Holders of ordinary shares will not hold a pre-emptive right in case of
preference shares and the priority shares being issued.
The company will announce the issue with a pre-emptive right and the
period within which said right may be exercised in the Dutch Gazette,
in a national newspaper and in the Official Price List.
The pre-emptive right may be restricted or excluded in a resolution of
the general meeting.
In the relative proposal the reasons for the proposal and the choice of
the intended price of issue shall be elucidated in writing.
The pre-emptive right may also be restricted or excluded by the company
body designated by virtue of paragraph 1, in case said body will have
been designated in a resolution of the general meeting as being
competent to restrict or exclude the pre- emptive right for a specific
period not exceeding five years.
The designation may each time be extended for a period not exceeding
five years; it will in any case cease to apply in case the designation
of the corporate body competent to issue shares as referred to in
article 5, paragraph 1 will no longer be effective.
Unless laid down otherwise in the designation - without prejudice to
the provisions in the preceding sentence - it cannot be withdrawn.
A resolution of the general meeting for restriction or exclusion of the
pre-
<PAGE> 44
- 7 -
emptive right or for designation will require a majority of at least
two/thirds of the votes cast, in case less than fifty per cent of the
issued capital will be represented at the meeting.
Within eight days after said resolution, the company will deposit a
full text thereof at the office of the Trade Register.
In case of rights to take ordinary shares being granted, the holders of
ordinary shares will hold a pre-emptive right; the provisions laid down
hereinbefore in the present paragraph will be correspondingly
applicable.
Shareholders will not hold a pre-emptive right to shares issued to a
party exercising an already previously acquired right to take shares.
5. 5. The price at which the shares will be issued may not be below par,
without prejudice to the provisions laid down in article 80, paragraph
2, Volume 2 of the Civil Code.
5. 6. Payment shall be made in money insofar as contribution other than in
money will not have been agreed upon.
Payment in foreign currency may only be made with the consent of the
company.
The payment liability will in said case be fulfilled for the
amount at which the amount paid may freely be exchanged in Dutch
currency or in Euros.
Decisive will be the rate of exchange on the date of payment.
In deviation from the provisions laid down in the preceding sentence,
the company may demand payment at the rate of exchange on a particular
date within two months prior to the last day on which payment shall be
made, provided the shares or the depository receipts for these shares
will forthwith after having been issued be included in the Price List
of a Stock Exchange outside the Netherlands.
COMPANY SHARES
ARTICLE 6
6. 1. In case of shares being issued, the company may not take company
shares.
6. 2. Acquisition by the company of company shares not paid up will be null
and
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void.
6. 3. After the relative approval of the board of supervisory directors
having been obtained, the company may acquire paid-up company shares
for a consideration in case:
a. the common equity, reduced by the price of acquisition, will not be
smaller than the paid and claimed part of the capital, increased by
the reserves which shall be kept by virtue of the law;
b. the nominal amount of the shares in its capital acquired, held or
held in pledge by the company or those held by a subsidiary will
not exceed one/tenth part of the issued capital, and
c. authorization for the acquisition will have been granted by the
general meeting.
Acquisition of shares contrary to the provisions in the present
paragraph will be null and void.
6. 4. Decisive for the requirement under a. of the preceding paragraph will
be the amount of the common equity in accordance with the balance sheet
lately confirmed, reduced by the price of acquisition for the shares in
the capital of the company and distributions to the charge of profit or
reserves to other parties which the company and its subsidiary owed
after the date of the balance sheet.
In case a financial year will have lapsed for more than six months,
without the annual account having been confirmed, acquisition in
accordance with paragraph 3 will not be permitted.
6. 5. In the authorization the general meeting shall fix the number of shares
that may be acquired, the manner in which they may be acquired and
between what limits the price shall be.
The authorization will be valid for a maximum period of eighteen
months.
6. 6. The preceding paragraphs will not apply to shares acquired by the
company under a universal title.
6. 7. The board of management will be competent to alienate company shares
held
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by the company.
6. 8. The provisions laid down hereinbefore in the present article will be
correspondingly applicable to depository receipts of shares in the
capital of the company.
CAPITAL REDUCTION
ARTICLE 7
7. 1. The general meeting of shareholders may pass a resolution for the
reduction of the issued capital by withdrawing shares or by reducing
the amount of the shares in an amendment of the articles of
association.
The shares to which the resolution relates shall be designated in the
resolution and the implementation of the resolution shall have been
arranged. The paid and claimed part of the capital may not become
smaller than the minimum capital prescribed by law at the time of the
resolution.
7. 2. A resolution for withdrawal of shares may only relate to:
- shares held by the company itself or of which it holds the
depository receipts.
- all preference shares of a particular category or of both
categories with repayment.
7. 3. Reduction of the amount of shares without repayment and without
exemption from the payment liability shall be carried out
proportionately on all shares of a similar category.
The requirement of proportion may be deviated from with the consent of
all shareholders concerned.
7. 4. Partial repayment on shares or exemption from the payment liability
will only be possible by way of implementation of a resolution for
reduction of the amount of the shares.
Such repayment or exemption shall be made
- either proportionately on all shares;
- or proportionately with respect to the preference shares of a
particular category or of both categories.
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The requirement of proportion may be deviated from with the consent of
all shareholders concerned.
7. 5. A resolution for the reduction of the capital relating to preference
shares of a particular category or of both categories will require a
prior or simultaneous resolution of approval of the meeting of the
holders of said shares of that category or these categories.
7. 6. The convening notice for a meeting in which a resolution referred to
in the present article will be passed will state the object of the
capital reduction and the manner of implementation.
A resolution for the reduction of the capital will require a majority
of at least two/thirds of the votes cast, in case less than fifty per
cent of the capital will be represented.
7. 7. The company shall publish the resolutions referred to in the present
article in accordance with the provisions laid down in the law.
A resolution for the reduction of the issued capital will not take
effect for as long as creditors of the company may raise objections in
accordance with the provisions laid down in the law.
SHARES
ARTICLE 8
The ordinary shares shall be registered shares or bearer shares at the
discretion of the shareholder; the preference shares and the priority share may
only be registered shares.
BEARER SHARES
ARTICLE 9
9. 1. All bearer shares will be embodied in one share certificate.
In special cases the board of management may resolve, subject to the
approval of the board of supervisory directors and Necigef, that bearer
shares will be embodied in an other manner than in the collective
certificate referred to in the preceding sentence.
9. 2. This share certificate will be signed in the manner as determined in
these
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articles of association as regards representation of the company.
9. 3. The company will cause Necigef to keep the share certificate referred
to in paragraph 1 for the party (parties) entitled.
9. 4. The company will grant the party entitled a right in respect of an
ordinary bearer share by (a) Necigef enabling the company to write up a
share on the share certificate and (b) the party entitled designating
an associated institution which will credit him accordingly as joint
owner (hereinafter to be called: a joint owner) in its collective
deposit.
9. 5. Without prejudice to the provisions in article 27, paragraph 3 of
the present articles of association, the administration of the share
certificate will irrevocably be entrusted to Necigef and Necigef will
be irrevocably authorized on behalf of the party/parties entitled to
effect everything necessary in respect of the relative ordinary shares,
including acceptance, delivery and cooperation to writing-up and
writing-off of the share certificate.
9. 6. For the application of the present articles of association, the
party entitled as joint owner in a collective deposit of ordinary
bearer shares as referred to in the Act on securities transfer by
giro/bank will likewise be deemed to be holder of shares.
The company will be competent to lay down further rules with respect to
the share certificate.
ARTICLE 10
10.1. In the event that a participant in a deposit in the name of the
associated institution wishes the delivery of one or several bearer
shares, the following actions shall occur constituting one and the same
event: (a) Necigef will deliver the share/shares to the party entitled
by means of a deed, (b) the company will acknowledge the delivery, (c)
Necigef will enable the company to delete the share/shares from the
share certificate, (d) the relevant associated institution will debit
the party entitled accordingly as participant in its collective deposit
and (e) the company will register the holder as holder of a registered
share/shares in the register of shareholders.
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10.2. A holder of an ordinary registered share may at all times have said
share made out to bearer by and through the following actions (a) the
party entitled shall deliver said share to Necigef in a deed, (b) the
company shall acknowledge the delivery, (c) Necigef shall enable the
company to register a share on the share certificate, (d) an associated
institution designated by the party entitled accordingly shall credit
the party entitled as joint owner in its collective deposit and (e) the
company shall delete the name of the party entitled as holder of the
relative share from the register.
REGISTERED SHARES
ARTICLE 11
11.1. Share certificates will not be issued for registered shares.
11.2. The board of management will keep a register of shareholders which,
with respect to the holders of registered shares and usufructuaries and
pledgees of such shares, will include the names and addresses as well
as the other data prescribed by law.
11.3. Every holder of registered shares and every usufructuary or pledgee
of such shares shall notify the company of his address in writing.
11.4. The register will be kept up-to-date regularly.
All annotations in the register will be signed in the manner as laid
down in the present articles of association with respect to
representation of the company.
11.5. The register shall be deposited at the office of the company for
inspection by parties entitled to attend meetings.
The preceding sentence shall not apply to that part of the register
which is kept outside the Netherlands in compliance with legislation or
Stock Exchange rules and regulations applying outside the Netherlands.
11.6. The board of management will gratuitously provide a holder of
registered shares and a usufructuary and pledgee of such shares with an
extract from the register with respect to their rights to a share and
the rights to attend meetings attached thereto.
Said extract will be signed in the manner as laid down in the present
articles
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of association with respect to representation of the company.
RIGHT OF USUFRUCT AND RIGHT OF LIEN
ARTICLE 12
12.1. A right of usufruct may be created on shares.
12.2. The shareholder will hold the voting right on the shares on which a
right of usufruct will have been created.
In deviation from the provisions laid down in the preceding sentence,
the voting right attached to ordinary shares will accrue to the
usufructuary in case this will have been determined upon the creation
of the right.
The voting rights attached to the preference shares can only be granted
to the usufructuary if so provided on the establishment of the usufruct
and if both such provisions and - in case of a transfer of the
usufruct, the transmissions of the right to vote, are approved by the
board of supervisory directors.
The voting right attached to the priority share cannot be granted to
the usufructuary.
12.3. The shareholder not holding voting rights and the usufructuary holding
voting rights, will hold the rights granted by law to holders of
depository receipts of shares issued with the co-operation of the
company.
The usufructuary not holding voting rights, will not hold the rights
referred to in the preceding sentence either.
ARTICLE 13
13.1. Shares, with the exception of the priority share, may be pledged.
13.2. The provisions in paragraphs 2 and 3 of article 12 will be
correspondingly applicable to the voting right on pledged shares and to
rights of the pledgees to attend meetings.
BOARD OF MANAGEMENT
ARTICLE 14
14.1. The company will have a board of management.
14.2. Without prejudice to the restrictions in accordance with the present
articles of association, the board of management will be charged with
the management
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of the company.
14.3. The board of management will be competent to enter into legal acts
as referred to in article 94, paragraph 1, Volume 2 of the Civil Code
subject to the prior approval of the supervisory board.
ARTICLE 15
15.1. The board of management will consist of two or more members.
The number of members of the board of management will be fixed by the
board of supervisory directors.
15.2. Members of the board of management will be appointed by the general
meeting. If the priority share is issued, the appointment shall take
place from a binding nomination, drawn up by the priority, of at least
two nominees for each vacancy to be filled.
The priority shall be invited to draw up the binding nomination by the
board of management.
The binding nomination shall be drawn up within two months, after the
sending of the above mentioned invitation.
If the priority fails to make use of its right to draw up a binding
nomination or fails to do so in a timely manner, the shareholders
meeting shall be free to make the appointment.
The shareholders meeting may at all times override the binding nature
of the nomination by adopting a resolution to this effect with at least
two-thirds of the votes cast at a meeting at which more than half of
the issued share capital is represented.
The provisions of article 120, paragraph 3 of Book 2 of the Dutch Civil
Code shall not apply.
15.3. Members of the board of management may at any time be suspended or
dismissed by the shareholders meeting.
The shareholders meeting may adopt a resolution to suspend or dismiss a
member of the board of management only by at least two-thirds of the
votes cast at the meeting at which more than half of the issued capital
is
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represented, unless the proposal concerned has been made by the
Supervisory Board.
A suspension as referred to in the preceding sentence may be removed by
the general meeting.
15.4. A suspension may be extended once or several times but it cannot
continue for longer than an aggregate period of three months.
15.5. The remuneration and the further conditions of employment will be fixed
separately for each member of the board of management by the board of
supervisory directors.
INTERNAL ORGANISATION OF THE BOARD OF MANAGEMENT
ARTICLE 16
16.1. The board of management may lay down further rules and regulations
with respect to its procedure and internal organisation among which
those with respect to the holding of, the convening of and the passing
of resolutions in its meetings and outside a meeting as well as regards
the division of duties.
The laying-down of such rules and regulation will require the prior
approval of the board of supervisory directors.
16.2. Without prejudice to its own responsibility - the board of management
will be competent to appoint officers with such powers and such title
to be determined by the board of managing directors.
16.3. Without prejudice to the provisions laid down elsewhere in the present
articles of association, all resolutions of the board of management
with respect to the following subjects will require the approval of the
board of supervisory directors such legal acts as will be clearly
defined by the board of supervisory directors and of which the board of
management will have been notified in writing.
For the application of the present paragraph, a resolution of the board
of management for the passing or approval of a resolution of any body
of the company in which the company participates will be equated with a
resolution as referred in the preceding sentence, provided the
resolution for entering into such
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a legal act will be subject to the approval of the board of supervisory
directors as referred to hereinbefore in the present paragraph.
The lacking of the approval as referred to in the present paragraph
will not affect the power of representation of the board of management
or the members of the board of management.
ABSENCE OR INABILITY TO ATTEND
ARTICLE 17
17.1. In case of absence or inability to attend of one or several members of
the board of management, the management of the company will temporarily
be entrusted to the other members of the board of management, provided
there will be at least two of them.
17.2. In case of all members of the board of management being absent or
unable to attend, the management of the company will temporarily be
entrusted to one person to be designated for this purpose - whether or
not from its number - by the board of supervisory directors.
ARTICLE 18
REPRESENTATION
18.1. The board of management will represent the company insofar as not
ensuing otherwise from the law.
The power of representation will also accrue to two persons acting
jointly viz.
- either two members of the board of management;
- or a member of the board of management together with a holder of
proxy;
- or two holders of proxy acting jointly,
for as far as said holders of proxy are concerned, provided they will
be acting within the limits of the power granted.
18.2. In case of a conflicting interest between the company and one or
several members of the board of management, the company will be
represented in the manner as provided for in paragraph 1.
In all cases in which the company will hold an interest conflicting
with that of a member of the board of management in private, the
resolution for entering
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into the relative legal act will require the prior approval of the
board of supervisory directors.
The lacking of the approval as referred to in the preceding sentence
will not affect the power of representation of the board of management
or the members of the board of management.
BOARD OF SUPERVISORY DIRECTORS
ARTICLE 19
19.1. The company will have a board of supervisory directors.
19.2. The board of supervisory directors will be charged with the supervision
of the policy of the board of management and of the general course of
affairs of the company and the enterprise associated with it.
The board of supervisory directors will assist the board of management
by the rendering of advice.
The Board will furthermore be charged with everything otherwise
entrusted to it by the law and the present articles of association.
In the performance of their duties the supervisory directors will be
guided by the interests of the company and he enterprise associated
with it.
19.3. The board of management will timely provide the board of supervisory
directors with the data necessary for the proper performance of its
duties.
19.4. The board of supervisory directors may seek advice at the expense of
the company for the proper performance of its duties.
ARTICLE 20
20.1. The board of supervisory directors will consist of three or more
natural persons.
The number of supervisory directors will be fixed by the general
meeting with due observance of the provisions laid down in the
preceding sentence.
20.2. If at any time there will be less than three members of the board of
supervisory directors in office, the remaining members of said Board
and/or the remaining member will constitute a competent Board, without
prejudice to the obligation of the Board to have the vacancies filled
as soon as possible.
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20.3. The supervisory directors will receive a remuneration. Said
remuneration will be fixed by the general meeting.
ARTICLE 21
21.1. The supervisory directors will be appointed by the general meeting.
21.2. If preference shares B are issued the nomination shall take place from
a binding nomination, drawn up by the priority, of at least two
nominees for each vacancy to be filled.
The priority shall be invited to draw up the binding nomination by the
board of management.
The binding nomination shall be drawn up within two months, after the
sending of the above mentioned invitation.
If the priority fails to make use of its right to draw up a binding
nomination or fails to do so in a timely manner, the shareholders
meeting shall be free to make the appointment.
The shareholders meeting may at all times override the binding nature
of the nomination by adopting a resolution to this effect with at least
two-thirds of the votes cast at a meeting at which more than half of
the issued capital is represented.
The provisions of article 120, paragraph 3 of Book 2 of the Dutch Civil
Code shall not apply.
21.3. Supervisory directors may at any time be suspended or dismissed by
the shareholders meeting.
The shareholders meeting may adopt a resolution to suspend or dismiss a
Supervisory Director only by at least two-thirds of the votes cast at a
meeting at which more than half of the issued capital is represented
unless the proposal concerned has been made by the Supervisory Board.
The person who has reached the age of seventy-two cannot be appointed
supervisory director.
ARTICLE 22
22.1. A supervisory director will resign from office at the latest after
the end of the
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general meeting of shareholders in which the annual account will be
considered in the financial year in which he will reach the age of
seventy-two.
22.2. Each supervisory director will furthermore resign from office by
rotation as established by the board of supervisory directors.
Resigning supervisory directors may be re-appointed forthwith, without
prejudice to the provisions with respect to the age-limit laid down in
the law.
INTERNAL ORGANISATION OF THE BOARD OF SUPERVISORY DIRECTORS
ARTICLE 23
23.1. The board of supervisory directors will appoint a chairman and a deputy
chairman from its number.
23.2. The board of supervisory directors may lay down further rules and
regulations with as regards its internal organisation among which those
with respect to the holding of, the convening of and the passing of
resolution at its meetings and outside a meeting as well as with
respect to the division of the duties.
23.3. The board of supervisory directors will at any time be allowed
admittance to all business premises of the company and it will be
competent to peruse all correspondence, accounting records, vouchers
and other data carriers and to check the cash resources and other
capital assets of the company.
23.4. In case a resolution of the board of supervisory directors shall be
made evident, a relative written notification of the (acting) chairman
of said Board will suffice.
GENERAL MEETING AND MEETINGS OF SHAREHOLDERS
ARTICLE 24
Within the limits set by the present articles of association and the law, all
powers not granted to others will accrue to the general meeting.
ARTICLE 25
25.1. The annual meeting will be held within six months after the end of each
financial year.
25.2. Unless the period as referred to in article 31, paragraph 2 of the
present articles of association will have been extended in accordance
with the
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provisions laid down there - the following subjects will i.a. be
considered at said meeting
- the annual report;
- the annual account and the appropriation of profit, and
- discharge from liability to the board of management and the board
of supervisory directors.
In case the period referred to in article 31, paragraph 2 will have
been extended, the subjects mentioned in the preceding sentence will be
considered in a meeting of shareholders to be held at the latest one
month after said period having lapsed.
25.3. Without prejudice to the provisions in article 108a, Volume 2 of the
Civil Code, extraordinary meetings of shareholders will be held
whenever deemed desirable by the board of management or the board of
supervisory directors.
Furthermore extraordinary meetings of shareholders will be held
whenever the persons entitled to attend meetings, representing at least
one/tent part of the issued capital, will lodge the relative written
request with precise statement of the subjects to be considered with
the board of management and/or the board of supervisory directors.
ARTICLE 26
26.1. The board of management or the board of supervisory directors will send
the convening notices for the meetings of shareholders and not later
than on the fifteenth day prior to the date of the meeting.
26.2. A notice convening a meeting shall be given by publication in a
nationally distributed daily newspaper as well as such foreign
newspapers as designated by the board of management.
26.3. The convening notice will state the subjects to be considered or it
will announce that the persons entitled to attend meetings may take
cognizance thereof and obtain gratuitous copies thereof at the office
of the company as well as at such locations including a bank in
Amsterdam, registered by virtue of the Act on the Supervision of the
Credit System, and possibly at an other
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location as laid down in the convening notice.
26.4. The convening notice will also state the location(s) where and the date
on which those persons deriving their rights to attend meetings from
bearer shares shall at the latest deposit documentary evidence of their
rights against a receipt which may serve as admission ticket to the
meeting.
The date referred to in the preceding sentence may not be set earlier
than on the seventh day prior to the date of the meeting.
A statement of an associated institution, or of a foreign bank subject
to commercial supervision by the government, to be designated by the
board of management may also serve as admission ticket as referred to
in the penultimate sentence, to the effect that the number of shares
stated in said statement are kept in (its collective) deposit in the
name of the person mentioned in said statement and will be kept in
deposit up and to including the date of the meeting.
