<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 22, 1999
REGISTRATION STATEMENT NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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VERSATEL TELECOM INTERNATIONAL N.V.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
THE NETHERLANDS 4813 NONE
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
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<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>
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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
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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 SHARE OR ADS OFFERING PRICE(2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Ordinary Shares par value NLG
0.05 per share(3)............. shares $ $150,000,000 $41,700
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(1) Includes shares which the underwriters have the option to
purchase to cover over-allotments.
(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 will be 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 , 1999
PROSPECTUS
[VERSATEL TELECOM LOGO]
VERSATEL TELECOM INTERNATIONAL N.V.
-- ORDINARY SHARES
IN THE FORM OF SHARES OR AMERICAN DEPOSITARY SHARES
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THIS IS AN INITIAL GLOBAL PUBLIC OFFERING BY VERSATEL TELECOM INTERNATIONAL N.V.
AND A NUMBER OF SELLING SHAREHOLDERS OF ORDINARY SHARES IN THE FORM OF
SHARES OR AMERICAN DEPOSITARY SHARES. EACH ADS REPRESENTS ONE ORDINARY SHARE.
THIS OFFERING IS BEING MADE CONCURRENTLY WITH AN OFFERING BY VERSATEL OF
$ OF ITS SENIOR DOLLAR NOTES DUE 2009 AND E OF ITS 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. WE ANTICIPATE THE INITIAL
PUBLIC OFFERING PRICE PER SHARE WILL BE BETWEEN E AND E , AND PER ADS
WILL BE BETWEEN $ AND $ .
AS PART OF THIS OFFERING, WE WILL OFFER A NUMBER OF OUR EMPLOYEES THE RIGHT TO
BUY SHARES OR ADSS AT A 15% DISCOUNT TO THE PUBLIC OFFERING PRICE.
THE ADSs WILL BE LISTED ON THE NASDAQ STOCK MARKET'S NATIONAL MARKET UNDER THE
SYMBOL "VRSA" AND ON THE AMSTERDAM STOCK EXCHANGE UNDER THE SYMBOL "VRSA".
INVESTING IN THE SHARES AND ADSs INVOLVES RISKS. "RISK FACTORS" BEGINS ON PAGE
11.
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<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
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.
Co-Managers
HAMBRECHT & QUIST PARIBAS
E-Manager
E*TRADE
, 1999
<PAGE> 3
[ARTWORK]
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary............................. 1
Risk Factors........................ 11
Disclosure Regarding Forward-Looking
Statements........................ 24
Use of Proceeds..................... 25
Dividend Policy..................... 26
Capitalization...................... 27
Dilution............................ 29
Exchange Rate Information........... 30
Unaudited Pro Forma Consolidated
Financial Information............. 33
Selected Financial Data for
VersaTel.......................... 39
Selected Financial Data for
Svianed........................... 41
Management's Discussion and Analysis
of Financial Condition and Results
of Operations..................... 43
Business............................ 59
Svianed........................... 72
Management.......................... 81
Principal Shareholders.............. 88
Selling Shareholders................ 89
Material Relationships and Related
Transactions...................... 90
Description of Capital Stock........ 91
Description of American Depositary
Receipts.......................... 94
Description of Material
Indebtedness...................... 101
Shares Eligible for Future Sale..... 105
Tax Considerations.................. 107
Underwriting........................ 116
Legal Matters....................... 120
Experts............................. 120
Where You Can Find More
Information....................... 120
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 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.
Until , 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
, 1999.
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.
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<PAGE> 5
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 June 11,
1999, the Noon Buying Rate was $1.05 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 June 11, 1999, the exchange rate
of Dutch guilders to U.S. dollars (based on the Noon Buying Rate for euro) was
NLG 2.10 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 June 11, 1999 the exchange rate of Belgian francs to
U.S. dollars (based on the Noon Buying Rate for euro) was BEF 38.36 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."
-------------------------
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER RSA 421-B WITH THE STATE OF NEW HAMPSHIRE NOR THE
FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE
STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY
DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY
SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A
SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY
WAY UPON THE MERITS OR QUALIFICATION OF, OR RECOMMENDED OR GIVEN APPROVAL TO,
ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE OR CAUSE TO BE MADE
TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT
WITH THE PROVISIONS OF THIS PARAGRAPH.
-------------------------
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
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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.
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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
scheduled to occur simultaneously with closing of this offering. See "Material
Relationships and Related Transactions" and "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.
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.
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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.
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<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 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 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.
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<PAGE> 11
SHAREHOLDERS' AGREEMENT
Our current shareholders are bound by a shareholders' agreement which
prohibits the issuance of additional shares unless the holders agree to be bound
by the shareholders' agreement. The shareholders' agreement, according to its
terms, will terminate on the effective listing by the parties thereto of our
entire share capital on any stock exchange. VersaTel's share capital will be
listed on the Amsterdam Stock Exchange simultaneously with this offering. One of
our shareholders has objected to the interpretation that the shareholders'
agreement will terminate upon such listing, and we can give no assurance that
such shareholder will not challenge this interpretation.
5
<PAGE> 12
THE OFFERING
<TABLE>
<S> <C>
Shares offered by VersaTel......................... Shares(1)
Shares offered by the Selling Shareholders......... Shares(1)(2)
Shares outstanding after the offering.............. Shares(3)
</TABLE>
ADSs............................... Each ADS represents one Share.
Public Offering Price.............. Estimated to be between E and E per
Share and between $ and $ per
ADS.
Use of Proceeds.................... The net proceeds of this offering (after
deducting underwriting discounts and
estimated expenses) are estimated to be
E million from the offering of the
Shares and $ million from the
offering of the ADSs. 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 net proceeds of
approximately $ million and E
million from our concurrent offering of
Senior Dollar Notes and Senior Euro
Notes, a portion of which we intend to
use to repay an aggregate of $150.0
million 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
conditional 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".
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) None of the Shares or ADSs being sold by the selling shareholders represent
ordinary shares issued and outstanding as of the date of this prospectus.
All such ordinary shares will be issued at the time of the closing of this
offering upon exercise by such selling shareholders of outstanding warrants
pursuant to certain registration rights granted to such selling
shareholders. The warrants 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.
(3) Based on 38,854,810 (as adjusted) ordinary shares outstanding as of May 31,
1999 and assumes no exercise of the over-allotment option by the
underwriters. Does not include an aggregate of (i) 7,500,000 ordinary shares
reserved for issuance under the Company's 1998 stock option plan and 1999
stock option plan, (ii) 5,000,100 ordinary shares reserved for issuance upon
exercise of then outstanding warrants and (iii) 685,000 ordinary shares
approved for issuance by our shareholders in connection with the
acquisitions of CS Net, SpeedPort and ITinera. See "Description of Capital
Stock -- Warrants" and "Management -- Stock Option Plans."
6
<PAGE> 13
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 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 -- Results of Operations" and the
Unaudited Pro Forma Financial Statements 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.............. 49,895 24,458 14,206 6,964
---------- ---------- --------- ---------
Total operating expenses................... 168,217 82,459 57,232 28,055
---------- ---------- --------- ---------
Loss from operations......................... (71,973) (35,281) (26,152) (12,820)
Net Interest expense......................... 65,540 32,127 27,809 13,632
Currency loss (gain)......................... (5,146) (2,522) 40,283 19,747
---------- ---------- --------- ---------
Net loss before income taxes................. (132,367) (64,886) (94,244) (46,199)
Provision for income taxes................... 3,092 1,516 921 451
---------- ---------- --------- ---------
Net loss..................................... (135,459) (66,402) (95,165) (46,650)
========== ========== ========= =========
Net loss per share (basic and diluted)(2).... (4.15) (2.04) (2.44) (1.20)
Weighted average number of shares
outstanding(2)............................. 32,622 32,622 38,985 38,985
FINANCIAL DATA:
EBITDA(3).................................... (22,078) (10,823) (11,946) (5,856)
Capital expenditures......................... 90,511 44,368 55,972 27,437
</TABLE>
7
<PAGE> 14
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
----------------------
NLG $(1)
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and restricted cash.................................... 564,684 276,806
Working capital (excluding cash and restricted cash)........ (93,832) (45,996)
Capitalized finance cost.................................... 28,000 13,725
Property, plant and equipment, net.......................... 62,193 30,487
Construction in progress.................................... 92,205 45,199
Goodwill.................................................... 348,625 170,895
Total assets................................................ 1,142,888 560,239
Total long-term obligations (including current portion)..... 1,117,059 547,578
Total shareholders' equity (deficit)........................ (112,455) (55,125)
</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) As adjusted to give effect to a 2-for-1 stock split on April 13, 1999.
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.
8
<PAGE> 15
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>
9
<PAGE> 16
<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 8,492 688,796 337,645 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) As adjusted to give effect to a 2-for-1 stock split on April 13, 1999.
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.
10
<PAGE> 17
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 $ in aggregate principal amount of Senior Dollar
Notes due 2009 and E in aggregate principal amount of Senior Euro Notes
due 2009 (the "Third High Yield Offering"), a portion of which will be used to
refinance the Interim Loans. As of 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 such date, VersaTel's total 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 "Notes") do not limit the amount of indebtedness that we may
incur to finance the cost of the
11
<PAGE> 18
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.
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.
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,
12
<PAGE> 19
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. 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. 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.
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, 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
13
<PAGE> 20
- 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. 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 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.
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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 came 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 affect 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 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.
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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 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, Mark 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.
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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.
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.
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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. 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
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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.
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.
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OBJECTIONS TO CORPORATE ACTIONS BY A SHAREHOLDER MAY RESULT IN OUR ACTIONS BEING
BLOCKED AND THE DISTRACTION OF THE ATTENTION OF OUR MANAGEMENT.
Upon completion of this offering, Cromwilld Limited will own % of our
outstanding ordinary shares, on a fully diluted basis. Cromwilld is controlled
by Denis O'Brien, a member of our supervisory board. Cromwilld objected to the
First High Yield Offering and the Second High Yield Offering and threatened to
challenge our actions in court. 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.
However, we are not certain whether or not Cromwilld will attempt to frustrate,
block or challenge our future actions.