The convening notice will also state that with respect to registered
shares, rights may only be exercised at the meeting in case the
relative persons entitled to attend the meeting will have notified the
board of management in writing of their intentions to attend (have
themselves represented at) the meeting at the latest on the day prior
to the day of the meeting.
ARTICLE 27
27.1. The meetings of shareholders will be held in Amsterdam.
27.2. The chairman of the board of supervisory directors will act as chairman
of the meetings of shareholders and in case of his absence, the deputy
chairman of the board of supervisory directors and in case he will also
be absent, a supervisory director to be designated by the supervisory
directors present at the meeting.
in case the chairmanship of the meeting will not be provided for as
stated hereinbefore, the meeting itself will designate its chairman.
27.3. All persons entitled to attend the meeting provided with an admission
ticket or those who will have announced their intention to be present
will be allowed admission to the meetings of shareholders, everything
as laid down
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hereinbefore in article 26, paragraph 3, as well as the members of the
board of management and the supervisory directors.
The chairman will decide with respect to the admission of others.
27.4. Persons entitled to attend the meeting may have themselves represented
at the meeting by an attorney authorised in writing.
27.5. Minutes will be kept of the proceedings at meetings of shareholders by
a secretary to be designated by the chairman of the meeting, which
minutes will be signed by way of confirmation by the chairman and the
secretary.
In deviation from the provisions laid down in the first sentence of the
present paragraph, the chairman of the meeting and/or the board of
management may decide to have a notarial record drawn up.
The documents mentioned hereinbefore in the present paragraph will be
available at the office of the company for perusal by persons entitled
to attend the meeting.
At request, each of them will be provided with copies of or extracts
from said documents at a price not exceeding cost.
ARTICLE 28
28.1. Every share will carry the right to cast one vote.
No vote may be cast in the general meeting of shareholders for a share
owned by the company or a subsidiary thereof;
nor may a vote be cast for a share of which one of them holds the
depository receipts.
However, usufructuaries and pledgees of shares owned by the company and
its subsidiaries will not be excluded from their voting rights, in case
the right of usufruct or the right of lien will have been created prior
to the share being owned by the company or a subsidiary thereof.
The company or a subsidiary thereof cannot cast a vote for a share on
which it holds a right of usufruct or a right of lien.
In the determination of the extent to which the shareholders vote, are
present or represented, or the extent to which the share capital is
provided or represented,
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shares of which it has been laid down in the law that no votes may be
cast for them will be disregarded.
Members of the board of management and supervisory directors as such
will hold an advisory vote.
28.2. All votes will be cast by word of mouth, unless the chairman of the
meeting will decide that votes will be cast in writing.
28.3. The chairman of the meeting may decide that votes will be cast by
acclamation, unless one of the persons entitled to vote will oppose
this.
28.4. Abstentions and invalid votes will be regarded as votes not cast.
28.5. All resolutions will be passed by an absolute majority of the votes
cast insofar as the law or the present articles of association will not
prescribe a larger majority.
28.6. The opinion of the chairman expressed at the meeting as regards the
outcome of a ballot will be decisive.
The same will apply to the text of a resolution passed, insofar as
votes will have been cast on a proposal not laid down in writing.
28.7. However, if immediately after the opinion referred to in the preceding
paragraph having been expressed, its correctness will be challenged, a
new ballot will be held, in case the majority of the general meeting,
or if the original ballot was not held by roll call or in writing, one
of the parties entitled to vote will desire this.
As a result of said new ballot the legal consequences of the original
ballot will be cancelled.
MEETINGS OF HOLDERS OF SHARES OF A PARTICULAR CATEGORY
ARTICLE 29
29.1. The provisions laid down hereinbefore with respect to meetings of
shareholders will as much as possible be applicable to meetings of
holders of a particular category.
29.2. In deviation from the provisions laid down in the preceding paragraph,
the period for convening the meeting of the holders of preference
shares of a
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particular category will be at least seven working days and holders of
said shares need not announce their intention to attend the meeting.
Furthermore resolutions of holders of preference shares may also be
passed in an other manner than at a meeting of shareholders, provided
the shareholders entitled to vote will unanimously have declared in
writing (including all forms of written communication) to favour the
proposal.
The provisions in the preceding paragraph will not be applicable in
case, in addition to holders of shares of the relative category, there
will be other persons deriving rights to attend meetings from said
shares.
CONVENING NOTICES AND NOTIFICATIONS
ARTICLE 30
30.1. All convening notices and notifications by the company, destined for
persons entitled to attend meetings, as far as registered shares are
concerned, will be sent by letter to the addresses as included in the
register of shareholders and apart from this by means of an
advertisement in at least one national newspaper as well as in the
Official Price List.
30.2. Documents for the perusal of persons entitled to attend the meeting
will be deposited at the office of the company as well as at such
locations, including a bank in Amsterdam, as will be stated in a
convening notice or notification.
30.3. Communications which shall be addressed to the general meeting by
virtue of the law or the present articles of association, may be sent
either by including them in the convening notice or in the document
deposited for perusal at the office of the company, provided this will
be stated in the convening notice.
FINANCIAL YEAR; ANNUAL ACCOUNT; ANNUAL REPORT
ARTICLE 31
31.1. The financial year will coincide with the calendar year.
31.2. Within five months after the end of the financial year, apart from
extension of said period not exceeding six months by the general
meeting on the ground of special circumstances, the board of management
will compile an annual account and an annual report
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The compiled annual account will be submitted to the board of
supervisory directors who will present a relative report to the general
meeting.
The annual account will be signed by all members of the board of
management and all supervisory directors.
If the signature(s) of one or several of them will be lacking, the
reason thereof will be stated.
31.3. The board of supervisory directors issues a recommendation regarding
the annual account to the shareholders meeting.
31.4. The company will grant an accountant to be designated by the general
meeting the assignment to audit the annual account and the annual
report compiled by the board of management and to report his findings
to the board of management and the board of supervisory directors and
to issue a certificate, everything as referred to in article 393,
paragraph 1 of Volume 2 of the Civil Code.
In case the general meeting will not proceed to the aforesaid
appointment, the board of supervisory directors will be competent or,
in case said Board will fail to do so, the board of management will be
competent.
ARTICLE 32
32.1. The company will ensure that the annual account, the annual report and
the data to be added thereto by virtue of the law and the report of the
board of supervisory directors will be available for perusal by the
persons entitled to attend the meetings at the office of the company as
well as at a bank in Amsterdam to be stated in the convening notice as
of the date of the convening notice for the annual meeting until after
the end of said meeting.
The company will gratuitously make a copy of the documents referred to
in the preceding sentence available to the persons entitled to attend
meetings.
In case said documents will be amended, the provisions in the preceding
sentence will also apply with respect to the amended documents.
32.2. The annual account will be confirmed by the general meeting.
32.3. In case discharge from liability will be granted to the board of
management
<PAGE> 63
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for the management conducted by it in any financial year and to the
board of supervisory directors for the supervision exercised by it,
said discharge from liability will be limited to everything evident
from the annual account or announced to the general meeting, without
prejudice to the provisions laid down in the law.
PUBLICATION
ARTICLE 33
33.1. The annual account, the annual report and the data to be added thereto
by virtue of the law will be published within eight days after the
confirmation of the annual account.
Publication shall be made by depositing a copy prepared entirely in the
Dutch language or, if no Dutch language version was made, a copy in the
French, German or English language at the office of the commercial
register in Amsterdam. The date of adoption must be annotated on the
copy.
If the annual accounts have not been adopted in conformity with the
statutory provisions within seven months from the end of the financial
year, the management shall publish the annual accounts as prepared in
the manner provided in paragraph 1 without delay; it shall be stated in
the annual accounts that they have not yet been adopted.
If the shareholders meeting has extended the period to compile the
annual account in accordance with article 31, paragraph 2, the
provision of the previous sentence shall enter into effect as from two
months after the end of such period.
Simultaneously with and in the same manner as the annual accounts, a
copy of the annual report and of the other information referred to in
section 2: 392 of the Dutch Civil Code shall be published in the same
language. The preceding sentence shall not apply, except for the
information referred to in subparagraphs a, c, f and g of section
2:392, subsection 1 of the Dutch Civil Code, if the documents are kept
for public inspection at the office of the company and a complete or
partial copy thereof is obtainable on request at no more than cost. The
company shall file a notice of this fact for registration in the
commercial
<PAGE> 64
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register.
If, due to the volume of the company's enterprise the exemption of
section 2:396 paragraphs 3 up to and including 8 of the Dutch Civil
Code or of section 2:397, paragraphs 3 up to and including 6 of the
Dutch Civil Code is applicable, the publication will take place with
due observance of the applicable exemptions.
33.2. A resolution for distribution on shares and resolutions for interim
distribution as well as (the manner of) making distributions payable
and the composition of the distributions will be published forthwith.
RESERVES, ALLOCATION TO RESERVES AND DISTRIBUTIONS
ARTICLE 34
34.1. Separate share premium reserves will be formed in the accounting
records of the company in behalf of both the ordinary shares and the
preference shares A.
34.2. Distributions may only be made to the charge of the reserves referred
to in the preceding paragraph on respectively deductions or
depreciation made to the charge of shares of the relative category.
A resolution for the withdrawal from the share premium reserve
belonging to the preference shares may be passed by the board of
management under prior approval of the meeting of shareholders of said
shares.
ARTICLE 35
35.1. The company can only make distributions to shareholders insofar as the
common equity of the company will exceed the amount of the paid capital
of the company, increased by the reserves which shall be kept by virtue
of the law.
35.2. To the extent the profits allow this, a dividend to be deducted from
the positive amount of the profits as evidenced by the profit and loss
account shall in the first place be distributed on the preference
shares B according to a percentage which shall be the equivalent of the
average rate of the European
<PAGE> 65
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Central Bank, increased with a surcharge or discount calculated against
the number of days to which the payment has to be made.
The surcharge and discount shall amount to a maximum of 3% and shall be
determined by the board of management upon the prior approval of the
supervisory board at the time of the initial issue of a preference
share B.
The dividend shall be calculated against the paid in amount on a
share's nominal amount.
If the distribution was not made or was not made in full on account of
insufficient profits, the deficit shall be paid to the holders of the
preference B shares from the profit of one or more of the succeeding
financial years.
The profits which remain shall be distributed to the holders of
preference shares A, the amount of such distributable dividend or the
manner of calculation to be determined by the corporate body authorised
to initially issue the preference shares A.
From the profits which remain, shall, as far as this may be possible,
be distributed to the priority share a dividend equal to 20% of the
nominal amount of such share.
Successively, the board of management shall, with the approval thereto
of the supervisory board, determine which part of the remaining profits
after application of the previous provisions shall be reserved.
35.3. The profit left after application of the provisions laid down
hereinbefore in the present paragraph will be available to the general
meeting, subject to the proviso that the profit then left will only be
for the benefit of holders of ordinary shares.
35.4. Amounts may be withdrawn from the distributable reserves by virtue of a
resolution of the general meeting.
The provisions laid down in the preceding paragraph will not be
applicable to the share premium reserve belonging to the preference
shares.
35.5. The company may only make interim distributions in case the requirement
of paragraph 1 of the present article will have been fulfilled as will
be evident
<PAGE> 66
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from an interim specification of equity as referred to in article 105,
paragraph 4, Volume 2 of the Civil Code and provided this will be done
after prior approval of the board of supervisory directors.
Distributions on ordinary shares as referred to in the present
paragraph may be made payable in shares or negotiable rights thereon.
35.6. Without prejudice to the provisions laid down hereinbefore, the general
meeting may pass a resolution for making distributions on ordinary
shares (whether or not at the discretion of shareholders) fully or
partially payable instead of in money (whether or not at the discretion
of the shareholders)
a. in ordinary shares (if so requested and if possible to the charge of
the share premium reserve) or negotiable rights thereon or
b. in capital assets of or negotiable claim rights on the company.
A resolution as referred to in the preceding sentence may only be
passed on proposal of the board of management which resolution will
have been approved by the board of supervisory directors.
35.7. No distribution in behalf of the company will be made on the shares in
its capital acquired by the company and on shares of which the company
holds the depository receipts.
35.8. In the calculation of the appropriation of profit, the shares on which
no distribution will be made in behalf of the company by virtue of the
provisions in paragraph 7, will be disregarded.
35.9. Distributions for which resolutions have been passed will be made
payable at the latest after a fortnight.
The claim for distribution will lapse as a result of expiry of a period
of five years to be counted as of the date of it becoming payable.
AMENDMENT OF THE ARTICLES OF ASSOCIATION, DISSOLUTION, JURIDICAL MERGER AND
SPLITTING-UP
ARTICLE 36
36.1. The general meeting may pass a resolution for amendment of the articles
of association, dissolution, juridical merger and splitting-up.
<PAGE> 67
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If the priority share is outstanding, a resolution as set forth in the
previous sentence may only be adopted upon proposal of the priority.
A resolution for amendment of a provision in the articles of
association whereby holders of the preference shares have been granted
any right or for an amendment whereby such right will be prejudiced,
will only be valid after prior approval of the holders of said shares.
36.2. In case a proposal as referred to in the preceding sentence will be
made to the general meeting, this shall invariably be stated in the
convening notice for the relative meeting.
36.3. Simultaneously with the convening notice for the meeting in which an
amendment of the articles of association will be considered, a copy of
the proposal, containing the verbatim text of the proposed amendment,
will be deposited for perusal by the persons entitled to attend the
meeting until the end of said meeting.
Persons entitled to attend the meeting may gratuitously obtain a copy
of aforesaid proposal.
ARTICLE 37
37.1. In case a resolution for dissolution will have been passed, the company
will be liquidated by the board of management, unless the general
meeting will appoint other liquidators, under the supervision of the
board of supervisory directors.
The general meeting will fix the remuneration for the liquidators.
37.2. During the liquidation the present articles of association will
continue being effective as much as possible.
37.3. From the balance remaining of the equity of the company after payment
of all debts, including those relating to the liquidation, - in the
order to be stated hereinafter - first the holders of the preference
B-shares and A-shares and the holder of the priority share will be paid
the amounts paid on said shares (including any share premium paid),
increased by the dividend as laid down in article 35, paragraph 2, on
the basis of time on the current financial year and,
<PAGE> 68
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as far as the preference B-shares are concerned, possibly on preceding
financial years.
The balance then remaining will be distributed to the holders of
ordinary shares and other parties entitled to said shares in proportion
to each of their rights.
37.4. After the company will have ceased to exist, the accounting records,
vouchers and other data carriers will be kept by the person to be
designated for this purpose by the liquidators for the period
prescribed by law.
FINAL PROVISION
For a period of five years the board of management under prior approval of the
supervisory board is entitled to issue both the ordinary shares as well as the
preference shares A and B to a maximum as defined in article 4 paragraph 1 of
the articles, as well as to restrict or exclude the pre-emptive right of
shareholders.
<PAGE> 1
Exhibit 5.1
[SHEARMAN & STERLING LETTERHEAD]
(212) 848-4000
July 22, 1999
VersaTel Telecom International N.V.
Paalbergweg 36
1105 BV Amsterdam - Zuidoost
The Netherlands
Ladies and Gentlemen:
We refer to the registration statement to be filed on Form F-1 under the
Securities Act of 1933 (the "Registration Statement") by the legal entity
created by the agreement (the "Deposit Agreement") for issuance of American
Depositary Shares ("ADSs") evidenced by American Depositary Receipts ("ADRs")
for American Depositary Receipts for ordinary shares, par value NLG .05 each of
VersaTel Telecom International N.V.
In that capacity, we have reviewed the Registration Statement and
originals, or copies certified or otherwise identified to our satisfaction, of
other documents, corporate records, certificates and other instruments as we
have deemed necessary or appropriate for purposes of this opinion. In such
examination, we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as copies.
We are attorneys admitted to practice law in the State of New York and we
do not express herein any opinion as to any matters governed by or involving
conclusions under the laws of any other jurisdiction other than the federal law
of the United States of America. In rendering the opinion expressed herein, we
have, with your approval, relied without independent investigation as to all
matters governed by or involving conclusions under the law of The Netherlands
upon the opinion (including the qualifications, assumptions and limitations
expressed therein) of Stibbe Simont Monahan Duhot, Dutch counsel for the
Company, of even date herewith, a copy of which is attached hereto.
We are of the opinion that the ADSs covered by the Registration Statement,
when issued in accordance with the terms of the Deposit Agreement, will, when
sold, be legally issued and will entitle the holders thereof to the rights
specified in the Deposit Agreement and the ADRs.
This opinion may be delivered to Stibbe Simont Monahan Duhot which may rely
on this opinion to the same extent as if such opinion were addressed to it.
We hereby consent to the use of this opinion as Exhibit 5.1 to the
Registration Statement and to the use of our name under the caption "Legal
Matters" contained in the prospectus which is included in the Registration
Statement.
Very truly yours,
SHEARMAN & STERLING
<PAGE> 1
Exhibit 5.2
[STIBBE SIMONT MONAHAN DUHOT LETTERHEAD]
A.F.J.A. Leijten, advocaat
VersaTel Telecom International N.V.
P.O. Box 22697
1100 DD Amsterdam
21 July 1999
Dear Sirs,
We are acting as special legal counsel in the Netherlands on matters of Dutch
law to VersaTel Telecom International N.V. (the "Company") in connection with
the filing by the Company of a registration statement on Form F-1 with the
United States Securities and Exchange Commission (the "Registration Statement").
Pursuant to the Registration Statement, 21,250,000 ordinary shares of the
Company (the "Offer Shares") will be sold to the public in the framework of an
initial public offering by the Company and a number of selling shareholders
concurrently with an offering by the Company of Senior Dollar Notes and Senior
Euro Notes due 2009. The offering of the ordinary shares will be made pursuant
to an Underwriting Agreement among the Company, the selling shareholders named
therein and Lehman Brothers Inc. as U.S. Representative of the several U.S.
underwriters named in Schedule 1 thereof to be dated 22 July 1999 (the "U.S.
Underwriting Agreement") and an International Underwriting Agreement as defined
in the U.S. Underwriting Agreement.
In rendering this opinion we have examined and relied upon the following
documents:
(1) A draft of the U.S. Underwriting Agreement marked ST&B draft July 18,
1999;
(2) a copy of the Preliminary Offering Memorandum (the "Preliminary Offering
Memorandum") in relation to the issue of the Offer Shares, dated 30 June
1999;
(3) an on-line excerpt dated 21 July 1999 of the registration of the Company
in the Trade Register of the Chamber of Commerce of Amsterdam, The
Netherlands (the
<PAGE> 2
"Excerpt");
(4) the draft articles of association (statuten) of the Company to be dated 23
July 1999, to be executed on that date before Mr. J.H.M. Carlier,
civil-law notary, officiating in Amsterdam, The Netherlands, and being in
force on the date hereof (the "New Articles");
(5) a copy of the Deed of Incorporation of the Company (the "Deed of
Incorporation"), executed on 10 October 1995, before Mr Albert Peter van
Lidth de Jeude, civil-law notary, officiating in Amsterdam, The
Netherlands;
(6) a company certificate of even date hereof attached hereto as Annex 1
(the "Company Certificate");
and such other documents and such treaties, laws, rules, regulations, and the
like, as we have deemed necessary as a basis for the opinions hereinafter
expressed.
We have assumed:
(i) the genuineness of all signatures;
(ii) the authenticity of all agreements, certificates, instruments, and other
documents submitted to us as originals;
(iii) the conformity to the originals of all documents submitted to us as
copies;
(iv) that the documents referred to under (1), (2) and (4) above will be duly
and validly signed and executed by all parties thereto on the dates
indicated, substantially in the form as examined by us as drafts;
(v) that the contents of the Excerpt and the Company Certificate are true and
complete as of the date hereof; and
(vi) that as of the date hereof the Representations and Warranties and
Agreements of the Selling Shareholders set forth in Section 2 of the
Underwriting Agreements are true and correct.
Based on the foregoing and subject to any factual matters or documents not
disclosed to us in the course of our investigation, and subject to the
qualifications and limitations stated hereafter, we are of the opinion that:
A. The Company has been duly incorporated and is validly existing as a
"naamloze vennootschap" (company with limited liability) under the laws of
The Netherlands.
B. The Offer Shares, to be sold as contemplated in the Registration
Statement, when duly issued and delivered in accordance with the
provisions of the U.S. Underwriting Agreement and Netherlands law, against
payment therefor as provided in the U.S. Underwriting Agreement, will be
duly and validly issued, fully paid and non-assessable.
C. The choice of New York law as the law governing the U.S. Underwriting
Agreement is valid and binding under the laws of The Netherlands, except
(i) to the extent that any term
- 2 -
<PAGE> 3
of the U.S. Underwriting Agreement or any provision of New York law
applicable to the U.S. Underwriting Agreement is manifestly incompatible
with the public policy (ordre public) of The Netherlands, and except (ii)
that a Dutch court may give effect to mandatory rules of the laws of
another jurisdiction with which the situation has a close connection, if
and insofar as, under the laws of that other jurisdiction those rules must
be applied, whatever the chosen law. However, in our opinion, (i) there is
nothing in Dutch law which would render any term of the U.S. Underwriting
Agreement manifestly incompatible with the public policy (ordre public) of
The Netherlands, and (ii) no such mandatory rules of Dutch law are
applicable to the U.S. Underwriting Agreement, except that to the extent
that issues would involve the corporate organisation of the Company, the
courts of The Netherlands will apply Netherlands law as mandatorily
applicable to such issues, regardless the chosen law applicable to the
U.S. Underwriting Agreement.
In rendering the opinions expressed herein, we have, with your approval, relied
without independent investigation as to all matters governed by or involving
conclusions under the federal law of the United States of America and the law of
the State of New York, upon the opinion (including the qualifications,
assumptions and limitations expressed therein) of Shearman & Sterling, United
States counsel to the Company, of even date herewith.
In addition to the other assumptions and qualifications contained herein, this
opinion letter is further subject to the following qualification:
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 substantative 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.
We express no opinion on any law other than the law of The Netherlands as it
currently stands and has been interpreted in published case law of the courts of
The Netherlands as per the date hereof. We express no opinion on any laws of the
European Communities (insofar as not implemented in The Netherlands in statutes
or other regulations of general application).
This opinion is strictly limited to the matters stated herein and may not be
read as extending by implication to any matters not specifically referred to.
Nothing in this opinion should be
- 3 -
<PAGE> 4
taken as expressing an opinion in respect of any representations or warranties,
or other information, or any other document examined in connection with this
opinion except as expressly confirmed herein.
We hereby consent to the use of this opinion as Exhibit 5.2 to the Registration
Statement and to the use of our name under the caption "Legal Matters" contained
in the prospectus which is included in the Registration Statement.
Yours sincerely,
/s/ A.F.J.A. Leijten /s/ M.W. Josephus Jitta
- --------------------- ------------------------
A.F.J.A. Leijten M.W. Josephus Jitta
- 4 -
<PAGE> 5
ANNEX 1
COMPANY CERTIFICATE
The undersigned, J.A. van Berne, Corporate Secretary of VersaTel Telecom
International N.V. (the "Company") and authorised to represent the Company,
hereby declares the following to Stibbe Simont Monahan Duhot in order for them
to rely on the contents hereof in the framework of the legal opinion to be
issued by them to us in relation to the Registration Statement on Form-1
relating to the proposed initial public offering of 21,250,000 of our Ordinary
Shares:
1. The Company has not proposed and the shareholders of the Company have
not resolved to dissolve the Company;
2. The Company is not involved in legal proceedings which are aimed at the
dissolution of the Company;
3. The Company has not applied for suspension of payment and has not been
declared bankrupt;
4. Since the shareholders resolution of 14 July 1999 to amend the Company's
articles of association, no resolution to amend the articles of
association of the Company has been taken;
5. Prior to the shareholders resolution of 14 July 1999, no resolution to
amend the articles of association of the Company has been taken, which has
not been carried out up to this date;
Signed by J.A. van Berne on 21 July 1999.
<PAGE> 1
Exhibit 8.1
July 22, 1999
VersaTel Telecom International N.V.
Paalbergweg 36
1105 BV Amsterdam - Zuidoost
The Netherlands
Ladies and Gentlemen:
We have acted as special United States tax counsel to VersaTel
Telecom International N.V., a Netherlands company (the "Company"), in connection
with the filing by the Company under the Securities Act of 1933, as amended (the
"Act"), of a registration statement dated July 22, 1999 on Form F-1 (the
"Registration Statement") with the United States Securities and Exchange
Commission (the "Commission"), relating to the registration and the sale of
21,250,000 ordinary shares of the Company, par value NLG 0.05 per share (the
"Shares"), in the form of shares of American Depositary Shares (the "ADSs"), as
set forth in the prospectus dated July 22, 1999 contained in the Registration
Statement (the "Prospectus").
In our capacity as such counsel, we hereby confirm as of the
date hereof that, although the discussion set forth under the caption "Tax
Considerations -- U.S. Federal Income Tax Considerations" in the Prospectus does
not address all of the possible United States federal income tax considerations
that may be relevant to a potential purchaser of Shares or ADSs, such
discussion, insofar as it relates to statements of law or legal conclusions
under the laws of the United States, fairly presents the information called for
and, subject to the limitations and qualifications stated therein, represents
our opinion as to the material United States federal income tax consequences to
a "U.S. Holder" (as defined in the Prospectus) of the receipt of distributions
on, and the disposition of, Shares or ADSs.
In rendering our opinion, we have examined (i) the
Registration Statement, (ii) the Prospectus, (iii) the draft deposit agreement
between the Bank of New York and the Company, and (iv) such other documents and
material as we have considered necessary or appropriate for purposes of this
opinion (together, the "Documents"). This opinion is premised, among other
things, on the initial and continuing accuracy of the facts, representations,
covenants and other
<PAGE> 2
information set forth in the Documents and assumes that the transactions
contemplated by the Documents will be consummated in accordance with the terms
thereof. We have also assumed that any Documents that were reviewed in draft
form will be duly executed or finalized substantially in the form that we have
reviewed and that, where applicable, they will be valid and binding as of the
date hereof in accordance with their terms.
This opinion is based on presently applicable United States
federal income tax law and no assurance can be given that future legislative,
judicial or administrative developments will not adversely affect the
conclusions expressed herein. Moreover, in rendering this opinion, we undertake
no responsibility to advise you of any new developments in the application or
interpretation of United States federal income tax law and this opinion may not
be relied upon to the extent that there is any new development in such law as it
relates to the conclusions expressed herein.
We have not considered and do not express any opinion other
than as expressly set forth above with respect to United States federal income
tax. Nor have we addressed the tax consequences, if any, under the laws of any
state, locality or foreign jurisdiction.
We hereby consent to the filing of this opinion with the
Commission as an exhibit to the Registration Statement and to the reference to
us in the first paragraph under the caption "Tax Considerations -- U.S. Federal
Income Tax Considerations" in the Prospectus. In giving such consent, we do not
hereby admit that we are in the category of persons whose consent is required
under Section 7 of the Act, and the rules and regulations of the Commission
promulgated thereunder.
Very truly yours,
Shearman & Sterling
DRM/KY
<PAGE> 1
Exhibit 10.10
VersaTel Telecom International N.V.
- Ordinary Shares in the form of
Shares or American Depositary Shares
INTERNATIONAL UNDERWRITING AGREEMENT
July 22, 1999
LEHMAN BROTHERS INTERNATIONAL (EUROPE)
As Lead Manager of the several
International Managers named in Schedule I
c/o Lehman Brothers International (Europe)
One Broadgate
London EC2M 7HA
Dear Sirs:
VersaTel Telecom International N.V., a public company organized under the
laws of The Netherlands, and having its corporate seat in Amsterdam, The
Netherlands (the "Company"), proposes to sell to the several underwriters listed
on Schedule I hereto (the "International Managers") an aggregate of - ordinary
shares, par value NLG 0.05 per share, of the Company (the "Ordinary Shares"),
and each of Cromwilld Limited ("Cromwilld") and the holders of warrants (the
"Warrants") to purchase Ordinary Shares listed in Schedule II hereto (together
with Cromwilld, the "Selling Shareholders") propose severally to sell to the
International Managers an aggregate of - Ordinary Shares on the First Delivery
Date (as defined herein) (such - Ordinary Shares to be sold by the Company and
the Selling Shareholders being hereinafter referred to as the "Firm Shares").
The International Managers may elect to have all or a portion of the Firm Shares
deposited by the Company and the Selling Shareholders pursuant to the Deposit
Agreement (as defined herein) and to receive such Firm Shares in the form of
American Depositary Shares ("ADSs") in lieu of receiving such shares in the form
of Ordinary Shares. References herein to "Firm Shares", "Option Shares" (as
defined) or "Shares" (as defined) shall be deemed to include ADSs representing
any such Firm Shares, Option Shares or Shares, respectively, and references to
ADSs include the ADRs (as defined herein) evidencing such ADSs, in each case
unless the context otherwise requires.
In addition, the Company [and Cromwilld Limited] propose to grant to the
International Managers an option to purchase up to - additional Ordinary Shares
(the "Option Shares"), on the terms and for the purposes set forth in Section 3
hereof. The Firm Shares and the Option Shares, if purchased, are hereinafter
collectively called the "Shares", unless the context otherwise requires. This is
to confirm the agreement concerning the purchase of the Shares from the Company
and the Selling Shareholders by the International Managers.
The ADSs, evidenced by American Depositary Receipts ("ADRs"), will be
issued in accordance with the Deposit Agreement (the "Deposit Agreement"), among
the Company, The Bank of New York, as depositary (the "Depositary"), and the
holders and beneficial owners from time to time of ADRs issued thereunder. Each
ADS will represent one Ordinary Share deposited pursuant to the Deposit
Agreement and delivered to Mees Pierson N.V., (the "Correspondent Bank"), the
custodian for the Depositary.
<PAGE> 2
2
It is understood by all parties that the Company and the Selling
Shareholders are concurrently entering into an agreement dated the date hereof
(the "U.S. Underwriting Agreement") providing for the sale by the Company of an
aggregate of - Ordinary Shares in the form of Ordinary Shares or ADSs (the "Firm
U.S. Shares") and the granting of an option by the Company and one of the
Selling Shareholders to purchase up to an additional - Ordinary Shares in the
form of Ordinary Shares or ADSs (the "Option U.S. Shares"; and together with the
Firm U.S. Shares, the "U.S. Shares") through arrangements with the several U.S.
underwriters listed on Schedule I to the U.S. Underwriting Agreement (the "U.S.
Underwriters"), for whom Lehman Brothers Inc. is acting as U.S. representative
(the "U.S. Representative"; and together with the Lead Manager, the
"Representatives"). The International Managers and the U.S. Underwriters
simultaneously are entering into an agreement among the International Managers
and the U.S. Underwriters (the "Agreement Among International Managers and U.S.
Underwriters") which provides for, among other things, the transfer of Shares
between the two syndicates. Two forms of prospectus are to be used in connection
with the offering and sale of the Shares contemplated by the foregoing, one
relating to the Shares (in the form of Ordinary Shares or ADSs) to be sold in
the United States and Canada (the "U.S. Prospectus") and the second relating to
the Shares (in the form of Ordinary Shares or ADSs) to be sold outside of the
United States and Canada (the "International Prospectus"). The U.S. Prospectus
will be identical to the International Prospectus except for certain substitute
pages. This Agreement, the U.S. Underwriting Agreement, the Deposit Agreement
and the Power of Attorney and Custody Agreement (as defined) shall hereafter be
referred to as the "Operative Agreements". Except as used in Sections 3, 4, 5
and 11 herein, and except as the context may otherwise require, references
herein to Firm Shares, Option Shares and Shares shall include Firm U.S. Shares,
Option U.S. Shares and U.S. Shares, respectively (including, in each case, ADSs
representing any or all of such shares).
This is to confirm the agreement concerning the purchase of the Shares
from the Company and the Selling Shareholders by the International Managers.
1. Representations, Warranties and Agreements of the Company. The
Company represents, warrants and agrees that:
(a) A registration statement on Form F-1 (File No. 333-81333),
and amendments thereto, with respect to the Shares have (i) been
prepared by the Company in conformity with the requirements of the
United States Securities Act of 1933, as amended (the "Securities
Act"), and the rules and regulations (the "Rules and Regulations")
of the United States Securities and Exchange Commission (the
"Commission") thereunder, (ii) been filed with the Commission under
the Securities Act and (iii) become effective under the Securities
Act; a second registration statement on Form F-1 with respect to the
Shares (i) may also be prepared by the Company in conformity with
the Securities Act and the Rules and Regulations and (ii) if to be
so prepared, will be filed with the Commission under the Securities
Act pursuant to Rule 462(b) of the Rules and Regulations on the date
hereof. Copies of the first such registration statement and the
amendments thereto, together with the form of any such second
registration statement, have been delivered by the Company to the
Lead Manager of the International Managers. As used in this
<PAGE> 3
3
Agreement, "Effective Time" means (i) with respect to each of the
Primary Registration Statement (as defined) and the ADS Registration
Statement (as defined herein), the date and the time as of which
such registration statement, or the most recent post-effective
amendment thereto, if any, was declared effective by the Commission
and (ii) with respect to the 462(b) Registration Statement (as
defined), the date of the Effective Time of such second registration
statement, and "Effective Times" is the collective reference to both
Effective Times; "Effective Date" means (i) with respect to each of
the Primary Registration Statement and the ADS Registration
Statement, the date of the Effective Time of such registration
statement and (ii) with respect to the 462(b) Registration
Statement, the date of the Effective Time of such registration
statement, and "Effective Dates" is the collective reference to both
Effective Dates; "Preliminary Prospectus" means each prospectus
included in any such registration statement, of amendments thereof,
before it became effective under the Securities Act and any
prospectus filed with the Commission by the Company with the consent
of the Representatives pursuant to Rule 424(a) of the Rules and
Regulations; "Primary Registration Statement" means the first
registration statement referred to in this Section 1(a), as amended
at its Effective Time, "Rule 462(b) Registration Statement" means
the second registration statement, if any, referred to in this
Section 1(a), as filed with the Commission, and "Registration
Statements" means both the Primary Registration Statement and any
Rule 462(b) Registration Statement, including in each case all
information contained in the final prospectus filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations in
accordance with Section 7(a) hereof and deemed to be a part of the
Registration Statements as of the Effective Time of the Registration
Statements as of the Effective Time of the Primary Registration
Statement pursuant to paragraph (b) of Rule 430A of the Rules and
Regulations; and "Prospectus" means such final prospectus, as first
filed with the Commission pursuant to paragraph (1) or (4) of Rule
424(b) of the Rules and Regulations.
(b) A registration statement on Form F-6 (File No. 333--) with
respect to the ADSs evidenced by the ADRs has (i) been prepared by
the Company and the Depositary in conformity with the requirements
of the Securities Act and the Rules and Regulations, (ii) been filed
with the Commission under the Securities Act and (iii) become
effective under the Securities Act. Copies of such ADS Registration
Statement, including all amendments thereto, have been delivered by
the Company to the Lead Manager. As used in this Agreement, "ADS
Registration Statement" means such registration statement, including
all exhibits thereto, as amended at the time such registration
statement became effective under the Securities Act.
(c) The Primary Registration Statement and the ADS
Registration Statement conform (and the Rule 462(b) Registration
Statement, if any, the Prospectus and any further amendments or
supplements to the Registration Statements, the Prospectus or the
ADS Registration Statement, when they become effective or are filed
with the Commission, as the case may be, will conform) in all
respects to the requirements of the Securities Act and the Rules
<PAGE> 4
4
and Regulations and do not and will not, as of the applicable
effective date (as to the Registration Statements, the ADS
Registration Statement and any amendments thereto) and as of the
applicable filing date (as to the Prospectus and any amendment or
supplement thereto) 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; provided
that no representation or warranty is made as to information
contained in or omitted from the Registration Statements or the
Prospectus in reliance upon and in conformity with the written
information described in Section 10(f) furnished to the Company
through the Lead Manager by or on behalf of any U.S. Underwriter or
International Manager, respectively, specifically for inclusion
therein.
(d) The Company is a public company with limited liability
("naamloze vennootschap"), duly incorporated and validly existing
under the laws of The Netherlands, is not in bankruptcy, liquidation
or receivership, is duly qualified to do business and is in good
standing in each jurisdiction, if applicable, in which its ownership
or lease of property or the conduct of its business requires such
qualification.
(e) Each of the subsidiaries (as defined in Section 17 hereof)
of the Company has been duly organized and is validly existing under
the laws of its jurisdiction of organization or incorporation, is
not in bankruptcy, liquidation or receivership, is duly qualified to
do business and is in good standing in the jurisdiction in which its
ownership or lease of property or the conduct of its business
requires such qualification; and each has all power and authority
necessary to own or hold its respective property and to conduct the
business in which it is engaged; and, other than [VersaTel
Netherlands B.V. and] Svianed B.V., none of the subsidiaries of the
Company is a "significant subsidiary", as such term is defined in
Rule 405 of the Rules and Regulations; and all of the issued share
capital of each subsidiary of the Company has been duly and validly
authorized and issued and is fully paid and non-assessable and is
wholly owned directly or indirectly by the Company, free and clear
of all liens, encumbrances, equities or claims (other than, in the
case of Svianed B.V., a lien granted in favor of Lehman Commercial
Paper, Inc.).
(f) The Company has an authorized and issued share capital as
set forth in the Prospectus; all outstanding shares of capital stock
of the Company have been duly and validly authorized and issued; all
outstanding shares of capital stock of the Company are fully paid,
and holders of such shares will have no liability for any debt or
other obligation of the Company towards third parties in their
capacity as holders thereof; the outstanding shares of capital stock
of the Company conform in all material respects to the description
thereof contained in the Prospectus; except as described in the
Prospectus, there are no outstanding securities convertible into or
exchangeable for, or warrants, rights or options to purchase from
the Company and its subsidiaries, or obligations of the Company and
its subsidiaries to issue, any class of share capital of the Company
or any of its subsidiaries; except as described in the
<PAGE> 5
5
Prospectus, there are no restrictions on transfer or voting of any
of the capital stock of the Company pursuant to the Company's
articles of association (the "Articles of Association") or
equivalent constituent documents or any agreement to which the
Company is a party or by which it may be bound or to which any of
its property may be subject; and no depositary receipts have been
issued with respect to the capital stock of the Company.
(g) The Shares to be issued and sold by the Company to the
International Managers hereunder and under the U.S. Underwriting
Agreement have been duly and validly authorized and, when issued and
delivered against payment therefor as provided herein and in the
U.S. Underwriting Agreement, will be duly and validly issued, fully
paid and non-assessable and, when the Shares to be deposited
pursuant to the Deposit Agreement are so deposited and ADSs have
been issued and delivered against payment therefor as provided
herein and in the U.S. Underwriting Agreement, such ADSs will be
duly and validly issued; the Shares to be sold by the Selling
Shareholders to the International Managers hereunder and to the U.S.
Underwriters under the U.S. Underwriting Agreement, (A) in the case
of Selling Shareholders other than Cromwilld, when issued upon
exercise of the warrants by the Selling Shareholders, will have been
duly and validly issued and will be fully paid and non-assessable or
(B) in the case of Cromwilld, have been duly and validly issued and
are fully paid and non-assessable, and when such Shares to be
deposited pursuant to the Deposit Agreement are so deposited and
ADSs have been issued and delivered against payment therefor as
provided herein and in the U.S. Underwriting Agreement, such ADSs
will be duly and validly issued; and there are no preemptive or
other rights to subscribe for or to purchase, nor any restriction
upon the voting or transfer of, any of the Shares or ADSs pursuant
to the Articles of Association or Netherlands law and regulations,
except as described in the Prospectus; the Shares and the ADSs will
conform to the descriptions thereof contained in the Prospectus; and
the certificate or certificates evidencing the Shares will comply in
all respects with Netherlands law.
(h) The execution, delivery and performance of the Operative
Agreements by the Company and the consummation of the transactions
contemplated hereby and thereby, and the amendments to the Articles
of Association of the Company will not conflict with or result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust,
loan agreement, shareholders agreement or other material agreement
or instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound or
to which any of the properties or assets of the Company or any of
its subsidiaries is subject, nor will such actions result in any
violation of the provisions of the Articles of Association or other
constitutive documents of the Company or any of its subsidiaries or
any statute, license, legislation, authorization, or any order, rule
or regulation of any court or governmental
<PAGE> 6
6
agency or body (including, without limitation, any statutes, rules,
orders or regulations promulgated by the Minister van Verkeer en
Waterstaat (the "Transport Department"), the Onafhankelijke Post en
Telecommunicatie Autoriteit ("OPTA") or the Commission of the
European Union) having jurisdiction over the Company or any of its
subsidiaries or any of their properties or assets; and except for
the registration of the Shares and the ADSs under the Securities Act
and such consents, approvals, authorizations, registrations or
qualifications as may be required under the United States Securities
Exchange Act of 1934, as amended (the "Exchange Act") and applicable
state securities laws in connection with the purchase and
distribution of the Shares and the ADSs by the International
Managers, no consents, approvals, authorizations or orders of, or
filing or registration with, any court or governmental agency or
body (including, without limitation, any statutes, rules, orders or
regulations promulgated by the Transport Department, OPTA or the
Commission of the European Union) is required for the execution,
delivery and performance of the Operative Agreements by the Company
and the consummation of the transactions contemplated hereby and
thereby.