Our current shareholders are bound by a shareholders' agreement which
prohibits the issuance of additional shares unless the holders thereof agree to
be bound by the terms of such shareholders' agreement. According to its terms,
the shareholders' agreement will terminate on the effective listing, by the
parties thereto, of our entire share capital on any stock exchange. VersaTel's
share capital will be listed on the Amsterdam Stock Exchange simultaneously with
the closing of this offering. We have been advised by our Netherlands counsel
that in its opinion a Netherlands court (if presented with the issue) should
conclude that the shareholders' agreement will be effectively terminated, and
the reclassification of the ordinary shares into a single class will become
effective, simultaneously with the closing of this offering. However, we can
give no assurance that Cromwilld will not challenge that interpretation or
otherwise challenge the validity of this offering or the Third High Yield
Offering either before or after the closing of either offering or that a
competent court of law will not support Cromwilld's challenges. Any such
challenge would divert the attention of our management and other corporate
resources and, in particular, if a challenge is successful, could have a
material adverse effect on the company and the market price of the Shares and
ADSs.
WE ARE CONTROLLED BY PARTIES WHOSE INTEREST MAY NOT BE ALIGNED WITH YOURS.
You should also be aware that 5 shareholders currently own 79.5% of our
shares. Upon completion of this offering, these shareholders will own % of
our shares. Collectively, these shareholders have the power to exercise voting
and management control, and their interests may be different from the interests
of our other shareholders.
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
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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. 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.
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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 for, 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.
SHARES ELIGIBLE FOR PUBLIC SALE AFTER THIS OFFERING COULD ADVERSELY AFFECT OUR
STOCK PRICE.
After this offering there will be outstanding ordinary
shares, including ordinary shares represented by the ADSs. There will be
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. The remaining shares that are not sold in this
offering will be "restricted securities," subject to the applicable volume
limitations and other conditions of Rule 144 under the Securities Act.
Our directors, executive officers, and some of our current 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, in aggregate, at an exercise price of NLG 2.55 per share, which
were issued pursuant to the First High Yield Offering and the Second High Yield
Offering. All warrants become exercisable upon completion of this offering and
we expect that, concurrently with the closing of this offering, the holders of
approximately warrants will exercise their warrants and,
immediately thereafter, sell ADSs issued upon exercise of such
warrants. 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 remaining
ordinary shares issued upon exercise of warrants within 180 days after the
closing of this offering. However, 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.
In addition, as of the date of this prospectus, there were outstanding
options to purchase 7,348,000 depositary receipts issued for ordinary shares,
none of which were fully vested and exercisable. An additional 550,000 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 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.
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.
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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.
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 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. 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 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
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.
23
<PAGE> 30
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties, and assumptions about us, including, among other things:
- our anticipated expansion plans for our network and growth strategies,
- our expectation of the impact of this expansion on our revenue potential,
cost basis and margins,
- our expectation of the competitiveness of our services,
- 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.
24
<PAGE> 31
USE OF PROCEEDS
We estimate that the net proceeds to us from (i) the sale of the
ordinary shares (in the form of Shares or ADSs) offered hereby will be
approximately $ million (NLG million) ($ million (NLG
million) if the underwriters' over-allotment option is exercised in
full), at an assumed initial public offering price of $ per ADS or E per
Share (the midpoint of the estimated range specified on the cover page of this
prospectus) and after deducting the underwriting discounts and commissions and
estimated offering expenses payable by us and (ii) the sale of the Dollar Notes
and Euro Notes in connection with the Third High Yield Offering will be
approximately $ million and E million, respectively, after deducting
underwriting discounts and estimated offering expenses. The total net proceeds
of the Third High Yield Offering, after deducting underwriting discounts and
estimated offering expenses, will be approximately $ million
(NLG million).
Of the aggregate net proceeds of $ million (NLG million) from this
offering and the Third High Yield Offering, we expect to use:
- $150.0 million (NLG 306.0 million) to repay $131.25 million and
$18.75 million in Interim Loans made by Lehman Commercial Paper Inc.
and ING (U.S.) Capital, LLC, respectively, affiliates of Lehman
Brothers Inc., Lehman Brothers International (Europe) and ING
Barings Limited, each an underwriter or an affiliate of an
underwriter in this offering and the Third High Yield Offering;
- approximately $ million (NLG million) to fund capital
expenditures for expansion of our network, including approximately
$ million (NLG million) for , approximately
$ million (NLG million) for and approximately
$ million (NLG million) for ; 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 only be used to repay
the Interim Loans and for expansion of the 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 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 to be received upon completion of this offering.
Accordingly, our management will have broad discretion in the application of the
net proceeds.
We will not receive any of the proceeds from the Shares or ADSs being sold
by the selling shareholders.
25
<PAGE> 32
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."
26
<PAGE> 33
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)
ordinary shares in the form of the Shares or ADSs (at an assumed
initial public offering price of $ per ADS or E per Share, the
midpoint of the estimated range specified on the cover page of this prospectus)
and (ii) the Third Notes offered in the Third High Yield Offering. You should
read this capitalization table together with the "Selected Financial Data for
VersaTel," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the 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).................. 559,366 274,199 964,581 472,834
======== ======= ========= =======
Current maturities of long-term debt......... 71 35 71 35
Long-term debt (less current portion):
13 1/4% Senior Notes due 2008(3)(4)........ 455,773 223,418 455,773 223,418
13 1/4% Senior Notes due 2008(3)(5)........ 292,072 143,172 292,072 143,172
% Senior Dollar Notes due 2009
(3)(6).................................. -- -- 510,000 250,000
% Senior Euro Notes due 2009(6)(7).... -- --
Other debt................................. 693 340 693 340
-------- ------- --------- -------
Total debt.............................. 748,609 366,965 1,258,609 616,965
-------- ------- --------- -------
Shareholders' equity:
Ordinary shares, par value NLG 0.05 per
share -- 150,000,000 shares authorized,
and 38,984,810 shares issued and
outstanding;
shares authorized and
shares issued and outstanding,
as adjusted(8)(9)....................... 1,949 955 1,949 955
Additional paid-in capital................. 51,112 25,055 328,552 161,055
Warrants(4)(5)(10)......................... 5,212 2,555 5,212 2,555
Accumulated deficit........................ (170,728) (83,690) (170,728) (83,690)
-------- ------- --------- -------
Total shareholders' equity (deficit).... (112,455) (55,125) 164,985 80,875
-------- ------- --------- -------
Total capitalization.................... 636,154 311,840 1,423,596 697,840
======== ======= ========= =======
</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) Cash and Restricted Cash reflects (i) the receipt of the estimated net cash
proceeds received from this offering of $136.0 million (NLG 277.4 million),
(ii) the receipt of the estimated net cash proceeds received from the Third
High Yield Offering of $238.1 million (NLG 485.7 million) and (iii) the
application of such proceeds as described in "Use of Proceeds."
(3) The U.S. dollar indebtedness for each series of 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.
(4) 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.
(5) 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.
27
<PAGE> 34
(6) For the purposes of this table, the total estimated net proceeds from the
Third High Yield Offering of $250,000,000 have been allocated to the Senior
Dollar Notes.
(7) The euro indebtedness of the Senior Euro Notes has been translated into
Dutch guilders at E1.00 per NLG 2.20371.
(8) Shares issued and outstanding includes 130,000 ordinary shares that we are
obligated to issue, and which have been approved for issuance by our
shareholders, in connection with the acquisition of CS Net.
(9) For purposes of this table, the number of ordinary shares issued and
outstanding, as adjusted, has not been adjusted for the number of Shares
and ADSs issued in this offering.
(10) Assumes no Shares or ADSs are sold by the selling shareholders in this
offering.
28
<PAGE> 35
DILUTION
As of March 31, 1999, our net tangible book value was NLG million
($ million), or NLG ($ ) 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,
on a pro forma basis giving effect to the sale of the ordinary
shares (in the form of Shares or ADSs) offered in this offering and the
application of the net proceeds from such sale of NLG million
($ million) (based on assumed initial public offering prices of E
per Share and $ per ADS, the midpoint of the estimated public offering price
range specified on the cover page of this prospectus, and 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 tables illustrate this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per Share............. NLG
Pro forma net tangible book value per Share as of March
31, 1999(1)............................................ NLG
Increase per Share attributable to new investors.......... NLG
Net tangible book value per Share after the offering........ NLG
Dilution per Share to new investors......................... NLG
=========
Assumed initial public offering price per ADS............... $
Pro forma net tangible book value per ADS as of March 31,
1999(1)................................................ $
Increase per ADS attributable to new investors............ $
Net tangible book value per ADS after the offering.......... $
Dilution per ADS to new investors........................... $
=========
</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 or ADSs purchased from us (based on assumed
initial public offering prices of E per Share and $ per ADS, the
midpoint of the public offering price range specified on the cover page of this
prospectus):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------- -------------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------- ------- ---------------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Existing shareholders........ % NLG $ % NLG $
New investors................
Total................... 100% NLG $ 100% NLG $
======= ===== ====== ======= ===== ====== ======
</TABLE>
- ---------------
(1) Does not give effect to the Third High Yield Offering.
29
<PAGE> 36
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 June 11)............................ 2.14 1.87 2.05 2.10
</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 June 11).......................... 39.18 34.15 37.47 38.36
</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.
30
<PAGE> 37
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 (through June 11)............. 1.08 1.03 1.05 1.05
</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.
31
<PAGE> 38
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.
32
<PAGE> 39
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 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
the "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
33
<PAGE> 40
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) (58,574)(3) (96,531) (47,319)
Interest expense -- related
parties.................... (145) -- (145) (71)
---------- ------ ---------- ----------
Total other income
(expense).................. (20,664) (350) (79,588) (39,014)
---------- ------ ---------- ----------
Net result before income
taxes......................... (67,130) 8,814 (152,009) (74,515)
PROVISION FOR INCOME TAXES...... 7 3,085 (3,085)(4) 7 3
---------- ------ ---------- ----------
Net result................. (67,137) 5,729 (152,016) (74,518)
========== ====== ========== ==========
NET RESULT PER SHARE (Basic and
Diluted)(5)(6)................ (2.06) (4.66) (2.28)
Weighted average number of
shares outstanding(5)(6)...... 32,622,194 32,622,194 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
Ratio of earnings to fixed
charges(8).................... -- 26.2 -- --
Deficiency of earnings plus
fixed charges to cover fixed
charges(9).................... (41,320) -- (67,275) (32,979)
</TABLE>
34
<PAGE> 41
- -------------------------
(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 periods of goodwill. Goodwill
records 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 the Company's advisers
and preliminary analysis of available financial and non-financial data, of
the fair values of such assets.