(i) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file
a registration statement under the Securities Act with respect to
any securities of the Company owned or to be owned by such person
or, other than obligations of the Company to register the Shares
being sold pursuant to this Agreement and the U.S. Underwriting
Agreement by the Selling Shareholders, to require the Company to
include any such securities in the securities registered pursuant to
either Registration Statement or the ADS Registration Statement or
in any securities being registered pursuant to any other
registration statement filed by the Company under the Securities Act
except as have been irrevocably waived, until the date 180 days
after the date hereof.
(j) Except as disclosed in the Prospectus, the Company has not
sold or issued any Ordinary Shares, ADSs or other share capital of
the Company or securities convertible or exercisable or exchangeable
for any such securities, during the six-month period preceding the
date of the Prospectus, including without limitation any sales
pursuant to Rule 144A under, or Regulations D or S of, the
Securities Act.
(k) The Company has full power and authority to enter into
this Agreement and the U.S. Underwriting Agreement.
(l) The Company has full power and authority to enter into the
Deposit Agreement; each of the Deposit Agreement has been duly
authorized by the Company, enforceable in accordance with its terms,
except that the enforcement thereof may be subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether
<PAGE> 7
7
considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing; upon the due and valid
issuance of the ADRs evidencing ADSs against the deposit of Shares
in respect thereof and against payment therefor in accordance with
the provisions of this Agreement, such ADRs will be duly and validly
issued and the persons in whose names the ADRs are registered will
be entitled to the rights specified in the ADRs and in the Deposit
Agreement; the ADRs conform in all material respects to the
descriptions thereof contained in the Prospectus.
(m) The Company had full power and authority to enter into the
settlement agreement, dated July 21, 1999, among the parties thereto
(the "Settlement Agreement"); and the Settlement Agreement is a
valid and binding obligation of the Company, enforceable against the
Company and the other parties thereto in accordance with its terms.
(n) The Operative Agreements conform in all material respects
to the descriptions thereof contained in the Prospectus.
(o) No stamp, capital or other issuance or transfer taxes or
duties and no capital gains, income, withholding or other taxes are
payable by or on behalf of the International Managers or the
International Managers in connection with (i) the sale of the Shares
(in the form of Ordinary Shares or ADSs) by the Company to the
International Managers in accordance with this Agreement and to the
U.S. Underwriter in accordance with the U.S. Underwriting Agreement,
(ii) the deposit with the Depositary or its nominee of Shares
against the issuance of ADRs evidencing ADSs, (iii) the delivery of
the Shares (in the form of Ordinary Shares or ADSs) to or for the
respective accounts of the International Managers or the
International Managers in the manner contemplated in this Agreement
and the U.S. Underwriting Agreement, respectively, or (iv) the sale
and delivery by the International Managers and the International
Managers to the initial purchasers therefrom.
(p) Neither the Company nor any of its subsidiaries has
sustained, since the date of the latest audited financial statements
included in the Prospectus, any material loss or interference with
its business from fire, explosion, flood or other calamity, whether
or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth in
the Prospectus; and, since such date, there has not been any change
in the share capital or long-term debt of the Company or any of its
subsidiaries or any material adverse change, or any development
involving a prospective material adverse change, in or affecting the
general affairs, management, financial position, shareholders'
equity or results of operations of the Company and its subsidiaries,
otherwise than as set forth in the Prospectus.
(q) The financial statements (including the related notes)
included in the Prospectus were prepared in accordance with
generally accepted accounting principles in the United States ("U.S.
GAAP") consistently applied
<PAGE> 8
8
throughout the periods involved and present fairly the financial
condition and results of operations of the entities purported to be
shown thereby, at the dates and for the periods indicated. The
summary financial data and selected financial and other data
included in the Prospectus have been accurately extracted from the
financial statements of the Company. The pro forma financial
information contained in the Prospectus has been prepared on a basis
consistent with the historical financial statements contained in the
Prospectus (except for the pro forma adjustments specified therein),
includes all material adjustments to the historical financial
information required by Rule 11-02 of Regulation S-X under the
Securities Act and the Exchange Act to reflect the transactions
described in the Prospectus, gives effect to assumptions made on a
reasonable basis and fairly presents the historical and proposed
transactions contemplated by the Prospectus, the Operative
Agreements and the High Yield Offering.
(r) Arthur Andersen, who have certified certain financial
statements of the Company, whose report appears in the Prospectus
and who will deliver the initial letter referred to in Section 6(t)
hereof dated the date of the Prospectus, are independent public
accountants as required by the Securities Act and the Rules and
Regulations; and KPMG Accountants N.V., who have certified certain
financial statements of Svianed B.V., whose report appears in the
Prospectus and who will deliver the initial letter referred to in
Section 6(t) hereof dated the date of the Prospectus, are
independent public accountants as required by the Securities Act and
the Rules and Regulations.
(s) The Company and each of its subsidiaries have good title
to all personal property owned by them, in each case free and clear
of all liens, encumbrances and defects except such as are described
in the Prospectus or such as do not materially affect the value of
such property and do not materially interfere with the use made and
proposed to be made of such property by the Company and its
subsidiaries. Except as otherwise described in the Prospectus,
neither the Company nor its subsidiaries owns any title to real
property or buildings, and all real property and buildings held
under lease by the Company and its subsidiaries are held by them
under valid, subsisting and enforceable leases, with such exceptions
as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company
and its subsidiaries.
(t) The Company and each of its subsidiaries carry, or are
covered by, insurance in such amounts and covering such risks as is
adequate for the conduct of their respective businesses and the
value of their respective properties and as is customary for
companies engaged in similar businesses in similar industries.
(u) The Company and each of its subsidiaries own or possess
adequate rights to use all material patents, patent applications,
trademarks, service
<PAGE> 9
9
marks, trade names, trademark registrations, service mark
registrations, copyrights and licenses necessary for the conduct of
their respective businesses and have no reason to believe that the
conduct of their respective businesses will conflict with, and have
not received any notice of any claim of conflict with, any such
rights of others, other than such that the Company believes will not
have a material adverse effect on the financial position,
shareholders' equity, results of operations, business or prospects
of the Company and its subsidiaries.
(v) There are no legal or governmental proceedings pending to
which the Company or any of its subsidiaries is a party or of which
any property or asset of the Company or any of its subsidiaries is
the subject which, if determined adversely to the Company or any of
its subsidiaries, might have a material adverse effect on the
financial position, shareholders' equity, results of operations,
business or prospects of the Company and its subsidiaries; and to
the best of the Company's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened
by others.
(w) The Shares have been approved for a listing on the
Official Market of the stock exchange of Amsterdam Exchanges N.V.
(the "AEX") and the ADSs have been approved for listing on the
National Association of Securities Dealers, Inc. Automated Quotation
National Market System (the "Nasdaq National Market System"), in
each case with trading scheduled to begin on a when, as and if
issued basis, on the First Delivery Date.
(x) The conditions for use of Form F-1, as set forth in the
General Instructions thereto, have been satisfied.
(y) There are no contracts or other documents which are
required to be described in the Prospectus or filed as exhibits to
either Registration Statement or the ADS Registration Statement by
the Securities Act or by the Rules and Regulations which have not
been described in the Prospectus or filed as exhibits to either
Registration Statement or the ADS Registration Statement.
(z) No relationship, direct or indirect, exists between or
among the Company on the one hand, and the directors, officers,
shareholders, customers or suppliers of the Company on the other
hand, which is required to be described in the Prospectus and is not
so described.
(aa) No labor disturbance by the employees of the Company or
any of its subsidiaries exists or to the knowledge of the Company is
imminent which might be expected to have a material adverse effect
on the consolidated financial position, shareholders' equity,
results of operations, business or prospects of the Company and its
subsidiaries.
(bb) The Company is in compliance in all material respects
with all applicable provisions of Netherlands and Belgian laws
relating to employees (including, without limitation, laws relating
to pension obligations).
<PAGE> 10
10
(cc) The Company and its subsidiaries have duly filed with the
appropriate taxing authorities all tax returns, reports and other
information required to be filed through the date hereof and have
paid all taxes due thereon (except as are being disputed in good
faith and for which reserves in accordance with U.S. GAAP have been
set aside); each such tax return, report or other information was,
when filed, accurate and complete in all material respects; nor does
the Company have any knowledge of any tax deficiency which, if
determined adversely to the Company or any of its subsidiaries,
might have a material adverse effect on the consolidated financial
position, shareholders' equity, results of operations, business or
prospects of the Company and its subsidiaries.
(dd) Except as disclosed in the Prospectus, under current laws
and regulations of The Netherlands and any political subdivision
thereof, all dividends and other distributions declared and payable
in respect of Ordinary Shares may be paid by the Company in Dutch
Guilders, euros or another currency that, in each case, may be
converted into foreign currency and may be freely transferred out of
The Netherlands, and all such payments made to holders thereof who
are non-residents of The Netherlands will not be subject to income,
withholding or other taxes under laws and regulations of The
Netherlands or any political subdivision or taxing authority thereof
or therein and will otherwise be free and clear of any other tax,
duty, withholding or deduction in The Netherlands or any political
subdivision or taxing authority thereof or therein and without the
necessity of obtaining any governmental authorization in The
Netherlands or any political subdivision or taxing authority thereof
or therein.
(ee) No stamp or other taxes or duties are payable by or on
behalf of the International Managers in The Netherlands upon or in
connection with the sale and delivery to or by the International
Managers of the Shares and ADSs as contemplated by the Prospectus.
(ff) As of the date hereof, and except as may otherwise be
disclosed in the Prospectus, the Company has not (i) issued or
granted any securities, including, without limitation, any options
or warrants, (ii) incurred any liability or obligation, direct or
contingent, other than liabilities and obligations which were
incurred in the ordinary course of business, (iii) entered into any
transaction not in the ordinary course of business or (iv) declared
or paid any dividend on its issued share capital.
(gg) The Company (i) makes and keeps books and records which
are accurate in all material respects and (ii) maintains internal
accounting controls which provide reasonable assurance that (A)
transactions are executed in accordance with management's
authorization, (B) transactions are recorded as necessary to permit
preparation of its financial statements and to maintain
accountability for its assets, (C) access to its assets is permitted
only in accordance with management's authorization and (D) the
reported accountability for its assets is compared with existing
assets at reasonable
<PAGE> 11
11
intervals.
(hh) Neither the Company nor any of its subsidiaries is (i) in
violation of its respective articles of association or by-laws or
equivalent constitutive documents, (ii) in default in any material
respect, and no event has occurred which, with notice or lapse of
time or both, would constitute such a default, in the due
performance or observance of any term, covenant or condition
contained in any material indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which it is a party or
by which it is bound or to which any of its properties or assets is
subject or (iii) is in violation in any material respect of any law,
ordinance, governmental rule, regulation or court decree to which it
or its properties or assets may be subject or has failed to obtain
any material license, permit, certificate, franchise or other
governmental authorization or permit necessary to the ownership of
its properties or assets or to the conduct of its business.
(ii) Except as otherwise described in the Prospectus, each of
the Company and its subsidiaries possesses all licenses, permits,
certificates, franchises, approvals and other authorizations
necessary to the conduct of their respective businesses and the
ownership, lease and operation of their respective properties; all
such licenses, permits, certificates, franchises, approvals and
other authorizations are in full force and effect and each of the
Company and its subsidiaries is in compliance therewith in all
material respects, except where the failure to possess such
licenses, permits, certificates, franchises, approvals and other
authorizations would not, in the aggregate, have a material adverse
effect on the business, properties, financial condition, results of
operations or prospects of the Company and its subsidiaries, taken
as a whole; and none of the Company and any of its subsidiaries has
received any notice of any proceedings relating to the revocation or
modification of any such license, permit, certificate, franchise,
approval or authorization which, individually or in the aggregate,
if the subject of an unfavorable decision, ruling or result, might
have a material adverse effect on the business, properties,
financial condition, results of operations or prospects of the
Company and its subsidiaries, taken as a whole.
(jj) Neither the Company nor any of its subsidiaries, nor any
director, officer, agent, employee or other person associated with
or acting on behalf of the Company or any of its subsidiaries, has
(i) used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political
activity, (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate
funds, (iii) violated or is in violation of any provision of the
United States Foreign Corrupt Practices Act of 1977, as amended, or
(iv) made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment.
(kk) To the best of the Company's knowledge after due inquiry,
there
<PAGE> 12
12
has been no violation of any applicable environmental law,
ordinance, rule, regulation, order, judgment, decree or permit in
any jurisdiction with respect to the properties of the Company or
its subsidiaries.
(ll) There are no material acquisitions of businesses or
assets by the Company or any of its subsidiaries pending or
currently being negotiated.
(mm) Each of the Company and its subsidiaries has undertaken a
review of all of its computer hardware and software ("Computer
Equipment") and determined that such Computer Equipment is not in
need of replacement or reprogramming to function correctly from
January 1, 2000, except where such replacement or reprogramming
would not have a material adverse effect on the Company and its
subsidiaries.
(nn) The Company is not an open-end investment company, unit
investment trust or face-amount certificate company that is or is
required to be registered under Section 8 of the United States
Investment Company Act of 1940, as amended (the "Investment Company
Act"), nor is it a closed-end investment company required to be
registered, but not registered, thereunder; and the Company is not
and, after giving effect to the offering and sale of the Shares and
the High Yield Offering, and the application of the proceeds thereof
as described in the Prospectus, will not be an "investment company"
as defined in the Investment Company Act and the rules and
regulations of the Commission thereunder.
(oo) Neither the Company nor any subsidiary has incurred any
liability for a fee, commission, or other compensation on account of
the employment of a broker or finder in connection with the
transactions contemplated by this Agreement, the U.S. Underwriting
Agreement or the Deposit Agreement.
(pp) Neither the Company nor any subsidiary has taken,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably have been expected to cause or
result in stabilization or manipulation of the price of any security
of the Company in connection with the offering of the Shares.
(qq) The Company owns no capital stock of, or other equity
interests in, any person or entity (other than VersaTel Telecom
Belgium N.V., VersaTel Telecom Europe B.V., Versatel Telecom
Netherlands B.V., Bizztel Telematica B.V., CS Net B.V., CS
Engineering B.V., Amstel Alpha B.V., 7-Klapper Beheer
B.V., ITinera Services N.V. and Svianed B.V.)
(rr) Taking into account the receipt of proceeds from the
offering and sale of the Shares and the High Yield Offering, the
Company does not expect to qualify as a passive foreign investment
company ("PFIC") as defined in Section 1296(a) of the United States
Internal Revenue Code of 1986, as amended (the "Code"), a "foreign
personal holding company" as defined in Section 552 of the Code or a
"controlled foreign corporation" as defined in
<PAGE> 13
13
Section 957 of the Code, for its current taxable year or for future
taxable years.
(ss) All of the representations, warranties and agreements of
the Company contained it the underwriting agreement relating to the
Company's concurrent offering of Senior Dollar Notes due 2009 and
Senior Euro Notes due 2009 (the "High Yield Offering") are true and
correct in all material respects.
2. Representations, Warranties and Agreements of the Selling
Shareholders. Each Selling Shareholder severally represents, warrants and agrees
that:
(a) (A) In the case of Selling Shareholders other than
Cromwilld, the Selling Shareholder has good and valid title to the
Warrants, each entitling the holder thereof to purchase 13.334
Ordinary Shares and, immediately prior to the time at which the
Shares to be sold by it in the offering (the "Warrant Shares") are
delivered to the International Managers and the International
Managers, the Selling Shareholder will have good and valid title to
such Warrant Shares to be sold by the Selling Shareholder pursuant
to this Agreement on such date, free and clear of all liens,
encumbrances, equities or claims; and upon delivery of such Warrant
Shares and payment therefor pursuant to this Agreement and the U.S.
Underwriting Agreement, good and valid title to such Warrant Shares,
free and clear of all liens, encumbrances, equities or claims, will
pass to the several International Managers or the several
International Managers, as the case may be; or (B) in the case of
Cromwilld, it has good and valid title to the Shares to be sold by
it, and, immediately prior to the time at with the Shares to be sold
by it in the Offering are delivered to the International Managers,
it will have good and valid title to such Shares, free and clear of
all liens, encumbrances, equities or claims; and upon delivery of
such Shares and payment therefor pursuant to this Agreement and the
U.S. Underwriting Agreement, good and valid title to such Shares,
free and clear of all liens, encumbrances, equities or claims, will
pass to the several International Managers or the several
International Managers, as the case may be.
(b) (A) In the case of all Selling Shareholders other than
Cromwilld, the Selling Shareholder has placed in custody under the
irrevocable power of attorney and custody agreement dated as of July
7, 1999 (together with the power of attorney and custody agreement
of Cromwilld referred to below, the "Power of Attorney and Custody
Agreement) with United States Trust Company of New York, as
custodian (together with the custodian referred to in (B) below, the
"Custodian"), a number of Warrants that will become exercisable,
upon the closing of this offering contemplated hereby, into the
Warrant Shares to be delivered and sold by the Selling Shareholder
pursuant to this Agreement and the U.S. Underwriting Agreement; and
(B) in the case of Cromwilld, it has placed in custody under the
irrevocable power of attorney and custody agreement dated as of July
21, 1999 with the Company, acting in its capacity as custodian, a
number of Shares to be delivered and sold by it pursuant to this
Agreement and the U.S. Underwriting Agreement.
<PAGE> 14
14
(c) Pursuant to the Power of Attorney and the Custody
Agreement, the Selling Shareholder has duly and irrevocably executed
and delivered a power of attorney appointing any of R. Gary Mesch,
Raj Raithatha and Leo van der Veen, as attorneys-in-fact, with full
power of substitution, and with full authority (exercisable by any
one or more of them) to (i) (in the case of all Selling Shareholders
other than Cromwilld) elect to exercise a number of Warrants held by
the Selling Shareholder into Warrant Shares and (ii) execute and
deliver this Agreement and the U.S. Underwriting Agreement and to
take such other action as may be necessary or desirable to carry out
the provisions thereof, in each case on behalf of the Selling
Shareholder.
(d) The Selling Shareholder has full right, power and
authority to enter into this Agreement and the U.S. Underwriting
Agreement and the Power of Attorney and Custody Agreement; the
execution, delivery and performance of this Agreement and the U.S.
Underwriting Agreement, the Power of Attorney and the Custody
Agreement of the Selling Shareholder and the consummation by the
Selling Shareholder of the transactions contemplated hereby and
thereby will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Selling Shareholder is a party
or by which the Selling Shareholder is bound or to which any of the
property or assets of the Selling Shareholder are subject, nor will
such actions result in any violation of the provisions of the
charter or by-laws, articles of partnership, deed of trust or other
equivalent constituent documents of such Selling Shareholder or any
statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Selling
Shareholder or the property or assets of the Selling Shareholder;
upon execution and delivery thereof by the attorney-in-fact, this
Agreement and the U.S. Underwriting Agreement will be duly
authorized, executed and delivered by the Selling Shareholder; and,
except for the registration of the Warrant Shares (in the case of
Selling Shareholders other than Cromwilld) or the Shares (in the
case of Cromwilld) under the Securities Act and such consents,
approvals, authorizations, registrations or qualifications as may be
required under the Exchange Act and applicable U.S. or Netherlands
securities laws in connection with the purchase and distribution of
the Warrant Shares (in the case of Selling Shareholders other than
Cromwilld) or the Shares (in the case of Cromwilld) by the
International Managers, the International Managers and the
Representatives, no consent, approval, authorization or order of, or
filing or registration with, any such court or governmental agency
or body is required for the execution, delivery and performance of
this Agreement, the U.S. Underwriting Agreement and the Power of
Attorney and Custody Agreement by the Selling Shareholder and the
consummation by the Selling Shareholder of the transactions
contemplated hereby and thereby.
<PAGE> 15
15
(e) To the extent that any statements or omissions made in the
Registration Statements, the Prospectus or any amendment or
supplement thereto are made in reliance upon and in conformity with
written information furnished to the Company by the Selling
Shareholders specifically for use therein, the Primary Registration
Statement did not, and the Rule 462(b) Registration Statement, if
any, the Prospectus and any amendments or supplements to the
Registration Statement or the Prospectus will not, when they become
effective or are filed with the Commission, as the case may be,
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.
(f) The Selling Shareholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result
in the stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Shares.
(g) (A) In the case of Selling Shareholders other than
Cromwilld, the information provided by the Selling Shareholder in
the Instruction to Purchase Warrant Shares in Connection with, and
Request to Include Warrant Shares for Sale in, the initial public
offering of the Company (attached to the Power of Attorney and
Custody Agreement) was true and correct as of the date on which it
was made, and as of the date hereof; and, except as disclosed in the
Prospectus, within the past three years the Selling Shareholder has
held no position or office or had any other material relationship
with the Company, or (B) in the case of Cromwilld, the information
provided by it in the Selling Shareholder Information Schedule
(Exhibit B to the Settlement Agreement) was true and correct when
made and as of the date hereof.
(h) In the case of Cromwilld, it had full power and authority
to enter into the Settlement Agreement; the Settlement Agreement has
been duly authorized, executed and delivered by it and constitutes a
legally binding obligation of Cromwilld, enforceable in accordance
with its terms.
3. Purchase of the Shares and ADSs by the International Managers. On
the basis of the representations and warranties contained in, and subject to the
terms and conditions of, this Agreement, (i) the Company agrees to sell - Firm
Shares (in the form of Ordinary Shares or ADSs) and (ii) each Selling
Shareholder agrees, severally but not jointly, to sell the number of Firm Shares
set forth opposite its name on Schedule II hereto, to the several International
Managers, and each U.S. Underwriter, severally and not jointly, agrees to
purchase the number of Firm Shares (in the form of Ordinary Shares or ADSs) set
opposite such U.S. Underwriter's name in Schedule I hereto, from the Company and
the Selling Shareholders. Each U.S. Underwriter shall be obligated to purchase,
from the Company and from each Selling Shareholder, that number of Firm Shares
which represents the same proportion of the number of Firm Shares to be sold by
the Company and by each Selling Shareholder, as the number of Firm Shares set
forth opposite the name of such U.S. Underwriter in Schedule I represents of the
total number of Firm Shares to be purchased by
<PAGE> 16
16
all of the International Managers pursuant to this Agreement. The respective
purchase obligations of the International Managers with respect to the Firm
Shares (including Firm ADSs) shall be rounded among the International Managers
to avoid fractional shares, as the Representative may determine.
In addition, the Company grants to the International Managers an
option to purchase up to an aggregate - Option Shares [and Cromwilld grants to
the International Managers an option to purchase up to an aggregate - Option
Shares] (in each case in the form of Ordinary Shares or ADSs). Such option is
granted solely for the purpose of covering over-allotments in the sale of Firm
Shares and is exercisable as provided in Section 5 hereof. Option Shares shall
be purchased severally for the account of the International Managers in
proportion to the number of Firm Shares set opposite the name of such
International Managers in Schedule I hereto. The respective purchase obligations
of the International Managers with respect to the Option Shares shall be rounded
among the International Managers to avoid fractional shares, as the
Representatives may determine.
The price of both the Firm Shares and any Option Shares purchased
from the Company and/or the Selling Shareholders in the form of Ordinary Shares
shall be - per Firm Share or Option Share, and the price of both the Firm Shares
and any Option Shares purchased from the Company and/or the Selling Shareholders
in the form of ADSs shall be $- per Firm ADS or Option ADS, in each case net of
underwriting discounts and commissions.
The Company and the Selling Shareholders shall not be obligated to
deliver any of the Shares to be delivered on the First Delivery Date or the
Second Delivery Date (each as defined herein), as the case may be, except upon
payment for all the Shares to be purchased on such Delivery Date as provided
herein and in the U.S. Underwriting Agreement.
4. Offering of Shares and ADSs by the International Managers. Upon
authorization by the Lead Manager of the release of the Firm Shares, the several
International Managers propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus; provided, however, that no Shares
registered pursuant to the 462(b) Registration Statement, if any, shall be
offered prior to the Effective Time thereof.
It is understood that - Firm Shares will initially be reserved by
the several International Managers and the several International Managers for
offer and sale upon the terms and conditions set forth in the Prospectus to
employees and persons having business relationships with the Company and its
subsidiaries (the "Directed Share Program") who have heretofore delivered to the
Representatives offers or indications of interest to purchase Firm Shares in
form satisfactory to the Representatives, and that any allocation of such Firm
Shares among such persons will be made in accordance with timely directions
received by the Representatives from the Company; provided, that under no
circumstances will the Representatives or any U.S. Underwriter or any
International Manager be liable to the Company or to any such person for any
action taken or omitted in good faith in connection with such offering to
employees and persons having business relationships with the Company and its
subsidiaries. It is further understood that any Firm Shares which are not
purchased by such persons will be offered by the International Managers and the
International Managers to the public upon the terms and conditions set forth in
the Prospectus.
<PAGE> 17
17
Each U.S. Underwriter agrees that, except to the extent
permitted by the Agreement Among International Managers and International
Managers, it will not offer or sell any of the Shares or ADSs outside of the
United States or Canada.
5. Delivery of and Payment for the Shares. Delivery of and
payment for the Firm Shares shall be made at the offices of [Stibbe Simont
Monahan Duhot, Amsterdam], at [time], on the [fourth] full business day
following the Date of this Agreement or at such other date or place as shall be
determined by agreement between the Representatives and the Company. This date
and time are sometimes referred to as the "First Delivery Date." On the First
Delivery Date, (a) with respect to the Firm Shares to be sold by the Company and
the Selling Shareholders to be delivered in the form of Ordinary Shares, the
Company and the Custodian, on behalf of the Selling Shareholders, shall deliver
or cause to be delivered to the Lead Manager for the account of each U.S.
Underwriter such Firm Shares by book entry transfer through Nederlands Centraal
Instituut voor Giraal Effectenverkeer B.V. ("NECIGEF"), in Amsterdam, The
Netherlands, for credit (i) to the designated account of the Lead Manager or its
nominee at NECIGEF or further credit to designated accounts with the Euroclear
System ("Euroclear") or Cedel Bank, societe anonyme ("Cedel"), as the case may
be, in such respective portions as the Lead Manager may designate by notice to
the Company and the Custodian given at least two full business days prior to the
First Delivery Date, and (ii) to such other NECIGEF accounts as the Lead Manager
may so designate and (b) with respect to the Firm Shares to be sold by the
Company and the Selling Shareholders to be delivered in the form of ADSs, if
any, the Company and the Custodian, on behalf of the Selling Shareholders, shall
(i) deliver or cause to be delivered such Firm Shares by book entry transfer
through NECIGEF for credit to the account of the Correspondent Bank of the
Depositary, (ii) cause the Depositary to issue one or more ADRs evidencing the
ADSs representing such Firm Shares to be registered in such names as specified
below and (iii) deliver or cause to be delivered such ADRs to the Lead Manager
for the account of each U.S. Underwriter, in each case against payment to or
upon the order of (A) the Company of the purchase price therefor by wire
transfer in same-day funds to the account or accounts specified by the Company
to the Lead Manager and (B) the Custodian, on behalf of the Selling
Shareholders, of the purchase price therefor by wire transfer in same-day funds
to the account or accounts specified by the Custodian to the Lead Manager, in
each case upon two business days' prior notice. Time shall be of the essence,
and delivery at the time and place specified pursuant to this Agreement is a
further condition of the obligation of each U.S. Underwriter hereunder. Upon
delivery, the Firm Shares shall be registered in such names and in such
denominations as the Lead Manager shall request in writing not less than two
full business days prior to the First Delivery Date.
The Lead Manager, on behalf of the several International
Managers, may elect to have Firm Shares delivered in the form of either Ordinary
Shares or ADSs in such portions as they may elect, in satisfaction of the
Company's and the Selling Shareholders' obligations to sell to the several
International Managers, and the several International Managers' obligations to
purchase, such Firm Shares. Notice of such election with respect to the First
Delivery Date shall be given by the Lead Manager to the Custodian and the
Company upon two business days' prior notice. Upon delivery, the ADRs evidencing
the ADSs representing the Firm Shares shall be registered in such names and in
such denominations as the Lead Manager shall request in writing not less than
two full business days prior to the First
<PAGE> 18
18
Delivery Date. For the purpose of expediting the checking and packaging of the
ADRs evidencing the ADSs representing the Firm Shares, the Company and the
Custodian, on behalf of the Selling Shareholders, shall make such ADRs available
for inspection by the Lead Manager in New York, New York, on the business day
prior to the First Delivery Date.
At any time on or before the thirtieth day after the date of
this Agreement, the option granted in Section 3 may be exercised by written
notice being given to the Company [and Cromwilld] by the Representatives. Such
notice shall set forth the aggregate number of Option Shares as to which the
option is being exercised, whether all or a portion of such shares are to be
delivered in the form of ADRs evidencing ADSs representing such Option Shares,
the denominations in which the shares of Option Shares and ADRs, if any, are to
be issued and the date and time, as determined by the Representatives, when the
Option Shares and ADRs, if any, are to be delivered; provided, however, that
this date and time shall not be earlier than the First Delivery Date nor earlier
than the second business day after the date on which the option shall have been
exercised nor later than the fifth business day after the date on which the
option shall have been exercised. The date and time the Option Shares are
delivered are sometimes referred to as the "Second Delivery Date" and the First
Delivery Date and the Second Delivery Date are sometimes each referred to as the
"Delivery Date".
Delivery of and payment for the Option Shares shall be made at
the place specified in the first sentence of the first paragraph of this Section
5 (or at such other place as shall be determined by agreement between the
Representatives and the Company) at [time], on the Second Delivery Date. On the
Second Delivery Date, (a) with respect to the Option Shares to be delivered in
the form of Ordinary Shares, the Company [and the Custodian on behalf of
Cromwilld] shall deliver or cause to be delivered to the Lead Manager for the
account of each U.S. Underwriter such Option Shares by book entry transfer
through NEGIGEF in Amsterdam, The Netherlands, for credit (i) to the designated
account of the U.S. Underwriter and for further credit to designated accounts at
Euroclear or Cedel, as the case may be, in such respective portions as the U.S
Representative may designate by notice to the Company given at least two full
business days prior to the Second Delivery Date, and (ii) to such other NECIGEF
accounts as the U.S Representative may so designate and (b) with respect to the
Option Shares to be delivered in the form of ADSs, if any, the Company [and the
Custodian on behalf of Cromwilld] shall (i) deliver or cause to be delivered
such Option Shares by book entry transfer through NECIGEF for credit to the
account of the Correspondent Bank of the Depositary, (ii) cause the Depositary
to issue one or more ADRs evidencing the ADSs representing such Option Shares to
be registered in such names as specified below and (iii) deliver or cause to be
delivered such ADRs to the Lead Manager for the account of each U..S.
Underwriter, in each case, against payment to or upon the order of the Company
[and the Custodian on behalf of Cromwilld] of the purchase price therefor by
wire transfer in (same day) funds to the account or accounts specified by the
Company to the Lead Manager upon two business days' prior notice. Time shall be
of the essence, and delivery at the time and place specified pursuant to this
Agreement is a further condition of the obligation of each U.S. Underwriter
hereunder. Upon delivery, the Option Shares shall be registered in such names
and in such denominations as the Lead Manager shall request in the aforesaid
written notice.
The Lead Manager, on behalf of the several International
Managers, may elect to have Option Shares delivered in the form of either
Ordinary Shares or ADSs in such
<PAGE> 19
19
portions as they may elect in satisfaction of the Company's [and Cromwilld's]
obligation to sell to the several International Managers, and the several
International Managers' obligations to purchase, such Option Shares. Notice of
such election with respect to the Second Delivery Date shall be given by the
Lead Manager to the Company [and the Custodian on behalf of Cromwilld] in
accordance with the provisions of the second preceding paragraph. Upon delivery,
the ADRs evidencing the ADSs representing the Option Stock shall be registered
in such names and in such denominations as the Lead Manager shall request in
accordance with the provisions of the second preceding paragraph. For the
purpose of expediting the checking and packaging of the ADRs evidencing the ADSs
representing Option Shares, the Company shall make such ADRs available for
inspection by the Lead Manager in New York, New York, on the business day prior
to the Second Delivery Date.
With respect to all or any portion of Shares and ADSs to be
purchased and sold hereunder, the Lead Manager, on behalf of the International
Managers and for the purposes of effecting reallocations of Shares and ADSs, may
elect to have such Shares and ADSs delivered to and paid for by the
International Managers in satisfaction of the obligation of the Company and the
Selling Shareholders to sell to the International Managers, and the
International Managers' obligations to purchase, such Shares and ADSs. Notice of
such election shall be given by the Lead Manager to the Company and the Selling
Shareholders two business days prior to the relevant Delivery Date.
With respect to all or any portion of the Shares and ADSs to
be purchased and sold pursuant to the U.S. Underwriting Agreement, the
International Representative, on behalf of the International Managers and for
purposes of effecting reallocations of Shares and ADSs, may elect to have such
Shares and ADSs delivered to and paid for by the International Managers in
satisfaction of the obligation of the Company and the Selling Shareholders to
sell to the International Managers, and the obligations of the International
Managers to purchase, such Shares and ADSs. Notice of such election shall be
given by the International Representative to the Company and the Selling
Shareholders two business days prior to the relevant Delivery Date.
6. Further Agreements of the Company. The Company agrees:
(a) To prepare the Rule 462(b) Registration
Statement, if necessary, in a form approved by the
Representatives and to file such 462(b) Registration Statement
with the Commission on the date hereof; to prepare the
Prospectus in a form approved by the Representatives and to
file such Prospectus pursuant to Rule 424(b) under the
Securities Act not later than 5:00 p.m., New York City time,
on the day following the execution and delivery of this
Agreement; to make no further amendment or any supplement to
either Registration Statement, the ADS Registration Statement
or to the Prospectus except as permitted herein; to advise the
Representatives, promptly after it receives notice thereof, of
the time when each Registration Statement or the ADS
Registration Statement or any amendment thereto has been filed
or becomes effective or any supplement to the Prospectus or
any amended Prospectus has been filed and to furnish the
Representatives with copies thereof; to advise the
Representatives, promptly after it receives notice thereof, of
the issuance by the Commission of any stop order or of any
order preventing or suspending
<PAGE> 20
20
the use of any Preliminary Prospectus or the Prospectus, of
the suspension of the qualification of the Shares or ADSs for
offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any
request by the Commission for the amending or supplementing of
either Registration Statement, the ADS Registration Statement
or the Prospectus or for additional information; and, in the
event of the issuance of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus
or the Prospectus or suspending any such qualification, to use
promptly its best efforts to obtain its withdrawal;
(b) To furnish promptly to each of the
Representatives and to U.S. counsel to the International
Managers and the International Managers a signed copy of each
of the Registration Statements and the ADS Registration
Statement as originally filed with the Commission, and each
amendment thereto filed with the Commission, including all
consents and exhibits filed therewith;
(c) To deliver promptly to the Representatives such
number of the following documents as the Representatives shall
reasonably request: (i) conformed copies of the Registration
Statements as originally filed with the Commission and each
amendment thereto (in each case excluding exhibits other than
this Agreement and the computation of per share earnings) and
(ii) each Preliminary Prospectus, the Prospectus (not later
than 5:00 p.m., New York City time, on the day following the
execution and delivery of this Agreement) and any amended or
supplemented Prospectus (not later than 10:00 a.m., New York
City time, on the day following the date of such amendment or
supplement), as the Representatives may reasonably request;
and, if the delivery of a prospectus is required at any time
after the Effective Time of the Primary Registration Statement
in connection with the offering or sale of the Shares or ADSs
(or any other securities relating thereto) and if at such time
any event shall have occurred as a result of which the
Prospectus as then amended or supplemented would include any
untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made when such Prospectus is delivered, not misleading,
or, if for any other reason it shall be necessary to amend or
supplement the Prospectus in order to comply with the
Securities Act, to notify the Representatives and, upon their
request, to prepare and furnish without charge to each U.S.
Underwriter and to any dealer in securities as many copies as
the Representatives may from time to time reasonably request
of an amended or supplemented Prospectus which will correct
such statement or omission or effect such compliance;
(d) To file promptly with the Commission any
amendment to the Registration Statements or the ADS
Registration Statement, or the Prospectus or any supplement to
the Prospectus, that may, in the reasonable judgment of the
Company or the Representatives, be required by the Securities
Act or requested by the Commission;
<PAGE> 21
21
(e) Prior to filing with the Commission any amendment
to either Registration Statement or the ADS Registration
Statement, or supplement to the Prospectus, or any Prospectus
pursuant to Rule 424 of the Rules and Regulations, to furnish
a copy thereof to the Representatives and counsel to the
International Managers and the International Managers and not
to file any such document to which the Representative shall
reasonably object after having been given reasonable notice of
the proposed filing thereof;
(f) As soon as practicable after the Effective Date
of the Primary Registration Statement, to make generally
available to the Company's security holders and to deliver to
the Representatives an earning statement of the Company and
its subsidiaries (which need not be audited) complying with
Section 11(a) of the Securities Act and the Rules and
Regulations (including, at the option of the Company, Rule
158);
(g) For a period of five years following the
Effective Date of the Primary Registration Statement, to
furnish to the Representatives copies of all materials
furnished by the Company to its shareholders and all public
reports and all reports and financial statements furnished by
the Company to the principal national securities exchange or
automatic quotation system upon which the Shares or ADSs may
be listed or quoted pursuant to requirements of or agreements
with such exchange or system or to the Commission pursuant to
the Exchange Act or any rule or regulation of the Commission
thereunder;
(h) Promptly from time to time to exercise best
efforts to take such action as the Representatives may
reasonably request, in cooperation with the International
Managers and the International Managers, to qualify the Shares
and ADSs for offering and sale under the securities laws of
such jurisdictions as the Representatives may request and to
comply with such laws so as to permit the continuance of sales
and dealings therein in such jurisdictions for as long as may
be necessary to complete the distribution of the Shares and
ADSs; provided that, in connection therewith, the Company
shall not be required to qualify as a foreign corporation or
otherwise subject itself to taxation in any jurisdiction in
which it is not otherwise so qualified or subject, except as
may be provided in the Operative Agreements.
(i) For a period of 180 days from the date of the
Prospectus, not to, directly or indirectly, issue, offer,
pledge, sell, contract to sell or sell or grant any contract,
option, right or warrant to purchase, purchase any option to
sell, or otherwise transfer or dispose of (or enter into any
transaction or device which is designed to, or could be
expected to, result in the disposition, transfer or purchase
by any person at any time in the future of) any Shares or
ADSs, Ordinary Shares (other than (x) Ordinary Shares issued
pursuant to employee stock option and incentive plans existing
on the date hereof and (y) Ordinary Shares or other share
capital used by the Company in connection with acquisitions or
strategic alliances (provided in each such case that the
recipient of such shares executes a Lock-up Letter (as defined
below) in advance of any such transfer)) or any other share
capital of the Company or securities
<PAGE> 22
22
convertible or exercisable or exchangeable for any such
securities, or sell or grant options, rights or warrants with
respect to any such securities (other than the grant of
options pursuant to employee stock option and incentive plans
existing on the date hereof) or enter into any swap or similar
agreement that transfers, in whole or in part, the economic
risk of ownership of any such securities, whether any of the
foregoing transactions is to be settled by delivery of any
such securities, in cash or otherwise, in each case without
the prior written consent of the Lead Manager; and to cause
each shareholder of the Company, [each] holder of options in
securities of the Company and each person named in the
Prospectus to furnish to the Representatives, prior to the
First Delivery Date, a letter or letters (the "Lock-up
Letters"), in form and substance satisfactory to counsel to
the International Managers, pursuant to which each such person
shall agree not to, directly or indirectly, offer, pledge,
sell, contract to sell or sell or grant any contract, option,
right or warrant to purchase, purchase any option to sell, or
otherwise transfer or dispose of (or enter into any
transaction or device which is designed to, or could be
expected to, result in the disposition, transfer or purchase
by any person at any time in the future of) any Shares, ADSs
or other share capital of the Company or securities
convertible or exercisable or exchangeable for any such
securities, or sell or grant options, rights or warrants with
respect to any such securities or enter into any swap or
similar agreement that transfers, in whole or in part, the
economic risk of ownership of any such securities (other than
(x) any exercise of any stock option granted to such person
pursuant to the Company's stock option plans prior to the date
hereof (although such sentence shall apply to any subsequent
sale of shares received upon any such exercise) or (y) if such
person is a shareholder of the Company, the transfer of any
Ordinary Shares to an affiliate of such person, provided that
the Representatives are notified in advance of any such
proposed transfer and are furnished in advance of such
transfer with a copy of the Lock-up Letter duly executed by
the transferee), whether any of the foregoing transactions is
to be settled by delivery of any such securities, in cash or
otherwise, for a period of 180 days from the date of the
Prospectus;
(j) To use all reasonable efforts to maintain the
listing of the Shares on the AEX and of the ADSs on the Nasdaq
National Market System until none of the Shares and ADSs is
outstanding;
(k) To comply in all material respects with the
Deposit Agreement so that ADRs evidencing ADSs will be
executed by the Depositary and delivered to the International
Managers on each Delivery Date;
(l) To comply in all material respects with all
covenants and agreements of the Company contained in
underwriting agreement relating to the High Yield Offering;
(m) To apply the net proceeds from the sale of the
Shares and ADSs
<PAGE> 23
23
being sold by the Company as set forth in the Prospectus, and
to apply the net proceeds from the Third High Yield Offering
as set forth in the Prospectus and in each prospectus relating
to such Offering;
(n) Between the date hereof and the First Delivery
Date (both dates inclusive), to notify and consult with the
Representatives, and to cause its subsidiaries and all other
parties acting on its or their behalf to notify and consult
with the Representatives, prior to issuing any announcement
which could be material in the context of the distribution of
the Shares and ADSs;
(o) Promptly to inform the Representatives of any
communications received by the Company from any governmental
or regulatory agency or authority, including, without
limitation, any Netherlands or Belgian regulatory authority,
the Luxembourg Stock Exchange, or the Commission, relating to
the offering of the Shares and ADSs and to furnish the
Representatives with copies thereof;
(p) To take such steps as shall be necessary to
ensure that neither the Company nor any subsidiary shall
become an "investment company" within the meaning of such term
under the Investment Company Act, and the rules and
regulations of the Commission thereunder;
(q) To not take, directly or indirectly, any action
which is designed to stabilize or manipulate, or which
constitutes or which might reasonably be expected to cause or
result in stabilization or manipulation, of the price of any
security of the Company in connection with the offering of the
Shares and ADSs;
(r) To take reasonable steps to minimize its
accumulation of passive income and passive assets and the risk
of the Company qualifying as a PFIC for 1999 and for future
years; provided that such steps are consistent with the
Company's general business plan and other business
considerations (which are subject to change);
(s) To monitor its status as a PFIC and, in the event
the Company is a PFIC, to provide the requisite information to
enable shareholders to make qualified electing fund (as such
term is used in the Code) elections;
(t) To cause each of Arthur Andersen and KPMG
Accountants N.V. to deliver an initial comfort letter, with
respect to the financial statements of the Company and Svianed
B.V., respectively, dated the date of the Prospectus, to the
International Managers and the International Managers, in form
and substance reasonably satisfactory to the Representatives
at or prior to the time copies of the Prospectus are furnished
to the Representatives; and
(u) In advance of registering any transfers of its
Ordinary Shares from Telecom Founders B.V. to a holder of
depositary receipts in Telecom
<PAGE> 24
24
Founders, to provide (or cause Telecom Founders to provide) to
the Representatives and their counsel evidence satisfactory to
the Representatives that such transfers may be made pursuant
to a valid exemption under the Securities Act.