<TABLE>
<CAPTION>
NLG
'000
--------
<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. Recorded
goodwill will be adjusted by management to reflect the change in net assets
and liabilities that may arise for example, as a result of normal trading)
between January 1, 1998 and the acquisition of Svianed. Goodwill is
amortized over a period of 10 years.
(3) Interest expense reflects (i) NLG 56.1 million of interest expense relating
to the Third High Yield Offering (calculated using an assumed interest rate
of 11.0% per annum) and (ii) NLG 2.5 million of amortization expenses
relating to amortization of the 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 file a consolidated
tax return for the year ended December 31, 1998.
(5) As adjusted to give effect to a 2-for-1 stock split on April 13, 1999.
Includes 130,000 ordinary shares approved for issuance by our shareholders
in connection with the acquisition of CS Net.
(6) For purposes of this table, net result per share and weighted average of
shares outstanding have not been adjusted to reflect the additional Shares
and ADSs to be issued in the equity offering.
(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.
(8) The ratio of earnings to fixed charges is calculated by dividing (i) income
(loss) from continuing operations before income taxes plus fixed charges by
(ii) fixed charges. Fixed charges consist of interest expense.
(9) The deficiency of earnings plus fixed charges to cover fixed charges is
calculated by adding (i) income (loss) from continuing operations before
income taxes plus (ii) fixed charges. Fixed charges consist of interest
expense.
35
<PAGE> 42
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) (138) (14,643)(3) (38,676) (18,959)
Interest expense -- related
parties..................... -- -- -- --
---------- ------ ---------- ----------
Total other income
(expenses)................ (58,135) (112) (72,890) (35,731)
---------- ------ ---------- ----------
Net result before income taxes... (78,382) 2,633 (99,153) (48,605)
PROVISION FOR INCOME TAXES....... -- 921 (921)(4) -- --
---------- ------ ---------- ----------
Net result.................. (78,382) 1,712 (99,153) (48,605)
========== ====== ========== ==========
NET LOSS PER SHARE (Basic and
Diluted)(5)(6).............. (2.01) (2.54) (1.25)
Weighted average number of
shares outstanding(5)(6).... 38,984,810 38,984,810 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
Ratio of earnings to fixed
charges(8).................. -- 24.5 -- --
Deficiency of earnings plus
fixed charges to cover fixed
charges(9).................. (60,530) -- (66,546) (32,621)
</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.
36
<PAGE> 43
(2) Reflects the amortization, on a current basis, of goodwill. Goodwill records
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 the Company's advisers and
preliminary analysis of available financial and non-financial data, of the
fair values of such assets.
<TABLE>
<CAPTION>
NLG '000
--------
<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. Recorded
goodwill will be adjusted by management to reflect the change in net assets
and liabilities that may arise (for example, as a result of normal trading)
between January 1, 1999 and the acquisition of Svianed Goodwill is amortized
over a period of 10 years.
(3) Interest expense reflects (i) NLG 14.0 million of interest expense relating
to the Third High Yield Offering (calculated using an assumed interest rate
of 11.0% per annum) and (ii) NLG 0.6 million of amortization expense
relating to amortization of the 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 file a consolidated
tax return for the year ended December 31, 1999.
(5) As adjusted to give effect to a 2-for-1 stock split on April 13, 1999.
Includes 130,000 ordinary shares approved for issuance by our shareholders
in connection with the acquisition of CS Net.
(6) For purposes of this table, net result per share and weighted average of
shares outstanding have not been adjusted to reflect the additional Shares
and ADSs to be issued in the equity offering.
(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.
(8) The ratio of earnings to fixed charges is calculated by dividing (i) income
(loss) from continuing operations before income taxes plus fixed charges by
(ii) fixed charges. Fixed charges consist of interest expense.
(9) The deficiency of earnings plus fixed charges to cover fixed charges is
calculated by adding (i) income (loss) from continuing operations before
income taxes plus (ii) fixed charges. Fixed charges consist of interest
expense.
37
<PAGE> 44
VERSATEL TELECOM INTERNATIONAL N.V.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
AS OF 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>
ASSETS
Current Assets:
Cash and cash equivalents......................... 329,551 5,318 400,230(2) 735,099 360,343
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 20,909 876,323 429,570
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 1,572,328 770,749
======== ====== ========= ========
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.......................................... 510,000(5) 510,000 250,000
Long Term Debt (13 1/4% Senior Notes)............... 747,845 -- 747,845 366,591
Long Term Debt less of current portion.............. -- 7,500 7,500 3,676
Pension obligation.................................. -- 450 450 221
Shareholders' Equity:
Share capital....................................... 1,949 5,000 (5,000)(6) 1,949 955
Additional paid-in capital.......................... 51,112 -- 277,440 328,552 161,055
Warrants............................................ 5,212 -- 5,212 2,555
Retained earnings (accumulated deficit)............. (170,728) 8,729 (8,729)(6) (170,728) (83,690)
-------- ------ --------- --------
Total shareholders' equity..................... (112,455) 13,729 164,985 80,875
-------- ------ --------- --------
Total liabilities and shareholders' equity... 757,123 41,494 1,572,328 770,749
======== ====== ========= ========
</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) Reflects (i) the net proceeds received from the equity offering of NLG 277.4
million, (ii) the proceeds of the Third High Yield Offering of NLG 510.0
million net of capitalized finance costs of NLG 24.7 million, and (iii) the
acquisition cost of Svianed of 362.5 million. Amounts paid in dollars have
been translated into Dutch guilders at the rate of $1.00 = NLG 2.04.
(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) Reflects the amortization, over the current period, of goodwill. Goodwill
records 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
38
<PAGE> 45
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 the Company's advisers
and preliminary analysis of available financial and non-financial data, of
the fair values of such assets.
<TABLE>
<CAPTION>
NLG '000
<S> <C>
Total purchase price (including NLG of acquisition costs)... (362,475)
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. Recorded
goodwill will be adjusted by management to reflect the change in net assets
and liabilities that may arise, for example, as a result of normal trading)
between March 31, 1999 and the acquisition of Svianed.
(5) Reflects $250,000 aggregate principal amount of Senior Dollar Notes and
Senior Euro Notes to be issued in the Third High Yield Offering.
(6) To eliminate the shareholders' equity of Svianed.
39
<PAGE> 46
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 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) (2,523) 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 8,491 688,796 337,645 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>
40
<PAGE> 47
VersaTel TELECOM INTERNATIONAL N.V.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
AS OF 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>
ASSETS
Current Assets:
Cash and cash equivalents.................. 329,551 5,318 400,230(1) 735,099 360,343
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 20,909 476,093 233,379
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(2) 52,735 25,850
Goodwill..................................... 4,354 -- 348,746(3) 353,100 173,089
Deferred tax assets.......................... -- 158 158 77
-------- ------- --------- --------
Total assets............................ 757,123 41,494 1,572,328 770,749
======== ======= ========= ========
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
Long Term Debt (11% Senior Notes)............ 510,000(4) 510,000 250,000
Long Term Debt (13 1/4% Senior Notes)........ 747,845 -- 747,845 366,591
Long Term Debt less of current portion....... -- 7,500 7,500 3,676
Pension obligation........................... -- 450 450 221
Shareholders' Equity:
Share capital................................ 1,949 5,000 (5,000) 1,949 955
Additional paid-in capital................... 51,112 -- 277,440 328,522 161,055
Warrants..................................... 5,212 -- 5,212 2,555
Retained earnings (accumulated deficit)...... (170,728) 8,729 (8,729) (170,728) (83,690)
-------- ------- --------- --------
Total shareholders' equity.............. (112,455) 13,729 (164,985) 80,875
-------- ------- --------- --------
Total liabilities and shareholders'
equity............................. 757,123 41,494 1,572,328 770,749
======== ======= ========= ========
</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) The computation of the goodwill in relation to the Svianed acquisition has
been recorded as if the acquisition of Svianed by VersaTel took place
effective March 31, 1999. The goodwill is amortized (on a pro forma basis)
over a period of 10 years.
(3) It is assumed that financing of NLG 358.0 million was obtained in connection
with the acquisition of Svianed effective March 31, 1999.
41
<PAGE> 48
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 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) (2,523) 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 8,491 688,796 337,645 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>
42
<PAGE> 49
<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 two-for-one 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 a
VersaTel switch and for which we bill a customer.
43
<PAGE> 50
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 independent public accountants. The selected financial data
for Svianed 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 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
Currency loss (gain)................................. -- -- -- -- -- --
------- ------- ------- ------- ------- -------
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
(IN THOUSANDS) $(1)
<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)
Capitalized finance cost............................. -- -- -- -- -- --
Property, plant and equipment, net................... 14,648 19,153 9,389 17,442 20,427 10,013
Construction in progress............................. -- -- -- -- -- --
Goodwill............................................. -- -- -- -- -- --
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>
44
<PAGE> 51
<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.
45
<PAGE> 52
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, 1998, 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> 53
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 as of 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
47
<PAGE> 54
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
48
<PAGE> 55
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.
49
<PAGE> 56
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."
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 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.
50
<PAGE> 57
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.
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,
51
<PAGE> 58
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 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.
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<PAGE> 59
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 2.9 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 fiscal year ended March 31, 1999 from NLG 2.4 million
for the fiscal year 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 three months ended March 31, 1999 from NLG 1.9 million for
the three 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 three months
ended March 31, 1999 from NLG 16,000 for the three 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 three
months ended March 31, 1999 from NLG 104,000 for the three months ended March
31, 1998. This increase was primarily due to the increase of an outstanding
loan.
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 Barings Limited, an
affiliate of ING Barings Limited. A portion of 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 358 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 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 may seek to raise senior secured debt financing in the future to fund
the expansion of its network and for general corporate purposes.
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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 operating losses
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 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
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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.