7. Further Agreements of the Selling Shareholders. Each
Selling Shareholder agrees:
(a) That the Shares to be sold by the Selling
Shareholder under this Agreement and the U.S. Underwriting
Agreement, and the Warrants (in the case of Selling
Shareholders other than Cromwilld) or the Shares (in the case
of Cromwilld) that have been placed in custody by the Selling
Shareholder with the Custodian, are subject to the interest of
the International Managers, the International Managers and the
other Selling Shareholders thereunder, that the arrangements
made by the Selling Shareholder for such custody are
irrevocable (except as otherwise explicitly provided in the
Power of Attorney and Custody Agreement), and that the
obligations of the Selling Shareholder under each this
Agreement and the U.S. Underwriting Agreement shall not be
terminated by any act of the Selling Shareholder, by operation
of law or, in the case of a trust, by the death or incapacity
of any executor or trustee or the termination of such trust,
or the occurrence of any other event.
(b) To deliver to the Representatives prior to the
Delivery Date a properly completed and executed United States
Treasury Department Form W-8 (if the Selling Shareholder is a
non-United States person) or Form W-9 (if the Selling
Shareholder is a United States person.)
(c) To cooperate with the Company, the International
Managers and the International Managers and to execute and
deliver, or use its best efforts to cause to be executed and
delivered, all such other instruments, and take all such other
actions as such party may reasonably be requested to take by
the Company, the International Managers and the International
Managers from time to time, in order to effectuate the
exercise of Warrants and the sale of Warrant Shares (in the
case of Selling Shareholders other than Cromwilld) or the
Shares (in the case of Cromwilld) in the offering contemplated
hereby.
8. Expenses. The Company agrees to pay or cause to be paid:
(a) the costs incident to the authorization, issuance, sale and delivery of the
Shares and ADSs and any taxes payable in that connection; (b) the costs incident
to the preparation, printing and distributing of the Registration Statements,
the ADS Registration Statement, each Preliminary Prospectus, each Prospectus and
any amendments, supplements and exhibits thereto; (c) the costs of distributing
the Registration Statements and the ADS Registration Statement as originally
filed and each amendment thereto and any post-effective amendments thereto
(including, in each case, exhibits), each Preliminary Prospectus, the
Prospectus, the International Prospectus and any amendment or supplement to the
Prospectus or the International Prospectus, all as provided in this Agreement
and the U.S. Underwriting
<PAGE> 25
25
Agreement; [(d) the costs of producing and distributing this Agreement, the U.S.
Underwriting Agreement, the Agreement Among International Managers and
International Managers, the Agreement Among International Managers and the
Supplemental Agreement Among International Managers;] (e) the filing fees
incident to securing any required review by the National Association of
Securities Dealers, Inc. of the terms of sale of the Shares and ADSs; (f) the
fees and expenses of qualifying the Shares and ADSs under the securities laws of
the several jurisdictions as provided in Section 6(h) and of preparing, printing
and distributing a Blue Sky Memorandum (including reasonable related fees and
expenses of counsel to the International Managers[, including Canadian
counsel]); [(g) (i) all costs and expenses incident to the preparation of the
"road show" presentation materials and (ii) all costs and expenses incident to
the road show travelling expenses of the Company]; (h) the costs of preparing
ADR certificates evidencing the ADSs; (i) all expenses and fees in connection
with the application for inclusion of the Shares on the AEX and the ADSs on the
Nasdaq National Market System, or the obtaining of any approvals in connection
with the sale of the Shares and ADSs from relevant authorities in The
Netherlands or Belgium; (j) the costs and expenses of depositing any Shares
under the Deposit Agreement against issuance of ADRs evidencing the ADSs; (k)
the fees and expenses (including fees and disbursements of counsel) of the
Depositary and any nominee or custodian appointed under the Deposit Agreement,
other than the fees and expenses to be paid by holders of ADRs (except the
International Managers and the International Managers, in connection with the
initial purchase of the ADSs); (l) the fees and expenses of any Authorized Agent
(as defined in Section 19 hereof); (m) the cost and charges of any transfer
agent or registrar; (n) all stamp or other issuance or transfer taxes or
governmental duties, if any, payable by the International Managers in connection
with the offer and sale of the Shares and ADSs to the International Managers and
by the International Managers to the initial purchasers therefrom; and (o) all
other costs and expenses incident to the performance of the obligations of the
Company under this Agreement not otherwise specifically provided for in this
Section 8, including, without limitation, the fees and expenses of Arthur
Andersen, the Company's independent accountants, KPMG Accountants N.V., the
accountants of Svianed B.V., Shearman & Sterling, U.S. counsel to the Company,
and Stibbe Simont Monahan Duhot, Netherlands counsel to the Company; provided
that, except as provided in this Section 8 and in Section 11, the International
Managers shall pay their own costs and expenses, including the costs and
expenses of their counsel and any transfer taxes on the Shares and ADSs which
they may sell. The Company shall pay the expenses of the Selling Shareholders
hereunder, as provided in each Power of Attorney and Custody Agreement; provided
that in no event shall Cromwilld be liable to the Company for any expenses
incurred in connection with the transactions contemplated by this Agreement and
the U.S. Underwriting Agreement.
9. Conditions of the International Managers' Obligations. The
several obligations of the International Managers hereunder are subject to the
accuracy, when made and on each Delivery Date, of the representations and
warranties of the Company contained herein, to the performance by the Company of
its obligations hereunder, and to each of the following additional terms and
conditions:
(a) The Rule 462(b) Registration Statement, if any,
and the Prospectus shall have been timely filed with the
Commission in accordance with Section 6(a); no stop order
suspending the effectiveness of any of either Registration
Statement or the ADS Registration Statement or any part
thereof
<PAGE> 26
26
shall have been issued and no proceeding for that purpose
shall have been initiated or threatened by the Commission; and
any request of the Commission for inclusion of additional
information in either of the Registration Statements, the ADS
Registration Statement or the Prospectus or otherwise shall
have been complied with.
(b) No U.S. Underwriter or International Underwriter
shall have discovered and disclosed to the Company on or prior
to such Delivery Date that either Registration Statement, the
ADS Registration Statement or the Prospectus or any amendment
or supplement thereto contain any untrue statement of a fact
which, in the opinion of counsel to the International Managers
and the International Managers, is material or omits to state
any fact which, in the opinion of such counsel, is material
and is required to be stated therein or is necessary to make
the statements therein not misleading.
(c) All corporate proceedings and other legal matters
incident to the authorization, form and validity of this
Agreement, the U.S. Underwriting Agreement, the Deposit
Agreement, the Shares, the ADSs and the ADRs and each
Registration Statement, the ADS Registration Statement and the
Prospectus or any amendment or supplement thereto, and all
other legal matters relating to this Agreement, the U.S.
Underwriting Agreement, the Deposit Agreement, the Power of
Attorney and Custody Agreement and the transactions
contemplated hereby and thereby shall be reasonably
satisfactory in all material respects to counsel to the
International Managers and the International Managers, and the
Company and the Selling Shareholders shall have furnished to
such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters.
(d) Shearman & Sterling shall have furnished to the
Representatives its written opinion, as U.S. counsel to the
Company, addressed to the International Managers and the
International Managers and dated such Delivery Date, in form
and substance satisfactory to the Representatives, to the
effect that:
(i) The Primary Registration Statement and
the ADS Registration Statement were declared
effective under the Securities Act as of the date and
time specified in such opinion, the Rule 462(b)
Registration Statement, if any, was filed with the
Commission on the date specified therein, the
Prospectus was filed with the Commission pursuant to
the subparagraph of Rule 424(b) of the Rules and
Regulations specified in such opinion on the date
specified therein and no stop order suspending the
effectiveness of either Registration Statement or the
ADS Registration Statement has been issued and no
proceeding for that purpose is pending or threatened
by the Commission;
(ii) The Registration Statements and the ADS
Registration Statement, as of their respective
Effective Dates, and the Prospectus,
<PAGE> 27
27
as of its date, and any further amendments or
supplements thereto, as of their respective dates,
made by the Company prior to such Delivery Date
(other than the financial statements and other
financial data contained therein, as to which such
counsel need express no opinion) complied as to form
in all material respects with the requirements of the
Securities Act and the Rules and Regulations;
(iii) To the best of such counsel's knowledge,
there are no contracts or other documents which are
required to be described in the Prospectus or filed
as exhibits to the Registration Statements or the ADS
Registration Statement by the Securities Act or by
the Rules and Regulations which have not been
described or filed as exhibits to the Registration
Statements or the ADS Registration Statement or
incorporated therein by reference as permitted by the
Rules and Regulations;
(iv) Assuming due authorization, execution
and delivery by the Company under the laws of The
Netherlands, each of this Agreement and the U.S.
Underwriting Agreement has been duly executed and
delivered by the Company insofar as New York law is
concerned;
(v) Assuming due authorization, execution
and delivery by the Company under the laws of The
Netherlands, the Deposit Agreement has been duly
executed and delivered by the Company insofar as New
York law is concerned and, assuming due
authorization, execution and delivery of the Deposit
Agreement by the Depositary and that each of the
Depositary and (under the laws of The Netherlands)
the Company has full power, authority and legal right
to enter into and perform its obligations thereunder,
constitutes a valid and legally binding agreement of
the Company, except as enforcement thereof may be
limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or similar
laws affecting enforcement of creditors' rights
generally and to general principles of equity
(regardless of whether in a proceeding in equity or
at law);
(vi) Assuming due authorization, execution
and delivery of the Deposit Agreement by the
Depositary, upon due issuance by the Depositary of
the ADRs evidencing ADSs being delivered by the
Company at such Delivery Date against the deposit of
Ordinary Shares to be deposited by the Company in
respect thereof in accordance with the provisions of
the Deposit Agreement, such ADRs will be duly and
validly issued and will entitle the persons in whose
names the ADRs are registered to the rights specified
therein and in the Deposit Agreement;
<PAGE> 28
28
(vii) Assuming the validity of such actions
under the laws of The Netherlands, under the laws of
the State of New York relating to submission to
personal jurisdiction, the Company has, pursuant to
Section 19 of this Agreement, legally, validly and
irrevocably submitted to the personal jurisdiction of
any state or federal court located in the Borough of
Manhattan, The City of New York, New York in any
action arising out of or relating to this Agreement
or the transactions contemplated hereby, and has
legally, validly and effectively appointed the
Authorized Agent as its authorized agent for the
purposes described in Section 19 of this Agreement,
and the Company has validly and irrevocably waived
(A) the defense of an inconvenient forum to the
maintenance of any such suit or proceeding and (B)
any immunity to jurisdiction to which it may
otherwise be entitled in any such suit or proceeding;
(viii) The issue and sale of the Shares and
ADSs being delivered by the Company at such Delivery
Date, the deposit with the Depositary of the Ordinary
Shares to be delivered in the form of ADSs against
the issuance of ADRs evidencing ADSs pursuant to the
Deposit Agreement and the compliance by the Company
with all of the provisions of this Agreement, the
U.S. Underwriting Agreement, the Deposit Agreement
and the Power of Attorney and Custody Agreement and
the consummation by the Company of the transactions
contemplated herein and therein, do not and will not
conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a
default under, (A) any existing applicable law, rule
or regulation of any court or governmental agency or
body of the United States or the State of New York
(other than state securities or Blue Sky laws as to
which we have not been requested to express any
opinion) or (B) any order, known to us, of any
government, governmental instrumentality or court of
the United States or the State of New York having
jurisdiction over the Company or any of their
properties or assets; and, except for the
registration of the Shares and the ADSs under the
Securities Act and such consents, approvals,
authorizations, registrations or qualifications as
may be required under the Exchange Act and applicable
state securities laws in connection with the purchase
and distribution of the Shares and the ADSs by the
International Managers and the International
Managers, no consent, approval, authorization or
order of, or filing or registration with, any such
court, governmental agency or body is required for
the execution, delivery and performance of this
Agreement, the U.S. Underwriting Agreement or the
Deposit Agreement by the Company and the consummation
of the transactions contemplated hereby and thereby;
(ix) The statements set forth in the
Prospectus under the captions "Description of
American Depositary Receipts," insofar as such
statements purport to constitute a summary of the
terms of the
<PAGE> 29
29
Deposit Agreement, the ADSs and the ADRs, fairly
summarize such terms, laws, agreements and other
documents in all material respects;
(x) The statements set forth in the
Prospectus under the caption "Tax Considerations --
U.S. Federal Income Tax Considerations" accurately
summarize, subject to limitations and qualifications
stated therein, the material U.S. federal income tax
consequences to a U.S. Holder of the purchase,
ownership and disposition of Ordinary Shares or ADSs;
(xi) The Company is not and, after giving
effect to the offering and sale of the Shares and
ADSs and the High Yield Offering, will not be an
"investment company" or an entity "controlled" by an
"investment company," as such terms are defined in
the United States Investment Company Act of 1940; and
(xii) The opinion of such counsel delivered
pursuant to Section 6(d) of the High Yield
Underwriting Agreement is confirmed and the
International Managers may rely upon such opinion as
if it were addressed to them.
In rendering such opinion, such counsel may (i) state that
their opinion is limited to matters governed by the federal
laws of the United States of America and the laws of the State
of New York and (ii) rely (to the extent such counsel deems
proper), as to matters involving the application of the laws
of The Netherlands upon the opinion of Stibbe Simont Monahan
Duhot referred to in Section 9(e) below if so specified in its
opinion. Such counsel shall also have furnished to the
Representatives a written statement, addressed to the
International Managers and dated such Delivery Date, in form
and substance satisfactory to the Representatives, to the
effect that (x) such counsel has acted as counsel to the
Company in connection with the preparation of the Registration
Statements and the ADS Registration Statement and (y) based on
the foregoing, no facts have come to the attention of such
counsel which lead it to believe that (I) each Registration
Statement and the ADS Registration Statement, as of their
respective Effective Dates, and the Prospectus, as of its
date, contained any untrue statement of a material fact or
omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein
not misleading or, (II) as of such Delivery Date, that the
Prospectus or International Prospectus contains any untrue
statement of a material fact or, omits to state any material
fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances
under which they were made, not misleading. The foregoing
opinion and statement may be qualified by a statement to the
effect that such counsel does not assume any responsibility
for the accuracy, completeness or fairness of the statements
contained in each Registration Statement, the ADS Registration
Statement or the Prospectus except for the statements made in
the Prospectus under the captions "Description of American
Depositary Shares" and "Tax Considerations -
<PAGE> 30
30
Certain U.S. Federal Income Tax Considerations" insofar as
such statements relate to the provisions of the ADSs, the ADRs
and the Deposit Agreement or concern legal matters.
(e) Stibbe Simont Monahan Duhot shall have furnished
to the Representatives its written opinion, as Netherlands
counsel to the Company, addressed to the International
Managers, the International Managers and the Company and dated
such Delivery Date, in form and substance satisfactory to the
Representatives and the Company, to the effect that:
(i) The Company has been duly incorporated
and is validly existing under the laws of The
Netherlands as a legal entity in the form of a
naamloze vennootschap, is duly qualified to do
business in each jurisdiction in which its ownership
or lease of property or the conduct of its businesses
requires such qualification, and has all power and
authority necessary to own or hold its properties and
to conduct the businesses in which it is engaged;
(ii) Each of the Company's Netherlands
subsidiaries has been duly incorporated and is
validly existing under the laws of The Netherlands,
is duly qualified to do business in each jurisdiction
in which its ownership or lease of property or the
conduct of its businesses requires such
qualification, and has all power and authority
necessary to own or hold its properties and to
conduct the businesses in which it is engaged;
(iii) The Company has an authorized and issued
capitalization as set forth in the Prospectus, and
all of the issued shares of capital stock of the
Company (including the Shares being delivered by the
Company and the Selling Shareholders on such Delivery
Date) have been duly and validly authorized and
issued, are fully paid and non-assessable and conform
to the description thereof contained in the
Prospectus and when the Shares to be sold by the
Company and the Selling Shareholders hereunder and
under the U.S. Underwriting Agreement are delivered,
or in the case of Shares to be deposited pursuant to
the Deposit Agreement, when such Shares are so
deposited, in each case against payment therefor as
provided herein and in the U.S. Underwriting
Agreement, such Shares will be duly and validly
issued, fully paid and non-assessable and the
subscription and deposit of such Shares will not be
subject to any preferential subscription rights or
preemptive rights pursuant to the Articles of
Association, Netherlands law or otherwise; except as
disclosed in the Prospectus, there are no outstanding
securities convertible into or exchangeable for, or
warrants, rights or options to purchase from the
Company or obligations of the Company to issue, any
class of capital stock of, or other form of ownership
interest in, the Company; and all
<PAGE> 31
31
of the issued shares of capital stock of, or other
form of ownership interest in, each subsidiary of the
Company have been duly and validly authorized and
issued and are fully paid, non-assessable and are
wholly owned directly or indirectly by the Company,
free and clear of all liens, encumbrances, equities
or claims;
(iv) There are no restrictions in the
Articles of Association that would prevent the Shares
and ADSs from being offered and sold by the Company
to the International Managers and the International
Managers;
(v) The shareholders register of the Company
does not contain, and, after the issuance of the
Shares and ADSs, will not contain, any registration
of any pledges ("pandrecht") or rights of usufruct
("vruchtgebruik") with respect to any shares of
capital stock of the Company;
(vi) Assuming the due execution by the
Selling Shareholders and the International Managers
of this Agreement, proportional co-ownership of the
Shares and ADSs, within the meaning of the Dutch
Securities Giro Administration and Transfer Act ("Wet
Giraal Effectenverkeer"), will have been acquired by
the International Managers on whose behalf and in
whose name such Shares and ADSs will be held and
administered by an associated institution of NECIGEF,
free and clear of all liens, claims or other
encumbrances;
(vii) The descriptions in the Prospectus of
statutes, legal and governmental proceedings and
contracts and other documents are accurate in all
material respects; the statements in the Prospectus
under the headings "Service of Process and
Enforceability of Civil Liabilities," "Summary -
Regulatory and Competitive Environment," "Risk
Factors - Changes in the Regulatory Environment Could
Affect our Ability to Offer our Products and
Services," "Dividend Policy," "Business Regulation,"
"Business - Intellectual Property," "Management -
Supervisory Board," "Management - Management Board,"
"Management - Executive Compensation," "Description
of Capital Stock," "Management - Stock Option Plans,"
and "Shares Eligible for Future Sale," to the extent
that they constitute summaries of matters of law or
regulation or legal conclusions, have been reviewed
by such counsel and fairly summarize the matters
described therein in all material respects;
(viii) The Company, with respect to each of the
Operative Agreements, has full right, power and
authority to execute and deliver each of the
Operative Agreements and to perform its obligations
thereunder; and all corporate action required to be
taken for the due and proper authorization, execution
and delivery of each of the Operative Agreements and
the consummation of the transactions
<PAGE> 32
32
contemplated thereby have been duly and validly
taken;
(ix) This Agreement and the U.S. Underwriting
Agreement have been duly authorized, executed and
delivered by the Company and, assuming that this
Agreement and the U.S. Underwriting Agreement
constitute valid and legally binding agreements under
the laws of the State of New York, constitute valid
and legally binding agreements of the Company
enforceable against the Company in accordance with
its terms;
(x) Each of the Deposit Agreement and the
Power of Attorney and Custody Agreement has been duly
authorized, executed and delivered by the Company
and, assuming due authorization, execution and
delivery of the Deposit Agreement by the Depositary
and assuming that the Deposit Agreement constitutes a
valid and legally binding agreement under the laws of
the State of New York, constitutes a valid and
legally binding agreement of the Company enforceable
against the Company in accordance with its terms;
(xi) The execution, delivery and performance
of the Operative Agreements by the Company, the
issuance of the Shares and the ADSs by the Company,
the deposit with the Depositary of the Shares to be
delivered in the form of ADSs against the issuance of
ADRs pursuant to the Deposit Agreement, the offer and
sale of Shares and ADRs in the manner contemplated by
this Agreement, the U.S. Underwriting Agreement and
the Prospectus and the compliance by the Company with
all of the provisions of this Agreement, the U.S.