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
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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
VersaTel intends to conduct a full operational test of its entire business
by the end of the second quarter of 1999, when VersaTel expects that all of its
systems and processes will be Year 2000 compliant. VersaTel's services and
products are primarily provided to business customers who operate Monday through
Friday and therefore it plans to conduct this test during a weekend. Certain
customers have approved this plan and have agreed to participate in the test.
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.
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
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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. 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 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 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>
UNITED STATES 22700
- ------------- -----
<S> <C>
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>
- - Amersfoot - 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:
LOGO
<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 intend to apply for such licenses
and registrations in Luxembourg in the 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.
However, we are not certain whether or not Cromwilld will attempt to frustrate,
block or challenge our future actions. See "Risk Factors -- Objections to
corporate actions by a shareholder may result in our actions being blocked and
the distraction of the attention of our management."
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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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>
Leopold W.A.M. van Doorne................. 39 Chairman
Denis O'Brien, Jr. ....................... 41 Member
Hans Wackwitz............................. 44 Member
James R. Meadows.......................... 46 Member
</TABLE>
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........................ 49 Senior Manager Operations
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................................. 36 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.............................. 43 Manager Network Operations
Hein A.M. Boot............................ 36 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 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.
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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. Members of the supervisory board
shall periodically retire in accordance with a roster drawn up by the general
meeting of shareholders. Every retiring supervisory director may be reappointed,
provided that such supervisory director has not attained the age of 72. A member
of the supervisory board must retire not later than on the day of the general
meeting of shareholders held in the fiscal year in which such member reaches the
age of 72.
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.
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 computer systems. From 1975 to 1981 he served as a senior
systems engineer with Westinghouse Electric. Mr. Gary Mesch holds a B.S. in
Electrical Engineering from the University of Colorado and an M.B.A. from Denver
University.
LEOPOLD W.A.M. VAN DOORNE has served as Chairman of the Supervisory Board
of VersaTel on behalf of NeSBIC since December 1995. Since 1996, Mr. van Doorne
has been the Managing Director
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of NeSBIC Groep B.V., a venture capital company and a subsidiary of Fortis, an
international group of more than 100 companies operating in the fields of
insurance, banking and investments. Worldwide, Fortis has over 35,000 employees.
From 1994 to 1996 he served as Managing Director of NeSBIC Venture Management
B.V. From 1990 to 1994 he was Regional Director of Banque de Suez Nederland N.V.
Mr. van Doorne serves as a member of the supervisory board of various other
companies. Mr. van Doorne holds a degree in law from the University of Utrecht.
DENIS O'BRIEN, JR. has served as a member of the Supervisory Board of
VersaTel on behalf of Cromwilld since December, 1996. Mr. O'Brien is Chairman of
the Board and Chief Executive Officer of Esat Telecom Group plc, a public
company listed on NASDAQ 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.
HANS WACKWITZ has served as a member of the Supervisory Board of VersaTel
on behalf of Paribas since August 1998. Mr. Wackwitz is a member of the
management board of COBEPA S.A. and Paribas 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 1986 to 1991 he served at
various management positions at Bankers Trust Company, including vice president
corporate finance, vice president short term finance and vice president money
market. Mr. Wackwitz holds a degree in economics from the Rijks Universiteit
Groningen and an M.B.A. from Columbia University.
JAMES R. MEADOWS has served as a member of the Supervisory Board of
VersaTel on behalf of Telecom Founders since August 1998. Mr. Meadows is Senior
Vice President and co-founder of PrimeTEC International, Inc., a U.S.-based
international telecommunications services provider, since 1997. From 1989 to
1997 he served as Director Government Affairs at Capital Network System, Inc.
(CNSI), a telecommunications services provider. Mr. Meadows is the President of
America's Carriers Telecommunications Association (ACTA) and is a member of the
Board of Directors of Lone Star 2000, a public policy foundation. Mr. Meadows
holds a degree in history from the University of Texas at Austin.
W. GREG MESCH has served as Chief Operations Officer of VersaTel since
April 1998. From VersaTel's inception in 1995 until August 1998, he served as a
member of the Supervisory Board of VersaTel on behalf of 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.
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
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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 1996 as manager of the network operations department. From
1972 to 1996 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.
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
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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 1994 to 1998 he worked as Manager Network Services at
CasTel, a cable and telecommunications company in The Netherlands. From 1992 to
1994 he has served as Manager Projects of EDON, a utility company. From 1986 to
1992 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 as a
group 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. 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.
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
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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 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, 1,950,000 options to purchase depositary
receipts have been granted under the 1999 Plan. VersaTel expects to grant an
additional 550,000 options under the 1999 Plan.
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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 5,233,000 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 May 31, 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.
None of the selling shareholders own, as of the date of this prospectus, any
ordinary shares of VersaTel. All Shares and ADSs being sold by the
selling shareholders will be issued to the selling shareholders concurrently
with the closing of this offering upon the exercise by such selling shareholders
of 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).............................. 6,750,584 17.4% %
NeSBIC Venture Fund C.V.(3)........................... 15,162,896 39.0
Cromwilld Limited(4).................................. 7,306,048 18.8
Paribas Deelnemingen N.V.............................. 7,282,340 18.7
Nederlandse Participatie Maatschappij N.V............. 2,352,942 6.1
---------- ----- ----
Total............................................... 38,854,810 100.0% %
All directors and executive officers as a group(5).... 14,056,632 36.2
</TABLE>
- -------------------------
(1) Does not give effect to dilution from the exercise of 150,000 outstanding
warrants covering 2,000,100 ordinary shares issued in the Second High Yield
Offering and 225,000 outstanding warrants covering 3,000,000 ordinary shares
issued in the First High Yield Offering or to options granted to employees
covering 5,398,000 ordinary shares (all as adjusted to give effect to the
2-for-1 stock split on April 13, 1999). Does not include 685,000 shares (as
adjusted) approved for issuance by our shareholders in connection with the
acquisitions of CS Net, SpeedPort and ITinera. See "Management -- Stock
Option Plans" and "Description of Capital Stock -- Warrants."
(2) Telecom Founders B.V., a Netherlands company, is a wholly owned subsidiary
of Relyt Holdings N.V., a Netherlands Antilles company owned by R. Gary
Mesch. The shareholders' agreement, entered into between Telecom Founders,
NeSBIC and Cromwilld, and subsequently acceded to by 2 additional
shareholders, requires Mr. Mesch ultimately to own more than 50.0% of the
shares of Telecom Founders B.V. Certain of the officers and directors of
VersaTel have beneficial interests in Telecom Founders B.V.
(3) Includes 1,274,510 ordinary shares held by NeSBIC Groep B.V., an affiliate
of NeSBIC Venture Fund C.V.
(4) Cromwilld Limited, an Isle of Man company, is controlled by Denis O'Brien, a
member of the Supervisory Board of VersaTel. The Shareholders' Agreement
requires Mr. O'Brien to own more than 90.0% of the shares of Cromwilld
Limited.
(5) Reflects the 6,750,584 shares held by Telecom Founders B.V., beneficial
ownership of which may be attributed to Mr. Mesch, and 7,306,048 shares held
by Cromwilld Limited, beneficial ownership of which may be attributed to Mr.
O'Brien.
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SELLING SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of ordinary shares by the selling shareholders. None of the selling
shareholders owns, as of the date of this prospectus, any ordinary shares of
VersaTel. All Shares and ADSs being sold by the selling shareholders will be
issued to the selling shareholders concurrent with the closing of this offering
upon the exercise by such selling shareholders of warrants to purchase
ordinary shares 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>
-- 0%
</TABLE>
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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.
The shareholders' agreement will, by its terms, terminate upon any of the
following events: (i) by written agreement of all the parties thereto, (ii) the
joint sale and transfer by the parties to the shareholders' agreement of the
entire share capital of VersaTel to a third party or (iii) the effective
listing, by the parties thereto, of the entire share capital of VersaTel on any
stock exchange. VersaTel's share capital will be listed on the Amsterdam Stock
Exchange simultaneously with the closing of this offering. VersaTel has been
advised by its Netherlands counsel that in its opinion a Netherlands court (if
presented with the issue) should conclude that the Shareholders' Agreement will
be effectively terminated, and the reclassification of the ordinary shares will
become effective, simultaneously with the closing of this offering. However, we
can give no assurance that Cromwilld will not challenge that interpretation or
otherwise challenge the validity of the proposed offering, either before or
after the closing of the offering, or that a competent court of law will not
support Cromwilld's challenges.
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. 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) and ING
Barings Limited are underwriters in the Third High Yield Offering. Paribas
Deelnemingen N.V., an affiliate of Paribas, is a shareholder of VersaTel.
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. 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 ING Barings Limited, are lenders under the
Interim Loans, which will be repaid with a portion of the net proceeds of the
Third High Yield Offering.
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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. On April 13, 1999, VersaTel
effected a 2-for-1 stock split. On , 1999, the 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 and priority shares. The amended articles of
association will become effective upon 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 million consisting of
ordinary shares with a par value of NLG 0.05 each, preference
shares 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 assets in the event
of liquidation or dissolution of VersaTel.
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.
As of the date of this prospectus, ordinary shares are issued and
outstanding. Upon completion of this offering, ordinary shares will be
issued and outstanding (assuming the underwriters do not exercise their
over-allotment option).
PREFERENCE SHARES
Holders of preference shares will be entitled to one vote per share. There
are no cumulative voting rights. Preference shares have no pre-emptive rights.
Preference shares are entitled to a cumulative annual dividend calculated on the
basis of a fixed interest rate on the paid up portion of the nominal value of
the preference shares, to the extent of distributable profits. Preference shares
do not entitle their holder to participate in the distribution of assets in the
event of liquidation or dissolution of VersaTel.
Preference 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. Notwithstanding such delegation,
an issuance of preference shares 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 will be in registered form and share
certificates will not be issued.
As of the date of this prospectus, no preference shares are issued or
outstanding.
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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 5% 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 of such warrants will be exercised for a total of
ordinary shares to be sold by the selling shareholders in 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 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 assets in the event
of liquidation or dissolution of VersaTel. Preference shares 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 5%
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.
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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 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 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, if VersaTel furnishes it
promptly with satisfactory evidence that it is legal to do so. 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 any 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.
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 security.
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
- - 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)
</TABLE>
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<TABLE>
<CAPTION>
If: You must pay:
<S> <C> <C>
- - 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 agreement and the
ADRs without your consent for any reason; provided, that 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. In no event shall any
amendment impair the right of the ADR holder to surrender such ADR and receive
the equivalent deposited securities in exchange, except in order to comply with
mandatory provisions of applicable law.
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.
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
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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
agreement.
PRE-RELEASE OF ADRS
In certain circumstances described below, subject to the provisions of the
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 $ in aggregate
principal amount of % Senior Dollar Notes due 2009 and E in
aggregate principal amount of % Senior Euro Notes due 2009. The notes
will be sold to Lehman Brothers International (Europe) 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 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 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
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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 prior to 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 ordinary shares to be outstanding after the offering
(assuming that the underwriters do not exercise their over-allotment option),
the Shares and ADSs offered hereby will be freely tradeable without
restriction in the public market unless such shares are held by "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 will be "restricted securities" under the
Securities Act and may be sold (i) in the public market only upon the expiration
of certain holding periods under Rule 144, subject to the applicable volume,
manner of sale and other limitations of Rule 144, (ii) offshore 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 (approximately ordinary
shares immediately following the offering), 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 upon the completion of this offering
and of such warrants will be exercised. A total of Shares or
ADSs will be sold by the selling shareholders in this offering. After the
closing of this offering, there will be unexercised warrants
outstanding. If any warrants not sold in this offering were exercised pursuant
to an exemption from the registration requirements of the Securities Act, the
shares issued upon exercise would be "restricted securities" under the
Securities Act and would be subject to the resale restrictions described above.
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 6,652,000 depositary receipts issued for ordinary shares,
none of which are fully vested and exercisable. An additional 2,500,000 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 received by it to
VersaTel or to another party designated by VersaTel for the fair market value of
the underlying shares.
In connection with the acquisitions of CS Net, Speedport and ITinera,
VersaTel is obligated to issue up to 685,000 additional shares. Upon issuance of
these shares, such shares will be "restricted securities" under the Securities
Act and subject to the resale restrictions described above.
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LOCK-UP ARRANGEMENTS
Along with our executive officers, and some of our shareholders and
directors, 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) for a period of 180 days after the date of this
prospectus without the prior written consent of Lehman Brothers Inc.
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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. 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,
- 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
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- 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 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 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.
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 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
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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 an individual who resided, or was deemed
to have resided, in The Netherlands at the time of the gift or his or her death.
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,
- 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,
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- 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 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.
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,
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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 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 allocated to the shareholder's country of residence.
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.
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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,
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, in the opinion of Shearman &
Sterling, special tax counsel to the Company, accurately summarizes, subject to
the limitations and qualifications stated herein, the material U.S. federal
income tax consequences to a U.S. Holder of the purchase, ownership and
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 currently in effect 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 defined below) 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 part of a short-sale, hedging transaction, "straddle," conversion
transaction or other integrated transaction, U.S. Holders owning directly,
indirectly or constructively, 10% or more of the stock of the Company, or U.S.
Holders whose functional currency (as defined in Section 985 of the Code) is not
the U.S. dollar. Prospective purchasers of Shares or ADSs should consult with
their own tax advisors with regard to the application of the U.S. federal income
tax laws to their particular situations as well as any tax consequences of
purchasing, holding or disposing of Shares or ADSs, including the applicability
and effect of the 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.
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<PAGE> 122
In general, for U.S. federal income tax purposes, U.S. Holders of ADRs
evidencing ADSs will be treated as the owners of the ordinary shares represented
by the ADSs.
CASH DISTRIBUTIONS
Subject to the Passive Foreign Investment Company ("PFIC") discussion
below, to the extent that a distribution on Shares or ADSs, is paid out of the
Company's current or accumulated earnings and profits (as determined for U.S.
federal income tax purposes), such distributions will be includible in the gross
income of a U.S. Holder as foreign source dividend income in an amount equal to
the gross U.S. dollar value of such distributions (without reduction for any
applicable foreign withholding tax). Therefore, in the event that any foreign
tax is withheld from a distribution, a U.S. Holder generally will be required to
report gross income in an amount greater than the cash received (although such
U.S. Holder may be eligible for a foreign tax credit attributable to such
withheld amounts as discussed below). To the extent that the amount of any
distribution on Shares or ADSs exceeds the current and accumulated earnings and
profits of the Company, 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 reduce the U.S. Holder's tax basis in its Shares or ADSs (but not
below zero), and then, if the amount of the distribution exceeds such tax basis,
as capital gain to the extent of such excess. 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 use the foreign tax credit
attributable to any Netherlands or other foreign withholding tax imposed on such
distributions unless such credit can be applied (subject to applicable
limitations) against U.S. federal income tax due on other foreign source income
in the appropriate category for foreign tax credit purposes. The Company
believes that it does not presently have accumulated earnings and profits for
U.S. federal income tax purposes. However, the Company cannot predict whether it
will have 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 foreign income taxes, if
any, withheld from a distribution to a U.S. Holder on 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. Dividends on Shares or ADSs generally will constitute
foreign source "passive income" or, in the case of certain U.S. Holders,
"financial services income" for U.S. foreign tax credit purposes. 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 taxes to the Netherlands taxing authorities, U.S. Holders may be
limited in their ability to deduct or credit such Netherlands withholding taxes
for U.S. federal income tax purposes. Special rules apply to certain individuals
whose foreign source income during the taxable year 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 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
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<PAGE> 123
(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 ORDINARY SHARES
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
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 will generally be capital gain or loss and, in the case of certain
non-corporate U.S. Holders, may be subject to 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 the 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 U.S. foreign tax credit for
Netherlands withholding taxes, if any, imposed on the proceeds received upon the
sale, exchange, repurchase by the Company or other disposition of Shares or
ADSs. The deductibility of capital losses 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,
no assurance can be provided in that regard.
Subject to the discussion of the qualified electing fund ("QEF") election
and the mark-to-market election below, a U.S. Holder that held Shares or ADSs in
a taxable year in which the Company was a PFIC generally would be subject to
special rules with respect to certain distributions made by the Company on
Shares or ADSs and gains from the 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. 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) will 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 resulting tax liability (determined as if such tax liability had
been due with respect to the particular taxable year). That portion, if any, of
the distributions or gains not so allocated to a prior taxable year of a U.S.
Holder in which the Company was a PFIC will be included in the U.S. Holder's
income for the taxable year of the 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 QEF election
or a "mark-to-market" election. If a U.S. Holder makes a valid QEF election
(generally, for the first year of the U.S. Holder's holding period for which the
Company is a PFIC), such U.S. Holder generally would, based on information
provided by the Company, include in income in each year that the Company is a
PFIC such U.S. Holder's ratable portion of the Company's net ordinary earnings
and net capital gain for the particular year regardless of whether the U.S.
Holder receives any cash distribution from the Company. An electing U.S.
Holder's basis in its Shares or ADSs will be increased to reflect any
undistributed income of the Company that
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<PAGE> 124
such holder recognizes as a result of a QEF election. If the Company determines
that it is a PFIC, the Company will upon reasonable request provide the
requisite information to a U.S. Holder to enable such U.S. Holder to make a QEF
election. Alternatively, if Shares or ADSs were to constitute "marketable stock"
within the meaning of the Code, a U.S. Holder generally would be eligible to
make a mark-to-market election with respect to Shares or ADSs. Under this
election, a U.S. Holder would be required to include income in each year as
ordinary income the excess, at the close of the year, of the fair market value
of such U.S. Holder's Shares or ADSs over the holder's adjusted basis in such
Shares or ADSs. Such a U.S. Holder would, to the extent of the previous net
mark-to-market gains included in income pursuant to this election, be allowed an
ordinary loss in respect of the excess, if any, of the adjusted basis of such
Shares or ADSs over their fair market value at the end of each taxable year. An
electing U.S. Holder's basis in its Shares or ADSs will be adjusted to reflect
any such income or loss amounts or a deduction of any shortfall of the fair
market value of such holder's ordinary shares against the holder's adjusted
basis in such shares. Prospective purchasers are urged to consult their own tax
advisors regarding the application of the PFIC rules.
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, for whom Lehman Brothers Inc. is acting as global
coordinator and representative (the "Representative"), have severally but not
jointly agreed, subject to the terms and conditions of an 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 or ADSs:
<TABLE>
<CAPTION>
UNDERWRITERS Number of Shares or ADSs
- ------------ ------------------------
<S> <C>
Lehman Brothers Inc. .......................................
ING Barings Limited.........................................
Bear, Stearns & Co. Inc. ...................................
Hambrecht & Quist LLC.......................................
Paribas.....................................................
E* Trade....................................................
Others......................................................
----------
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.
The 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 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 NLG per Share or $ per ADS. The
underwriters may allow, and such dealers may reallow, a concession not in excess
of NLG 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 Representative
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 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 certain of our 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 Representative, 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
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<PAGE> 126
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.
Any offer of the Shares and 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 shall be made only by a registered dealer) in the relevant Canadian
jurisdiction where any such offer is made.
Each underwriter 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.
At our request, the underwriters have reserved up to ordinary
shares (in the form of Shares and ADSs), offered hereby for sale to our
officers, directors, employees, business associates and related parties at the
initial public offering price or, in the case of employees, at a 15 percent
discount from the initial public offering price. These persons must commit
Shares or ADSs to purchase no later than the close of business on the day
following the date of this prospectus. The number of ordinary shares in the form
of Shares and ADSs available for sale to the general public will be reduced to
the extent these persons purchase reserved shares.
The underwriters and the selling shareholders 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 Representative, on behalf of the
underwriters, may purchase and sell Shares or ADSs in the open market. These
transactions may include over-allotment, syndicate
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<PAGE> 127
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
Representative, in covering syndicate short positions or making stabilizing
purchases, repurchases Shares or ADSs originally sold by that syndicate member.
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 nor the underwriters makes 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 nor
the underwriters makes 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.
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. ING Barings
Limited is an underwriter in the Third High Yield 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. Lehman Commercial Paper Inc., an affiliate of each of
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<PAGE> 128
Lehman Brothers Inc. and Lehman Brothers International (Europe), and ING (U.S.)