Underwriting Agreement and the Deposit Agreement, and
the consummation of the transactions contemplated
hereby and thereby, will not conflict with or result
in a breach or violation of any of the terms or
provisions of, or constitute a default under, or
result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of
the Company or any of its subsidiaries pursuant to
any material indenture, mortgage, deed of trust, loan
agreement or other material agreement or instrument
to which the Company or its subsidiaries is a party
or by which the Company or any of its subsidiaries is
bound or to which any of the property or assets of
the Company or its subsidiaries is subject, nor will
such actions result in any violation of the
provisions of the articles of association of the
Company or any of its subsidiaries or any statute or
any judgment, order, decree, rule or regulation of
any court or arbitrator or governmental agency or
body having jurisdiction over the Company or any of
its subsidiaries or any of their properties or
assets; and, except for the registration of the
Shares and ADSs under the Securities Act and such
consents, approvals, authorizations, registrations or
qualifications as may be required under the Exchange
Act and
<PAGE> 33
33
applicable foreign or state securities laws in
connection with the purchase and distribution of the
Shares and ADSs by the International Managers, no
consent, approval, authorization or order of, or
filing or registration with, any such court or
arbitrator or governmental agency or body under any
such statute, judgment, order, decree, rule or
regulation is required for the execution, delivery
and performance by the Company of this Agreement, the
U.S. Underwriting Agreement or the Deposit Agreement
by the Company, the listing of the Shares on the AEX
and the consummation of the transactions contemplated
hereby and thereby;
(xii) To the best knowledge of such counsel,
there are no pending actions or suits or judicial,
arbitral, rule-making, administrative or other
proceedings to which the Company or any of its
subsidiaries is a party or of which any property or
assets of the Company or any of its subsidiaries is
the subject which (A) singularly or in the aggregate,
if determined adversely to the Company or any of its
subsidiaries, could reasonably be expected to have a
material adverse effect on the Company and its
subsidiaries or (B) questions the validity or
enforceability of the Operative Agreements or any
action taken or to be taken pursuant thereto; and to
the best knowledge of such counsel, no such
proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(xiii) Neither the Company nor any of its
subsidiaries is (A) in violation of its articles of
association (B) in default in any material respect,
and no event has occurred which, with notice or lapse
of time or both, would constitute such a default, in
the due performance or observance of any term,
covenant or condition contained in any material
indenture, mortgage, deed of trust, loan agreement or
other material agreement or instrument to which they
are a party or by which they are bound or to which
any of their property or assets is subject or (C) in
violation in any material respect of any law,
ordinance, governmental rule, regulation or court
decree to which the Company or any of its
subsidiaries or their property or assets may be
subject;
(xiv) Each of the Operative Agreements, and
any other document required to be furnished hereunder
or thereunder is in proper legal form under
Netherlands law for the enforcement thereof against
the Company without further action on the part of the
International Managers, the International Managers or
the holders of the Shares or ADSs, as the case may
be; and to ensure the legality, validity,
enforceability, priority or admissibility in evidence
in The Netherlands of each of the Operative
Agreements or any other document required to be
furnished hereunder or thereunder, it is not
necessary that the Operative Agreements or any such
document be submitted to, filed or recorded with any
Netherlands court or other authority. All formalities
required in The Netherlands for the validity and
enforceability of the Operative Agreements (including
any necessary registration, recording
<PAGE> 34
34
or filing with any Netherlands court or other
authority) have been accomplished, and no
notarization is required, for the validity and
enforceability thereof;
(xv) The filing of each Registration
Statement and the ADS Registration Statement, the
listing of the Shares on the AEX and the listing of
the ADSs on the Nasdaq National Market System have
been duly authorized by the Company;
(xvi) Any judgment obtained in a United States
federal or state court of competent jurisdiction
sitting in New York City arising out of or in
relation to the obligations of the Company under the
Operative Agreements would be enforced against the
Company in the courts of The Netherlands;
(xvii) The International Managers and
International Managers would be permitted to commence
proceedings against the Company in Netherlands courts
of competent jurisdiction based on the Operative
Agreements (to the extent that they have direct
contractual rights against the Company under such
Operative Agreements which arise as a result of valid
and binding obligations of the Company under such
documents in accordance with the laws of the State of
New York), and (if they accepted jurisdiction) such
Netherlands courts would recognize the choice of law
provisions of the Operative Agreements;
(xviii) The Company can sue and be sued in its
own name; under Netherlands law, the agreement of the
Company that Operative Agreements shall be governed
by the laws of the State of New York will, if it
constitutes a valid and legally binding agreement
under the laws of the State of New York, be
recognized by the courts of The Netherlands;
(xix) Under the laws of The Netherlands, the
Company would in the Courts of The Netherlands not be
entitled to invoke immunity from jurisdiction or
immunity from execution on the grounds of sovereignty
in respect of any action arising out its obligations
under the Operative Agreements;
(xx) The indemnification and contribution
provisions set forth in Section 10 herein do not
contravene the public policy or laws of The
Netherlands;
(xxi) The submission by the Company to the
jurisdiction of the United States federal or New York
state courts sitting in New York City, set forth in
each of the Operative Agreements, constitute valid
and legally binding obligations of the Company, and
service of process effected in the manner set forth
in, the Operative Agreements, assuming validity under
the laws of the State of New York, will be
<PAGE> 35
35
effective, insofar as Netherlands law is concerned;
and
(xxii) The certificates used to evidence the
Shares and ADSs are in due and proper form and comply
with all applicable statutory requirements of
Netherlands law.
(xxiii) The opinion of such counsel delivered
pursuant to Section 6(e) of the High Yield
Underwriting Agreement is confirmed and the
International Managers may rely upon such opinion as
if it were addressed to them.
Such counsel shall also have furnished to the Representatives
a written statement, addressed to the International Managers
and dated such Delivery Date, in form and substance
satisfactory to the Representatives, to the effect that no
facts have come to the attention of such counsel which lead it
to believe that (I) each Registration Statement and the ADS
Registration Statement, as of their respective Effective
Dates, and the Prospectus, as of its date, contained any
untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in
order to make the statements therein not misleading or, (II)
as of such Delivery Date, that the Prospectus or International
Prospectus contains any untrue statement of a material fact
or, omits to state any material fact required to be stated
therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading. In rendering such opinion, such counsel may state
that their opinion is limited to matters governed by
Netherlands law and shall state that each of Shearman &
Sterling and Simpson Thacher & Bartlett may rely upon their
opinion with respect to matters of Netherlands law.
(f) Cains Advocates, Solicitors and Notaries, counsel
for Cromwilld, shall have furnished to the Representatives its
written opinion, as counsel to such Selling Shareholder,
addressed to the International Managers and dated such
Delivery Date, in form and substance satisfactory to the
Representatives, to the effect that:
(i) The Selling Shareholder has full right,
power and authority to enter into this Agreement, the
U.S. Underwriting Agreement and the Power of Attorney
and Custody Agreement and had full power and
authority to enter into the Settlement Agreement; the
execution, delivery and performance of the Settlement
Agreement by the Selling Shareholder did not, the
execution, delivery and performance of this
Agreement, the U.S. Underwriting Agreement and the
Power of Attorney and Custody Agreement by the
Selling Shareholder will not, and the consummation by
the Selling Shareholder of the transactions
contemplated hereby and thereby will not, conflict
with or result in a breach or violation of any of the
terms or provisions of, or constitute a default
under, any statute, any
<PAGE> 36
36
indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument known to such counsel
to which the Selling Shareholder is a party or by
which the Selling Shareholder is bound or to which
any of the property or assets of the Selling
Shareholder is subject, nor will such actions result
in any violation of the provisions of the charter or
by-laws or equivalent constitutive document of the
Selling Shareholder, any statute or any order, rule
or regulation known to such counsel of any court or
governmental agency or body having jurisdiction over
the Selling Shareholder or the property or assets of
the Selling Shareholder; and, except for the
registration of the Shares and ADSs under the
Securities Act and such consents, approvals,
authorizations, registrations or qualifications as
may be required under the Exchange Act and applicable
foreign or state securities laws in connection with
the purchase and distribution of the Shares by the
International Managers, no consent, approval,
authorization or order of, or filing or registration
with, any such court or governmental agency or body
was or is required for the execution, delivery and
performance of this Agreement, the U.S. Underwriting
Agreement, the Power of Attorney and Custody
Agreement and the Settlement Agreement by the Selling
Shareholder and the consummation by the Selling
Shareholder of the transactions contemplated hereby
and thereby;
(ii) This Agreement has been duly authorized,
executed and delivered by the Selling Shareholder;
(iii) The Settlement Agreement has been duly
authorized, executed and delivered by the Selling
Shareholder and constitutes a valid and binding
agreement of the Selling Shareholder;
(iv) The Power of Attorney and Custody
Agreement has been duly authorized, executed and
delivered by the Selling Shareholder and constitutes
a valid and binding agreement of the Selling
Shareholder; and
(v) Upon delivery of the Ordinary Shares of
the Selling Shareholder and payment therefor pursuant
hereto, the International Managers will acquire all
of the rights of the Selling Shareholder in such
Ordinary Shares and will acquire the interest of the
Selling Shareholder in such Shares free and clear of
all liens, encumbrances, equities or claims
whatsoever.
In rendering the opinion in Section 9(f)(v) above, such
counsel may rely upon a certificate of the Selling Shareholder
in respect of matters of fact as to ownership of, and the
absence of adverse claims regarding, the Shares sold by the
Selling Shareholder, provided that such counsel shall furnish
copies thereof to the Representatives and state that it
believes that both the International Managers and it are
justified in relying upon such certificate.
<PAGE> 37
37
The foregoing opinion and statement may be qualified by a
statement to the effect that such counsel does not assume any
responsibility for the accuracy, completeness or fairness of
the statements contained in either Registration Statement, the
ADS Registration Statement or the Prospectus.
(g) Arthur Andersen shall have furnished to the
Representatives written opinion, as special Netherlands tax
counsel to the Company, addressed to the International
Managers and the International Managers and dated such
Delivery Date, in form and substance satisfactory to the
Representatives, to the effect that:
(i) It is not necessary, prior to the
International Managers or the International Managers
seeking enforcement of the Operative Agreements, in
the Netherlands, that any stamp or similar tax be
paid;
(ii) The disclosure in the Prospectus under
the caption "Tax Considerations -- Netherlands Tax
Considerations" accurately summarizes, subject to the
limitations and qualifications stated therein, the
material Netherlands income tax consequences of the
purchase, ownership and disposition of Shares or
ADSs;
(iii) Except as disclosed in the Prospectus,
under current laws and regulations of The Netherlands
and any political subdivision thereof, all dividends
and other distributions on the Shares and ADSs may be
paid by the Company in Dutch Guilders, euros or
another currency that may be converted into foreign
currency that may be freely transferred out of The
Netherlands and, in each case, all such payments made
to holders thereof who are non-residents of The
Netherlands will not be subject to income,
withholding or other taxes under laws and regulations
of The Netherlands or any political subdivision or
taxing authority thereof or therein and will
otherwise be free and clear of any other tax, duty,
withholding or deduction in The Netherlands or any
political subdivision or taxing authority thereof or
therein and without the necessity of obtaining any
governmental authorization in The Netherlands or any
political subdivision or taxing authority thereof or
therein; and
(iv) No stamp or other issuance or transfer
taxes or duties and no capital gains, income
withholding or other taxes are payable in accordance
with Netherlands tax law, by or on behalf of the
International Managers or the International Managers,
to Netherlands taxation authorities or other
Netherlands agencies in connection with the
following:
(a) the issuance of the Shares by the
Company;
(b) the deposit by the Company with the
Depository or its nominee, of the
Shares against
<PAGE> 38
38
the issuance of ADRs evidencing the ADSs
pursuant to the Deposit Agreement;
(c) the delivery of the Shares or ADSs to or for
the respective accounts of the International
Managers and the International Managers in
the manner contemplated herein and in the
U.S. Underwriting Agreement; or
(d) the sale and delivery by the International
Managers and the International Managers of
the Shares and ADSs to the initial
purchasers therefrom.
(h) Nauta Dutilh shall have furnished to the
Representatives its written opinion, as Netherlands counsel to
the International Managers, addressed to the International
Managers and the International Managers and dated such
Delivery Date, in form and substance satisfactory to the
Representatives.
(i) Emmet, Marvin & Martin LLP shall have furnished
to the Representatives its written opinion, as counsel to the
Depositary, addressed to the International Managers and the
International Managers and dated such Delivery Date, in form
and substance satisfactory to the Lead Manager, to the effect
that:
(i) The Deposit Agreement has been duly
authorized, executed and delivered by the Depositary
and constitutes a valid and legally binding
obligation of the Depositary enforceable in
accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to
general equitable principles; provided, however, that
such counsel need express no opinion as to Section
5.08 of the Deposit Agreement; and
(ii) When ADRs have been duly executed and,
if applicable, countersigned, and duly issued and
delivered in accordance with the Deposit Agreement,
the ADSs evidenced by ADRs will be validly issued and
will entitle the registered holders thereof to the
rights specified in the ADRs and the Deposit
Agreement.
In rendering such opinion, such counsel may state that they
express no opinion as to the laws of any jurisdiction other
than U.S. federal and New York State law.
(j) Mark van der Heijden, special regulatory counsel
to the Company, shall have furnished his written opinion to
International Managers and the
<PAGE> 39
39
International Managers and dated such Delivery Date, in form
and substance satisfactory to the Representatives.
(k) With respect to the letter of each of Arthur
Andersen and KPMG Accountants N.V. delivered to the
Representatives and dated the date of the Prospectus referred
to in Section 6(r) (as used in this paragraph, the "initial
letter"), the Company shall have furnished to the
Representatives a letter (as used in this paragraph, the
"bring-down letter") of each such accounting firm, addressed
to the International Managers and the International Managers
and dated such Delivery Date (i) confirming that they are
independent public accountants within the meaning of the
Securities Act and are in compliance with the applicable
requirements relating to the qualification of accountants
under Rule 2-01 of Regulation S-X of the Commission, (ii)
stating, as of the date of the bring-down letter (or, with
respect to matters involving changes or developments since the
respective dates as of which specified financial information
is given in the Prospectus, as of a date not more than five
days prior to the date of the bring-down letter), the
conclusions and findings of such firm with respect to the
financial information and other matters covered by the initial
letter and (iii) confirming in all material respects the
conclusions and findings set forth in the initial letter.
(l) The Company shall have furnished to the
Representatives a certificate, dated such Delivery Date, of R.
Gary Mesch, Managing Director, and Raj Raithatha, Chief
Financial Officer, stating, on behalf of the Company, that:
(i) The representations, warranties and
agreements of the Company in Section 1 are true and
correct as of such Delivery Date; the Company has
complied with all its agreements contained herein;
and
(ii) (A) Neither the Company nor any of its
subsidiaries has sustained since the date of the
latest audited financial statements included in the
Prospectus any loss or interference with its business
from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any
labor dispute or court or governmental action, order
or decree, otherwise than as set forth in the
Prospectus or (B) since such date there shall not
have been any change in the share capital or
long-term debt of the Company or any of its
subsidiaries or any change, or any development
involving a prospective change, in or affecting the
general affairs, management, financial position,
shareholders' equity or results of operations of the
Company and its subsidiaries, otherwise than as set
forth in the Prospectus; and
(iii) They have carefully examined the
Prospectus and, in their opinion (A) the Prospectus,
as of its date, did not include any untrue statement
of a material fact and did not omit to state any
material fact required to be stated therein or
necessary to make the statements
<PAGE> 40
40
therein not misleading, and (B) since such date no
event has occurred which should have been set forth
in a supplement or amendment to the Prospectus so
that the Prospectus, as so amended or supplemented,
would not include any untrue statement of a material
fact and would not omit to state a material fact
required to be stated therein or necessary in order
to make the statements therein, in the light of the
circumstances in which they were made, not
misleading.
(m) The Custodian or one or more attorneys-in-fact on
behalf of the Selling Shareholders shall have furnished to the
Representatives on such Delivery Date a certificate, dated
such Delivery Date, signed by, or on behalf of, the Custodian
or one or more attorneys-in-fact stating that the
representations, warranties and agreements of the Selling
Shareholder contained herein are true and correct as of such
Delivery Date and that the Selling Shareholder has complied
with all agreements contained herein to be performed by the
Selling Shareholder at or prior to such Delivery Date;
provided, that such representations, warranties and agreements
shall not have been changed in any material respect from the
forms thereof attached to the Power if Attorney and Custody
Agreement delivered by such Selling Shareholder.
(n) (i) Neither the Company nor any of its
subsidiaries shall have sustained since the date of the latest
audited financial statements included in the Prospectus any
loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance,
or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth in the Prospectus
or (ii) since such date there shall not have been any change
in the share capital or long-term debt of the Company or any
of its subsidiaries or any change, or any development
involving a prospective change, in or affecting the general
affairs, management, financial position, shareholders' equity
or results of operations of the Company and its subsidiaries,
otherwise than as set forth in the Prospectus, the effect of
which, in any such case described in clause (i) or (ii), is,
in the judgment of the Representatives, so material and
adverse as to make it impracticable or inadvisable to proceed
with the offering of the Shares and ADSs on the terms and in
the manner contemplated in the Prospectus.
(o) Subsequent to the execution and delivery of this
Agreement there shall not have occurred any of the following:
(i) trading in securities generally on the New York Stock
Exchange, Inc., the American Stock Exchange, the Nasdaq
National Market System, the AEX or in the U.S.
over-the-counter market, or trading in any securities of the
Company on any exchange or in the over-the-counter market,
shall have been suspended or minimum prices shall have been
established on any such exchange or such market by the
Commission, by such exchange or by any other regulatory body
or governmental authority having jurisdiction, (ii) any
downgrading in the rating of any debt securities of the
Company by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under
the
<PAGE> 41
41
Securities Act), or any public announcement that any such
organization has under surveillance or review its rating of
any debt securities of the Company (other than an announcement
with positive implications of a possible upgrading, and no
implication of a possible downgrading, of such rating), (iii)
a banking moratorium shall have been declared by U.S. federal
or state authorities in the United States or by authorities in
The Netherlands or by European Union authorities, (iv) the
United States or The Netherlands shall have become engaged in
hostilities or there shall have been a declaration of a
national emergency or war by the United States or The
Netherlands or (v) there shall have occurred such a material
adverse change in general or United States or Netherlands
economic, political or financial conditions or in currency
exchange rates, taxation, exchange controls or foreign
investment regulations (or the effect of international
conditions on the financial markets in the United States or
The Netherlands shall be such) as to make it, in the judgment
of a majority in interest of the several International
Managers, impracticable or inadvisable to proceed with
completion of the offering or sale of and payment for the
Shares and ADSs on the terms and in the manner contemplated in
the Prospectus.
(p) The AEX and the Nasdaq National Market shall have
accepted the Shares and ADSs, respectively, for trading, in
each case subject only to official notice of issuance.
(q) The Ordinary Shares shall have been admitted for
the operations of NECIGEF, Euroclear and Cedel.
(r) The Company and the Depositary shall have
executed and delivered the Deposit Agreement (in form and
substance satisfactory to the Representatives) and the Deposit
Agreement shall be in full force and effect.
(s) The Depositary shall have furnished to the
Representatives a certificate, dated such Delivery Date, of
one of its authorized officers in a form satisfactory to the
Representatives.
(t) The Company shall have furnished to the
Representatives a copy of each Lock-up Letter.
(u) The closing under the U.S. Underwriting Agreement
shall have occurred concurrently with the closing hereunder on
such Delivery Date.
(v) In the case of the First Delivery Date, the
closing of the High Yield Offering shall have occurred
concurrently with the closing hereunder on such Delivery Date.