Capital, LLC, an affiliate of ING Barings Limited, are lenders of the Interim
Loans which will be repaid with a portion of the net proceeds of the Third High
Yield Offering. Paribas Corporation, an affiliate of Paribas, was an initial
purchaser in the Second High Yield Offering. Paribas Deelnemingen N.V., an
affiliate of Paribas, is a shareholder of VersaTel. See "Principal
Shareholders."
We 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> 129
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, 1997 and 1998 and
for each of the 3 years in the period ending December 31, 1998, 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 set 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> 130
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 and
1997...................................................... 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> 131
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To VersaTel Telecom International N.V.
We have audited the consolidated balance sheets as of December 31, 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 three years in the period ended December 31, 1998.
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, 1997 and 1998 and the result of its
operations and their cash flows for each of the three years ended December 31,
1998, in conformity with United States generally accepted accounting principles.
ARTHUR ANDERSEN
Amsterdam, The Netherlands
April 13, 1999
F-2
<PAGE> 132
VERSATEL TELECOM INTERNATIONAL N.V.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(AMOUNTS IN THOUSANDS OF DUTCH GUILDERS,
EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1998 1997
------- -------
NLG NLG
<S> <C> <C>
ASSETS
Current Assets:
Cash...................................................... 372,014 1,346
Restricted cash, current portion.......................... 89,752 76
Accounts receivable, net.................................. 7,902 1,804
Inventory, net............................................ 1,083 418
Prepaid expenses and other................................ 12,909 1,995
------- -------
Total current assets................................... 483,660 5,639
------- -------
Fixed Assets:
Property and Equipment, net............................... 38,608 13,619
Construction In Progress.................................. 46,019 --
------- -------
Total fixed assets..................................... 84,627 13,619
------- -------
Restricted cash, net of current portion................... 121,804 73
Capitalized finance costs, net............................ 28,750 --
Goodwill, net............................................. 4,556 --
------- -------
Total assets........................................... 723,397 19,331
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... 39,863 20,674
Due to related parties.................................... 806 249
Accrued liabilities....................................... 28,005 7,691
Deferred income, current portion.......................... -- 98
Current portion of capital lease obligations.............. 71 279
------- -------
Total current liabilities.............................. 68,745 28,991
Deferred Income, net of current portion..................... -- 341
Capital Lease Obligations, net of current portion........... 37 108
Subordinated Convertible Shareholder Loans.................. -- 8,105
Long Term Liabilities....................................... 670 --
Long Term Debt (13 1/4% Senior Notes)....................... 688,018 --
------- -------
Total Liabilities...................................... 757,470 37,545
------- -------
Shareholders' Equity:
Ordinary shares, NLG 0.05 par value....................... 1,949 958
Additional paid-in capital.................................. 51,112 6,037
Warrants.................................................... 5,212 --
Accumulated deficit......................................... (92,346) (25,209)
------- -------
Total shareholders' equity............................. (34,073) (18,214)
------- -------
Total liabilities and shareholders' equity........ 723,397 19,331
======= =======
</TABLE>
F-3
<PAGE> 133
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)
---------- ---------- ----------
(20,664) (587) (269)
---------- ---------- ----------
Net 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> 134
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> 135
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> 136
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> 137
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> 138
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> 139
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 19,159,286 and 38,984,810
class A shares were outstanding at December 31, 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 149 and NLG 211,556 at December 31, 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 65 and NLG 347 at December 31, 1997 and 1998, respectively.
7. PREPAID EXPENSES AND OTHER
Prepaid Expenses and Other as of December 31, 1998 and December 31, 1997
include an amount of NLG 5,897 and NLG 1,564, 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> 140
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 and 1997:
<TABLE>
<CAPTION>
USEFUL LIFE 1998 1997
----------- ------ ------
<S> <C> <C> <C>
Leasehold improvements............................ 5 3,555 911
Telecommunications equipment...................... 2-10 37,264 14,750
Other............................................. 3-5 7,929 1,546
------ ------
Property and equipment.......................... 48,748 17,207
Less Accumulated depreciation................... 10,140 3,588
------ ------
Property and equipment, net..................... 38,608 13,619
====== ======
</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> 141
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> 142
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> 143
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 - 0.99............ 99,000 3.0 0.30 99,000 0.30
NLG 1 - 1.99............ 299,000 3.5 0.63 299,000 0.63
NLG 2 - 2.99............ -- -- -- -- --
NLG 3 - 3.99............ -- -- -- -- --
NLG 4 - 4.99............ 4,350,000 4.32 2.23 4,350,000 2.23
NLG 5 - 5.99............ 650,000 4.46 2.55 650,000 2.55
</TABLE>
13. TAXES
The Company had income tax carry-forwards of approximately 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.
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.
F-14
<PAGE> 144
VERSATEL TELECOM INTERNATIONAL N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
There were no significant temporary differences which gave rise to deferred
tax assets and liabilities at December 31, 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, 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 199 at December 31, 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> 145
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> 146
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> 147
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> 148
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> 149
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> 150
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> 151
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, 1,950,000 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> 152
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
</TABLE>
F-23
<PAGE> 153
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 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 audits provide 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 operations and 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> 154
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> 155
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> 156
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> 157
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> 158
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> 159
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> 160
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 Holding B.V. 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 Holding B.V. 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> 161
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>
31 DEC. 1998 31 DEC. 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>
31 DEC. 1998 31 DEC. 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> 162
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> 163
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 Holding 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 Holding 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> 164
SVIANED B.V.
UNAUDITED CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Condensed Balance Sheets as of March 31, 1999 and 1998...... F-36
Condensed Statements of Operations for the Three Months
Ended March 31, 1999 and 1998............................. F-37
Condensed Statement of Shareholder's Equity as of March 31,
1999...................................................... F-38
Condensed Statements of Cash Flows for the Three Months
Ended March 31, 1999 and 1998............................. F-39
Condensed Notes to Financial Statements..................... F-40
</TABLE>
F-35
<PAGE> 165
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-36
<PAGE> 166
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>
3 MONTHS 3 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.......................................... (138) (104)
------- -------
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-37
<PAGE> 167
SVIANED B.V.
CONDENSED STATEMENTS OF SHAREHOLDER'S EQUITY
AS OF MARCH 31, 1999
(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-38
<PAGE> 168
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>
3 MONTHS ENDED 3 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-39
<PAGE> 169
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. 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
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-40
<PAGE> 170
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> 171
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> 172
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> 173
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> 174
Versatel Logo
VERSATEL TELECOM INTERNATIONAL N.V.
-- ORDINARY SHARES
IN THE FORM OF SHARES AND
AMERICAN DEPOSITARY SHARES
----------------------------
PROSPECTUS
, 1999
----------------------------
LEHMAN BROTHERS
ING BARINGS
BEAR STEARNS
HAMBRECHT & QUIST
PARIBAS
E*TRADE
<PAGE> 175
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......... $41,700
NASD filing fee............................................. $ 1,500
NASDAQ listing fee.......................................... *
Printing and engraving expenses............................. *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue sky fees and expenses.................................. *
Miscellaneous expenses...................................... *
-------
Total..................................................
=======
</TABLE>
- -------------------------
* To be completed by amendment
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.
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.
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.
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 5,800,000 for 2,606,742 ordinary shares.
II-1
<PAGE> 176
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.
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
Nederlandse Participatie Maatschappij N.V. for an aggregate consideration of NLG
6,000,000.
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 certain 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 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 certain 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 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.
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 Underwriting Agreement
3.1(1) Deed of Incorporation of the Company
3.2* Articles of Association of the Company
4.1* 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(2) 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
</TABLE>
II-2
<PAGE> 177
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
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(2) 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., Robert 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(3) 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.
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>
- -------------------------
* To be filed by amendment
(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-4 (File Number 333-70449) initially filed with the Securities and
Exchange Commission on January 12, 1999 and incorporated herein by
reference.
(3) 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
II-3
<PAGE> 178
"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 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-4
<PAGE> 179
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 June, 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 on the 22nd day of June, 1999. Each person whose signature
appears below hereby authorizes R. Gary Mesch and Raj Raithatha and each of
them, with full power of substitution, to execute in the name and on behalf of
such person any amendment or any post-effective amendment to this Registration
Statement and to file the same, with any exhibits thereto and other documents in
connection therewith, making such changes in this Registration Statement as the
Registrant deems appropriate, and appoints each of R. Gary Mesch and Raj
Raithatha and each of them, with full power of substitution, attorney-in-fact to
sign any amendment and any post-effective amendment to this Registration
Statement and to file the same, with any exhibits thereto and other documents in
connection therewith.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ R. GARY MESCH Managing Director (principal executive
- --------------------------------------------------- officer)
R. Gary Mesch
/s/ RAJ RAITHATHA Chief Financial Officer (principal financial
- --------------------------------------------------- and accounting officer)
Raj Raithatha
/s/ LEOPOLD W.A.M. VAN DOORNE Supervisory Director
- ---------------------------------------------------
Leopold W.A.M. van Doorne
Supervisory Director
- ---------------------------------------------------
Denis O'Brien
/s/ HANS WACKWITZ Supervisory Director
- ---------------------------------------------------
Hans Wackwitz
/s/ JAMES MEADOWS Supervisory Director
- ---------------------------------------------------
James Meadows
</TABLE>
II-5
<PAGE> 180
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 June, 1999.
<TABLE>
<CAPTION>
NAME CAPACITY
---- --------
<C> <S>
/s/ DONALD J. PUGLISI Managing Director of Puglisi & Associates
- ---------------------------------------------------
Donald J. Puglisi
</TABLE>
II-6
<PAGE> 181
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.1* Form of Underwriting Agreement
3.1(1) Deed of Incorporation of the Company
3.2* Articles of Association of the Company
4.1* 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(2) 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(2) 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., Robert 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(3) 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.
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>
- -------------------------
* To be filed by amendment
(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-4 (File Number 333-70449) initially filed with the Securities and
Exchange Commission on January 12, 1999 and incorporated herein by
reference.
(3) 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 10.3
ADVANCE\y 72
WARRANT AGREEMENT
Dated as of May 27, 1998
between
VERSATEL TELECOM B.V.
and
UNITED STATES TRUST COMPANY OF NEW YORK
as Warrant Agent
<PAGE> 2
ADVANCE\y 72
WARRANT AGREEMENT
WARRANT AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. Defined Terms 2
1.1 Certain Definitions 2
1.2 Rules of Construction 5
SECTION 2. Issuance, Form, Execution, Delivery and Registration
of Warrant Certificates 6
2.1 Issuance of Warrants 6
2.2 Execution of Warrant Certificates 6
2.3 Countersignature and Delivery 6
2.4 Form of Warrant Certificates 7
2.5 Restrictive Legends 8
2.6 Temporary Warrant Certificates 9
2.7 Separation of Warrants and Notes 10
2.8 Registration, Registration of Transfers and Exchanges 10
2.9 Book-Entry Provisions for Global Warrants 11
2.10 Special Transfer Provisions 13
2.11 Offices for Exercise, etc. 15
2.12 Cancellation 16
2.13 Lost, Stolen, Destroyed, Defaced or Mutilated Warrant
Certificates 16
SECTION 3. Terms of Warrants; Exercise of Warrants 17
3.1 Exercise Period 17
3.2 Manner of Exercise 17
3.3 Issuance of Warrant Shares 18
3.4 Fractional Warrant Shares 19
3.5 Sufficient Authorized Share Capital 19
3.6 Payment of Taxes 19
SECTION 4. Adjustment of Exercise Price and Number of Warrant Shares
Issuable 19
4.1 Adjustments 19
4.2 Superseding Adjustment 23
4.3 Minimum Adjustment 23
4.4 Notice of Adjustment 24
4.5 Notice of Certain Transactions 24
4.6 Adjustment to Warrant Certificate 25
4.7 Challenge to Good Faith Determination 25
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
4.8 Treasury Stock 25
SECTION 5. Holders' Rights 25
5.1 Registration Rights 25
5.2 Piggyback Registration Right 26
5.3 Repurchase Offer 27
5.4 Change of Control Equity Offer 27
5.5 Drag Along Rights 28
SECTION 6. Warrant Agent 28
6.1 Appointment of Warrant Agent 28
6.2 Rights and Duties of Warrant Agent 28
6.3 Individual Rights of Warrant Agent 30
6.4 Warrant Agent's Disclaimer 30
6.5 Compensation and Indemnity 30
6.6 Successor Warrant Agent 31
SECTION 7. Miscellaneous 32
7.1 Reports 32
7.2 Notices to the Company and Warrant Agent 33
7.3 Supplements and Amendments 34
7.4 Severability 35
7.5 Successors 35
7.6 Termination 35
7.7 Governing Law 35
7.8 Submission to Jurisdiction; Appointment of Agent
for Service; Waiver. 35
7.9 Benefits of This Agreement 36
7.10 Counterparts 36
7.11 Table of Contents 36
</TABLE>
Exhibits
EXHIBIT A - Form of Face of Global Warrant Certificate
EXHIBIT B - Form of Face of Definitive Warrant Certificate
EXHIBIT C - Form of Transfer Certificate for Transfer from Rule 144A Global
Warrant to Regulation S Global Warrant
EXHIBIT D - Form of Transfer Certificate for Transfer from Regulation S Global
Warrant to Rule 144A Global Warrant
<PAGE> 4
1
Exhibit 10.3
WARRANT AGREEMENT dated as of May 27, 1998 (the "Agreement") between
VersaTel Telecom B.V., a company organized under the laws of The Netherlands
(the "Company"), and the United States Trust Company of New York, as warrant
agent (in such capacity, the "Warrant Agent").
W I T N E S S E T H :
WHEREAS, the Company entered into a purchase agreement dated May 20,
1998 (the "Purchase Agreement") with Lehman Brothers Inc. (the "Initial
Purchaser") pursuant to which the Company has agreed to sell to the Initial
Purchaser 225,000 units (the "Units") consisting of $1,000 principal amount of
its 13 1/4% Senior Notes due 2008 (the "Notes") to be issued under an indenture
dated as of May 27, 1998 (the "Indenture") by and between the Company and the
United States Trust Company of New York, as Trustee (in such capacity, the
"Trustee"), and one warrant (the "Warrants") to purchase 6.667 ordinary shares
of the Company, par value NLG 0.10 per share (the "Ordinary Shares"); and
WHEREAS, prior to the separation of the Notes from the Warrants
issued as part of the Units as described herein, the Units shall be issued
pursuant to the Unit Agreement dated as of May 27, 1998 (the "Unit Agreement")
by and among the Company, the Warrant Agent, the Trustee and United States Trust
Company of New York as unit agent (the "Unit Agent"); and
WHEREAS, the Warrants and the Notes shall not be separately
transferable until such time on or after the Separation Date (as defined below);
and
WHEREAS, the Company desires the Warrant Agent to assist the Company
in connection with the issuance, exchange, cancellation, replacement and
exercise of the Warrants, and in this Agreement wishes to set forth, among other
things, the terms and conditions on which the Warrants may be issued, exchanged,
cancelled, replaced and exercised; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of
the Company, and the Warrant Agent is willing so to act, in connection with the
issuance of Warrant Certificates (as defined below) and other matters as
provided herein;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, and for the purpose of defining the respective
rights and obligations of the Company, the Warrant Agent and the Holders (as
defined below), the parties hereto agree as follows:
<PAGE> 5
2
1. SECTION DEFINED TERMS.
1.1 Certain Definitions. As used in this Agreement, the following terms shall
have the following respective meanings:
"Affiliate" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as
applied to any Person, is defined to mean the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
voting securities, by contract or otherwise.
"Bankruptcy Law" means (i) for purposes of the Company,
Faillissementswet and any similar statute, regulation or provision of any
other jurisdiction in which the Company is organized or conducting
business and (ii) for purposes of the Unit Agent, Title 11, U.S. Code or
any similar United States Federal, state or foreign law for the relief of
creditors.
"Board" means the Board of Supervisory Directors of the Company.
"Business Day" means a day other than a Saturday, Sunday or other
day on which commercial banks in New York City and Amsterdam, The
Netherlands are authorized or required by law to close.
"Cashless Exercise" has the meaning specified in Section 3.2 hereof.
"Cashless Exercise Ratio" means a fraction, the numerator of which
is the excess of the Current Market Value (as defined below) per Ordinary
Share on the Exercise Date over the Exercise Price per share as of the
Exercise Date and the denominator of which is the Current Market Value per
Ordinary Share on the Exercise Date.
"Cedel" means Cedel Bank, societe anonyme.
"Combination" has the meaning specified in Section 4.1(d) hereof.
"Commission" means the Securities and Exchange Commission.
"Current Market Value," per Ordinary Share or any other security at
any date, means (i) if the security is not registered under the Exchange
Act, the fair market value of the security (without any discount for lack
of liquidity, the amount of such security offered to be purchased or the
fact that such securities may represent a minority interest in a private
company or a company under the control of another Person) as determined in
good faith by the Board and certified in a board resolution that is
delivered to the Warrant Agent, and determined to be fair, from a
financial point of view, to the holders of such security or another
security exercisable for such security, by an Independent Financial Expert
(as set forth in such Independent Financial Expert's written fairness
opinion); or (ii) if the security is registered under the Exchange Act,
the average of the last reported sale price of the security (or the
equivalent in an over-the-counter market) for each Business Day (as
defined herein) during the period commencing 15 Business Days before such
date and ending on the date one day prior to such date, or if the security
has been
<PAGE> 6
3
registered under the Exchange Act for less than 15 consecutive Business
Days before such date, the average of the daily closing bid prices (or
such equivalent) for all of the Business Days before such date for which
daily closing bid prices are available (provided, however, that if the
closing bid price is not determinable for at least 10 Business Days in
such period, the "Current Market Value" of the security shall be
determined as if the security were not registered under the Exchange Act).
The Company shall pay the fees and expenses of any Independent Financial
Expert in the determination of Current Market Value.
"Definitive Warrants" means Warrants in definitive registered form
substantially in the form of Exhibit B.
"DTC" or "Depositary" means The Depository Trust Company or its
successors.
"DWAC" means the Depositary/Deposit Withdraw at Custodian system.
"Euroclear" means Morgan Guaranty Trust Company of New York
(Brussels office), as operator of the Euroclear System.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
(or any successor act), and the rules and regulations promulgated
thereunder.
"Exercise Date" means the date on which a Warrant is exercised by
the Holder thereof.
"Exercisability Date" means the date of the closing of an Initial
Public Offering (as defined below) by the Company.
"Exercise Price" means the purchase price per Warrant Share to be
paid upon the exercise of each Warrant, which price shall be NLG 5.10 per
Warrant Share as adjusted in accordance with the terms hereof.
"Expiration Date" means May 15, 2008.
"Holder" means the registered holder of a Warrant.
"Independent Financial Expert" means an internationally recognized
investment bank that does not (and whose directors, executive officers and
5% stockholders do not) have a direct or indirect financial interest in
the Company or any of its subsidiaries or Affiliates, which has not been
for at least five years, and at the time it is called upon to give
independent financial advice to the Company is not (and none of its
directors, executive officers or 5% stockholders is), a promoter,
director, or officer of the Company or any of its subsidiaries or
Affiliates. The Independent Financial Expert may be compensated and
indemnified by the Company for opinions or services it provides as an
Independent Financial Expert.
"Initial Public Offering" means the first time a registration
statement filed under the Securities Act (other than the Shelf
Registration Statement) respecting an offering,
<PAGE> 7
4
whether primary or secondary, of Ordinary Shares representing at least 15%
of the total issued and outstanding Ordinary Shares of the Company which
is underwritten on a firmly committed or best efforts basis, is declared
effective and the securities so registered are issued and sold.
"Issue Date" means May 27, 1998, the date on which the Warrants are
first issued.
"Majority Holders" means the Holders of a majority of the then
outstanding Warrants.
"Nasdaq National Market" means the Nasdaq Stock Market National
Market.
"Offering" means the offering of the Units, the Notes and the
Warrants.
"Officer" means the principal executive officer, the principal
financial officer, the treasurer or the principal accounting officer of
the Company.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company.