(w) Each Power of Attorney and Custody Agreement is
in full force and effect on such Delivery Date.
<PAGE> 42
42
(x) The Company shall have furnished to the
Representatives a copy of a letter or letters signed by each
current shareholder of the Company in favor of the AEX with
respect to the obligations relating to the disposition of
Ordinary Shares by such shareholders, in form and substance
satisfactory to the Representatives.
(y) No action shall have been taken and no statute,
rule, regulation or order shall have been enacted, adopted or
issued by any governmental agency or body which would, as of
each Delivery Date, prevent the issuance or sale of the Shares
or ADSs; and no injunction, restraining order or order of any
other nature by any federal or state court of competent
jurisdiction shall have been issued as of each Delivery Date
which would prevent the issuance or sale of the Shares or
ADSs.
(z) The Company shall have furnished to the
Representatives such further information, certificates and
documents as the Representatives may reasonably request.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance satisfactory to
counsel to the Representatives.
10. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each U.S.
Underwriter, its officers and employees and each person, if any, who controls
any U.S. Underwriter 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 (including, but not limited to, any loss, claim, damage, liability or
action relating to purchases and sales of the Shares and ADSs), to which that
U.S. Underwriter, officer, employee 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, either Registration Statement, the ADS Registration Statement or the
Prospectus, or in any amendment or supplement thereto, or (B) 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 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 in any
Preliminary Prospectus, either Registration Statement, the ADS Registration
Statement or the Prospectus, or in any amendment or supplement thereto, or in
any Blue Sky Application any material fact required to be stated therein or
necessary to make the statements therein not misleading, (iii) any act or
failure to act, or any alleged act or failure to act, by any U.S. Underwriter in
connection with, or relating in any manner to, the Shares and ADSs or the
offering 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 and (iv) the Directed Share Program
(provided that the Company shall
<PAGE> 43
43
not be liable in the case of any matter covered by clauses (iii) and (iv) 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 U.S. Underwriter through its gross negligence or wilful misconduct), and
shall reimburse each U.S. Underwriter and each such officer, employee and
controlling person promptly upon demand for any legal or other expenses
reasonably incurred by that U.S. Underwriter, officer, employee 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; 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 any Preliminary Prospectus, either
Registration Statement, the ADS Registration Statement or the 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
through the Representatives by or on behalf of any U.S. Underwriter specifically
for inclusion therein and described in Section 10(f); provided, further, that as
to any Preliminary Prospectus this indemnity agreement shall not inure to the
benefit of any U.S. Underwriter, its officers or employees or any person
controlling that U.S. Underwriter on account of any loss, claim, damage,
liability or action arising from the sale of Shares or ADSs to any person by
that U.S. Underwriter if that U.S. Underwriter failed to send or give a copy of
the Prospectus, as the same may be amended or supplemented, to that person
within the time required by the Securities Act, and the untrue statement or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact in such Preliminary Prospectus was corrected in the
Prospectus, unless such failure resulted from non-compliance by the Company with
Section 6(c). The foregoing indemnity agreement is in addition to any liability
which the Company may otherwise have to any U.S. Underwriter or to any officer,
employee or controlling person of that U.S. Underwriter.
(b) The Selling Shareholders, severally in proportion to the
number of Shares and ADSs to be sold by each of them pursuant to the U.S.
Underwriting Agreement, shall indemnify and hold harmless each U.S. Underwriter,
its officers and employees and each person, if any, who controls any U.S.
Underwriter 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
(including, but not limited to, any loss, claim, damage, liability or action
relating to purchases and sales of Shares and ADSs), to which that U.S.
Underwriter, officer, employee 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, any untrue statement or alleged
untrue statement of a material fact contained in either Registration Statement,
the ADS Registration Statement or the Prospectus, or in any amendment or
supplement thereto, or the omission or alleged omission to state in either
Registration Statement, the ADS Registration Statement or the Prospectus, or in
any amendment or supplement thereto, 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
written information furnished to the Company by or on
<PAGE> 44
44
behalf of the Selling Shareholders specifically for inclusion therein, and shall
reimburse each U.S. Underwriter, its officers and employees and each such
controlling person for any legal or other expenses reasonably incurred by such
U.S. Underwriter, its officers, employees 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.
(c) Each U.S. Underwriter, 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 and the Selling Shareholders, 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 or the
Selling Shareholders 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, either Registration Statement,
the ADS Registration Statement or the Prospectus, or in any amendment or
supplement thereto, or (B) in any Blue Sky Application or (ii) the omission or
alleged omission to state in any Preliminary Prospectus, either Registration
Statement, the ADS Registration Statement or the Prospectus, or in any amendment
or supplement thereto, or in any Blue Sky Application 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 through the
Representatives by or on behalf of that U.S. Underwriter specifically for
inclusion therein and described in Section 10(f), and shall reimburse the
Company and any such director, officer or controlling person and the Selling
Shareholders for any legal or other expenses reasonably incurred by the Company
or any such director, officer or controlling person or Selling Shareholder 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 U.S.
Underwriter may otherwise have to the Company or any such director, officer or
controlling person or the Selling Shareholders.
(d) Promptly after receipt by an indemnified party under this
Section 10 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 10, 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 10 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 10.
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 10 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the
<PAGE> 45
45
defense thereof other 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 Representatives, if the indemnified parties under this Section 10 consist
of any International Managers or any of their respective officers, employees or
controlling persons, 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 or the Selling Shareholders. Each indemnified
party, as a condition of the indemnity agreements contained in Sections 10(a),
10(b) and 10(c), shall use its best 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.
(e) If the indemnification provided for in this Section 10
shall for any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 10(a), 10(b) or 10(c) 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 and the Selling Shareholders on the one hand,
and the International Managers on the other, from the offering of the Shares and
ADSs or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
<PAGE> 46
46
relative benefits referred to in clause (i) above but also the relative fault of
the Company and the Selling Shareholders on the one hand and the International
Managers on the other with respect to the statements or omissions which resulted
in such loss, claim, damage or liability, or action in respect thereof, as well
as any other relevant equitable considerations. The relative benefits received
by the Company and the Selling Shareholders on the one hand and the
International Managers on the other with respect to such offering shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Shares and ADSs purchased under this Agreement (before deducting expenses
but after deducting underwriting discounts and commissions) received by the
Company and the Selling Shareholders, on the one hand, and the total
underwriting discounts and commissions received by the International Managers
with respect to the Shares and ADSs purchased under this Agreement, on the other
hand, bear to the total gross proceeds from the offering of the Shares and ADSs
under this Agreement, in each case as set forth in the table on the cover page
of the Prospectus. 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, the Selling Shareholders or the International Managers, the intent of
the parties and their relative knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company, the Selling
Shareholders and the International Managers agree that it would not be just and
equitable if contributions pursuant to this Section 10(e) were to be determined
by pro rata allocation (even if the International Managers 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
10(e) shall be deemed to include, for purposes of this Section 10(e), 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 10(e), (i) the aggregate liability of the Selling
Shareholders under this subsection (e) and subsections (a) and (b) and Sections
10(a), 10(b) and 10(e) of the U.S. Underwriting Agreement shall in no event
exceed the amount of the net proceeds (before deducting expenses but after
deducting underwriting discounts and commissions) received by the Selling
Shareholders from the sale of Shares and ADSs sold by the Selling Shareholders
hereunder and under the U.S. Underwriting Agreement and (ii) no U.S. Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares and ADSs underwritten by it and distributed to
the public was offered to the public exceeds the amount of any damages which
such U.S. Underwriter 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 Selling
Shareholders shall only be obligated to contribute pursuant to this subsection
(e) if the loss, claim, damage or liability arose from an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of the Selling Shareholders specifically for inclusion therein. The
Selling Shareholders' respective obligations in this subsection (e) to
contribute are several and not joint. The International Managers' obligations to
contribute as provided in this Section 10(e) are several in proportion to their
respective underwriting obligations and not joint.
<PAGE> 47
47
(f) The International Managers severally confirm that the
statements with respect to the offering of the Shares set forth in the last
paragraph on page (i) of, and under the caption "Underwriting" in, the
Prospectus are correct in all material respects and constitute the only
information furnished in writing to the Company by or on behalf of the
International Managers specifically for inclusion in the Registration
Statements, the ADS Registration Statement and the Prospectus.
11. Defaulting International Managers. If, on either Delivery
Date, any U.S. Underwriter defaults in the performance of its obligations under
this Agreement, the remaining non-defaulting International Managers shall be
obligated to purchase the Shares and ADSs which the defaulting U.S. Underwriter
agreed but failed to purchase on such Delivery Date in the respective
proportions which the number of the Firm Shares and ADSs set opposite the name
of each remaining non-defaulting U.S. Underwriter in Schedule I hereto bears to
the total number of the Firm Shares and ADSs set opposite the names of all the
remaining non-defaulting International Managers in Schedule I hereto; provided,
however, that the remaining non-defaulting International Managers shall not be
obligated to purchase any of the Shares and ADSs on such Delivery Date if the
total number of Shares and ADSs which the defaulting U.S. Underwriter or
International Managers agreed but failed to purchase on such date exceeds 9.09%
of the total number of Shares and ADSs to be purchased on such Delivery Date,
and any remaining non-defaulting U.S. Underwriter shall not be obligated to
purchase more than 110% of the number of Shares and ADSs which it agreed to
purchase on such Delivery Date pursuant to the terms of Section 3. If the
foregoing maximums are exceeded, the remaining non-defaulting International
Managers, or those other underwriters satisfactory to the Representatives who so
agree, shall have the right, but shall not be obligated, to purchase, in such
proportion as may be agreed upon among them, all the Shares and ADSs to be
purchased on such Delivery Date. If the remaining International Managers or
other underwriters satisfactory to the Representatives do not elect to purchase
the Shares and ADSs which the defaulting U.S. Underwriter or International
Managers agreed but failed to purchase on such Delivery Date, this Agreement
(or, with respect to the Second Delivery Date, the obligation of the
International Managers to purchase, and the Company to sell, the Option Shares)
shall terminate without liability on the part of any non-defaulting U.S.
Underwriter or the Company or the Selling Shareholders, except that the Company
will continue to be liable for the payment of expenses to the extent set forth
in Sections 8 and 13. As used in this Agreement, the term "U.S. Underwriter"
includes, for all purposes of this Agreement unless the context requires
otherwise, any party not listed in Schedule I hereto who, pursuant to this
Section 11, purchases Firm Shares and ADSs which a defaulting U.S. Underwriter
agreed but failed to purchase.
Nothing contained herein shall relieve a defaulting U.S.
Underwriter of any liability it may have to the Company and the Selling
Shareholders for damages caused by its default. If other underwriters are
obligated or agree to purchase the Shares or ADSs of a defaulting or withdrawing
U.S. Underwriter, either the Representatives or the Company may postpone the
First Delivery Date for up to seven full business days in order to effect any
changes that in the opinion of counsel to the Company or counsel to the
International Managers may be necessary in either Registration Statement, the
ADS Registration Statement, the Prospectus or in any other document or
arrangement.
12. Termination. The obligations of the International Managers
<PAGE> 48
48
hereunder may be terminated by the Representatives by notice given to and
received by the Company and the Selling Shareholders prior to delivery of and
payment for the Firm Shares if, prior to that time, any of the events described
in Sections 9(n) or 9(o) shall have occurred or if the International Managers
shall decline to purchase the Shares for any reason permitted under this
Agreement.
13. Reimbursement of International Managers' Expenses. If (a)
the Company or any Selling Shareholder shall fail to issue the Shares for
delivery to the International Managers for any reason permitted under this
Agreement or (b) the International Managers shall decline to purchase the Shares
or ADSs for any reason permitted under this Agreement (including the termination
of this Agreement pursuant to Section 12), the Company shall reimburse the
International Managers for fees and expenses of their counsels and for such
other out-of-pocket expenses as shall have been incurred by them in connection
with this Agreement and the proposed purchase of the Shares and ADSs, and upon
demand the Company shall pay the full amount thereof to the Representatives.
Notwithstanding the previous sentence, if this Agreement is terminated pursuant
to Section 11 by reason of the default of one or more International Managers,
the Company shall not be obligated to reimburse any defaulting U.S. Underwriter
on account of those expenses.
14. Notices, etc. All statements, requests, notices and
agreements hereunder shall be in writing, and:
(a) if to the International Managers, shall be
delivered or sent by mail, telex or facsimile transmission to
Lehman Brothers Inc., Three World Financial Center, New York,
New York 10285, Attention: Syndicate Department (Fax:
212-528-8822);
With a copy to Simpson Thacher & Bartlett, 99 Bishopsgate,
London, EC2M 3YH, Attention: William R. Dougherty (Fax:
011-44-171-422-4022);
(b) if to the Company, shall be delivered or sent by
mail, telex or facsimile transmission to the address of the
Company set forth in the Prospectus, Attention: Raj Raithatha
(Fax: 31-20-501-1011).
With a copy to Shearman & Sterling, 599 Lexington Avenue, New
York, New York 10022, Attention: John D. Morrison, Jr. (Fax:
212-848-7179)
(c) if to any Selling Shareholder, shall be delivered
or sent by mail, telex or facsimile transmission to the
address of such Shareholder set forth on Schedule II hereto.
With a copy to United States Trust Company of New York, 770
Broadway, 13th Floor, New York, NY 10003, Attention: Corporate
Trust Services (Fax: 212-780-0592)
provided, however, that any notice to a U.S. Underwriter pursuant to Section
10(d) shall be
<PAGE> 49
49
delivered or sent by mail, telex or facsimile transmission to such U.S.
Underwriter at its address set forth in its acceptance telex to the Lead
Manager, which address will be supplied to any other party hereto by the Lead
Manager upon request. Any such statements, requests, notices or agreements shall
take effect at the time of receipt thereof. The Company and the Selling
Shareholders shall be entitled to act and rely upon any request, consent, notice
or agreement given or made on behalf of the International Managers by Lehman
Brothers Inc. and the Company and the Underwriters shall be entitled to act and
rely upon any request, consent, notice or agreement given or made on behalf of
the Selling Shareholders by the Custodian.
15. Persons Entitled to Benefit of Agreement. This Agreement
shall inure to the benefit of and be binding upon the International Managers,
the Company, the Selling Shareholders and their respective successors. This
Agreement and the terms and provisions hereof are for the sole benefit of only
those persons, except that (A) the representations, warranties, indemnities and
agreements of the Company and the Selling Shareholders contained in this
Agreement shall also be deemed to be for the benefit of the officers and
employees of the International Managers and the person or persons, if any, who
control the International Managers within the meaning of Section 15 of the
Securities Act and (B) the indemnity agreement of the International Managers
contained in Section 10 of this Agreement shall be deemed to be for the benefit
of directors, officers and employees of the Company and any person controlling
the Company within the meaning of Section 15 of the Securities Act. Nothing in
this Agreement is intended or shall be construed to give any person, other than
the persons referred to in this Section 15, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision contained
herein.
16. Survival. The respective indemnities, representations,
warranties and agreements of the Company, the Selling Shareholders and the
International Managers contained in this Agreement or made by or on behalf of
them, respectively, pursuant to this Agreement, shall survive the delivery of
and payment for the Shares and ADSs and shall remain in full force and effect
regardless of any investigation made by or on behalf of any of them or any
person controlling any of them.
17. Definition of the Terms "Business Day" and "Subsidiary".
For purposes of this Agreement, (a) the term "business day" means any day on
which the Nasdaq National Market System is open for trading and (b) the term
"subsidiary" has the meaning set forth in Rule 405 of the Rules and Regulations.
18. Governing Law. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAW OF THE STATE OF NEW YORK.
19. Submission to Jurisdiction; Appointment of Agent for
Service; Waiver; Currency Indemnity. (a) To the fullest extent permitted by
applicable law, the Company and each Selling Shareholder irrevocably submit 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 agree that all claims in respect of such suit or proceeding may
be determined in any such court. The Company and each Selling Shareholder, to
the fullest extent permitted by applicable law, irrevocably and fully waive the
defense of an
<PAGE> 50
50
inconvenient forum to the maintenance of such suit or proceeding and hereby
irrevocably designate and appoint CT Corporation System (the "Authorized
Agent"), as their 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 and each Selling Shareholder hereby
irrevocably authorize and direct their Authorized Agent to accept such service.
The Company and each Selling Shareholder further agree that service of process
upon their Authorized Agent and written notice of said service to the Company
mailed by first class mail or delivered to their Authorized Agent shall be
deemed in every respect effective service of process upon the Company or such
Selling Shareholder, as the case may be, 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 and each Selling Shareholder agree 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 or any Selling
Shareholder arising out of or based on this Agreement or the transactions
contemplated hereby may also be instituted by the International Managers, its
officers and employees or any person who controls the International Managers
within the meaning of the Securities Act in any competent court in The
Netherlands, and the Company and the Selling Shareholders expressly accept the
jurisdiction of any such court in any such action.
The Company and the Selling Shareholders hereby irrevocably
waive, to the extent permitted by law, any immunity to jurisdiction to which
they 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.
The provisions of this Section 19(a) are intended to be
effective upon the execution of this Agreement without any further action by the
Company, the Selling Shareholders or the International Managers and the
introduction of a true copy of this Agreement into evidence shall be conclusive
and final evidence as to such matters.
(b) The Company and the Selling Shareholders, as the case may
be, shall indemnify the International Managers against any loss incurred by them
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
International Managers on the date of payment of such judgment or order are able
to purchase U.S. dollars with the amount of the Judgment Currency actually
received by such International Managers. If the U.S. dollars so purchased are
greater than the amount originally due to such International Managers hereunder,
such International Managers agree to pay to the Company and/or the Selling
Shareholders, as the case may be, an amount equal to the excess of the U.S.
dollars so purchased over the amount originally due to such International
Managers hereunder. The International Managers shall indemnify the Company and
the Selling Shareholders, as the case may be, against any loss incurred by them
as a result of any judgment or order being given or made and expressed and paid
in a Judgment Currency other than U.S. dollars and as a result of any variation
as between (i) the rate of
<PAGE> 51
51
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 the Company and the Selling Shareholders, as the
case may be, on the date of payment of such judgment or order are able to
purchase U.S. dollars with the amount of the Judgment Currency actually received
by the Company or such Selling Shareholders. If the U.S. dollars so purchased
are greater than the amount originally due to the Company or the Selling
Shareholders hereunder, the Company and the Selling Shareholders, as the case
may be, agree to pay to the International Managers an amount equal to the excess
of the U.S. dollars so purchased over the amount originally due to the Company
and the Selling Shareholders, as the case may be, hereunder. The foregoing shall
constitute a separate and independent obligation of the Company, the Selling
Shareholders and the International Managers, 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.
20. Counterparts. This Agreement may be executed in one or
more counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
21. Headings. The headings herein are inserted for convenience
of reference only and are not intended to be part of, or to affect the meaning
or interpretation of, this Agreement.
<PAGE> 52
If the foregoing correctly sets forth the agreement among the
Company, the Selling Shareholders and the International Managers, please
indicate your acceptance in the space provided for that purpose below.
Very truly yours,
VersaTel Telecom International N.V.
By:
----------------------------------
Name:
Title:
The Selling Shareholders Named in Schedule II
to This Agreement
By:
----------------------------------
Attorney-in-Fact
Accepted:
Lehman Brothers International (Europe)
For itself and as Lead Manager
of the several International Managers named
on Schedule I hereto
By:
----------------------------------------
Authorized Representative
<PAGE> 53
SCHEDULE I
<TABLE>
<CAPTION>
Number of
International Managers Shares and ADSs
- ---------------------- ---------------
<S> <C>
Lehman Brothers International (Europe)..............................
ING Barings Limited as agent for ING Bank N.V., London Branch.......
Bear, Stearns International Limited.................................
Paribas.............................................................
Hambrecht & Quist LLC...............................................
--------------
Total......................................................
==============
</TABLE>
<PAGE> 54
SCHEDULE II
<TABLE>
<CAPTION>
Selling Shareholders Number of Firm Shares
- -------------------- ---------------------
<S> <C>
Total
</TABLE>
<PAGE> 1
EXHIBIT 23.3
CONSENT OF THE INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to use of our reports
(and to all references to our Firm) included in or made part of this
Registration Statement on Form F-1 for VersaTel Telecom International N.V.
Arthur Andersen
Amsterdam, The Netherlands
July 22, 1999
<PAGE> 1
EXHIBIT 23.4
CONSENT OF THE INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the inclusion of our report dated March 15, 1999, with
respect to the balance sheets of Svianed B.V. as of December 31, 1998 and 1997
and the related statements of operations, shareholder's equity and cash flows
for the years then ended, in the Registration Statement on Form F-1 of VersaTel
Telecom International N.V. and to the reference to our firm under the heading
"Experts" in the prospectus.
KPMG Accountants N.V.
Amsterdam, The Netherlands
July 22, 1999