"Ordinary Shares" has the meaning specified in the Preamble hereto.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"Regulation S" means Regulation S (including any successor
regulation thereto) under the Securities Act, as it may be amended from
time to time.
"Repurchase Price" means, in respect of a Warrant, (i) the excess of
the Current Market Value of an Ordinary Share of the Company over the
Exercise Price per Ordinary Share, multiplied by (ii) the number of
Warrant Shares that would be obtained if one Warrant was exercised on the
date of repurchase.
"Resale Restriction Termination Date" has the meaning specified in
Section 2.5 hereof.
"Restricted Period" has the meaning specified in Section 2.4 hereof.
"Right" has the meaning specified in Section 4.1(g) hereof.
"Rule 144A" means Rule 144A (including any successor regulation
thereto) under the Securities Act, as it may be amended from time to time.
"Securities Act" means the Securities Act of 1933, as amended.
<PAGE> 8
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"Separation Date" has the meaning specified in Section 2.7 hereof.
"Successor Company" has the meaning specified in Section 4.1(d)
hereof.
"Unit" means the $1,000 principal amount of Notes and one Warrant
that comprise each Unit.
"Unit Certificates" means the certificates evidencing the Units to
be delivered pursuant to the Purchase Agreement.
"Warrant Agent" means the United States Trust Company of New York,
or the successor or successors of such Warrant Agent appointed in
accordance with the terms hereof.
"Warrant Certificates" means the certificates evidencing the
Warrants to be delivered pursuant to this Agreement, substantially in the
form of Exhibits A and B hereto.
"Warrant Registrar" has the meaning specified in Section 2.8 hereof.
"Warrant Shares" has the meaning specified in Section 2.1 hereof.
"Warrants" shall mean the Warrants issued hereunder and all warrants
issued upon transfer, division or combination of, or in substitution for,
any thereof. All Warrants shall at all times be identical as to terms and
conditions and date, except as to the number of Ordinary Shares for which
they may be exercised.
1.2 Rules of Construction. Unless the text otherwise required.
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning assigned to
it in accordance with United States generally accepted accounting
principles ("U.S. GAAP") in The Netherlands as in effect from time
to time;
(iii) "or" is not exclusive;
(iv) "including" means including, without limitation; and
(v) words in the singular include the plural and words in the plural
include the singular.
<PAGE> 9
6
2. SECTION ISSUANCE, FORM, EXECUTION, DELIVERY AND REGISTRATION OF WARRANT
CERTIFICATES.
2.1 Issuance of Warrants. Warrants comprising part of the Units shall be
originally issued in connection with the issuance of the Units and such Warrants
shall not be separately transferable from the Notes until on or after the
Separation Date as provided in Section 2.7 hereof.
Each Warrant Certificate shall evidence the number of Warrants
specified therein, and each Warrant evidenced thereby shall represent the right,
subject to the provisions contained herein and therein, to purchase from the
Company (and the Company shall issue and sell to such holder of the Warrant)
6.667 Ordinary Shares of the Company (the shares purchasable upon exercise of a
Warrant being hereinafter referred to as the "Warrant Shares," subject to
adjustment as provided in Section 4 hereof).
2.2 Execution of Warrant Certificates. The Warrant Certificates shall be
executed on behalf of the Company by two Officers of the Company. Such
signatures may be the manual or facsimile signatures of the present or any
future such officers. Typographical and other minor errors or defects in any
such reproduction of any such signature shall not affect the validity or
enforceability of any Warrant Certificate that has been duly countersigned and
delivered by the Warrant Agent.
In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer before the Warrant
Certificate so signed shall be countersigned and delivered by the Warrant Agent
or disposed of by the Company, such Warrant Certificate nevertheless may be
countersigned and delivered or disposed of as though the Person who signed such
Warrant Certificate had not ceased to be such officer of the Company; and any
Warrant Certificate may be signed on behalf of the Company by such Persons as,
at the actual date of the execution of such Warrant Certificate, shall be the
proper officers of the Company, although at the date of the execution and
delivery of this Agreement any such Person was not such an officer.
2.3 Countersignature and Delivery. Subject to the immediately following
paragraph, Warrant Certificates shall be countersigned by manual signature and
dated the date of countersignature by the Warrant Agent and shall not be valid
for any purpose unless so countersigned and dated. The Warrant Certificates
shall be numbered and shall be registered in the Warrant Register.
Upon the receipt by the Warrant Agent of a written order of the
Company set forth in an Officers' Certificate, specifying the amount of Warrants
to be countersigned, whether the Warrants are to be Global Warrants or
Definitive Warrants, whether the Warrants are to bear the Private Placement
Legend set forth in Section 2.5, the date of such Warrants and such other
information as the Warrant Agent may reasonably request, the Warrant Agent is
authorized, to countersign the Warrant Certificates upon receipt from the
Company at any time and from time to time of the Warrant Certificates, duly
executed as provided in Section 2.2 hereof, and deliver them, without any
further action by the Company. Such countersignature shall be by a duly
authorized signatory of the Warrant Agent (although it shall not be necessary
for the same signatory to sign all Warrant Certificates).
<PAGE> 10
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In case any authorized signatory of the Warrant Agent who shall have
countersigned any of the Warrant Certificates shall cease to be such authorized
signatory before the Warrant Certificate shall be disposed of by the Company,
such Warrant Certificate nevertheless may be delivered or disposed of as though
the Person who countersigned such Warrant Certificate had not ceased to be such
authorized signatory of the Warrant Agent; and any Warrant Certificate may be
countersigned on behalf of the Warrant Agent by such Persons as, at the actual
time of countersignature of such Warrant Certificates, shall be the duly
authorized signatories of the Warrant Agent, although at the time of the
execution and delivery of this Agreement any such Person is not such an
authorized signatory.
The Warrant Agent's countersignature on all Warrant Certificates
shall be in substantially the form set forth in Exhibit A and B hereto.
2.4 Form of Warrant Certificates. Warrants offered and sold to Qualified
Institutional Buyers in reliance upon Rule 144A in the United States of America
("Rule 144A Warrants") shall be issued on the Issue Date in the form of one or
more global Warrants in registered global form ("Rule 144A Global Warrants").
Rule 144A Global Warrants shall be deposited with the Warrant Agent, as
custodian for, and registered in the name of DTC or its nominee, duly executed
by the Company and countersigned by the Warrant Agent as provided herein;
provided until such time as the Warrants Separate from the Notes, the Rule 144A
Global Warrants shall be registered in the name of the Unit Agent and shall be
represented by a Global Unit deposited with the Unit Agent as custodian for and
registered in the name of DTC or its nominee.
Warrants offered and sold outside the United States of America in
reliance on Regulation S ("Regulation S Warrants") shall be issued on the Issue
Date in the form of one or more global Warrants in registered global form (the
"Regulation S Global Warrants"). Regulation S Global Warrants shall be the
Warrant Agent as custodian for, and registered in the name of, DTC or its
nominee, for credit to the subscribers' respective accounts at Euroclear and
Cedel, duly executed by the Company and countersigned by the Warrant Agent as
provided herein; provided that until such time as the Warrants Separate from the
Notes, the Regulation S Global Warrants shall be registered in the name of the
Unit Agent and shall be represented by a Global Unit deposited with the Unit
Agent as custodian for and registered in the name of DTC or its nominee, for
credit to the subscribers' respective accounts at Euroclear and Cedel. During a
period of 40 days commencing on the latest of the commencement of the Offering
and the Issue Date (such period through and including such 40th day, the
"Restricted Period"), beneficial interests in the Regulation S Global Warrants
may be held only through Euroclear or Cedel (as indirect participants in DTC).
The Rule 144A Global Warrants and the Regulation S Global Warrants are sometimes
collectively herein referred to as the "Global Warrants".
The Warrant Certificates evidencing the Global Warrants to be
delivered pursuant to this Agreement shall be substantially in the form set
forth in Exhibit A attached hereto. Such Global Warrants shall represent such of
the outstanding Warrants as shall be specified therein and each shall provide
that it shall represent the aggregate amount of outstanding Warrants from time
to time endorsed thereon and that the aggregate amount of outstanding
<PAGE> 11
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Warrants represented thereby may from time to time be decreased or increased, as
appropriate. Any endorsement of a Global Warrant to reflect the amount of any
increase or decrease in the amount of outstanding Warrants represented thereby
shall be made by the Warrant Agent and DTC in accordance with instructions given
by the holder thereof. The Depository Trust Company shall act as the Depository
(the "Depository") with respect to the Global Warrants until a successor, if
any, shall be appointed by the Company. Except as provided in Section 2.9(b),
owners of beneficial interests in a Global Warrant will not be entitled to
receive physical delivery of Definitive Warrants.
2.5 Restrictive Legends.
Global Warrants shall bear the following legend (the "Private
Placement Legend") on the face thereof:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN
AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S, (2) AGREES THAT
IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF
TIME AS PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT OR ANY SUCCESSOR
PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF
ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE
LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
(3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED
A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY
AND THE WARRANT AGENT SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM,
AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A
<PAGE> 12
9
CERTIFICATION OR TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS
SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE WARRANT AGENT, THIS
LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION
S UNDER THE SECURITIES ACT.
The Global Warrants shall also bear the following legend on the face
thereof: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
REPRESENTATIVE OF DTC AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTIONS 2.9 AND 2.10 OF THE WARRANT AGREEMENT.
2.6 Temporary Warrant Certificates. Pending the preparation of Definitive
Warrant Certificates, the Company may execute, and the Warrant Agent shall
countersign and deliver, temporary Warrant Certificates, which are printed,
lithographed, typewritten or otherwise produced, substantially of the tenor of
the Definitive Warrant Certificates in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Warrant Certificates may determine, as evidenced by
their execution of such Warrant Certificates.
If temporary Warrant Certificates are issued, the Company will cause
Definitive Warrant Certificates to be prepared without unreasonable delay. After
the preparation of Definitive Warrant Certificates, the temporary Warrant
Certificates shall be exchangeable for Definitive Warrant Certificates upon
surrender of the temporary Warrant Certificates at any office or agency
maintained by the Company for that purpose pursuant to Section 2.11 hereof.
Subject to the provisions of Section 3.6 hereof, such exchange shall be without
charge to the holder. Upon surrender for cancellation of any one or more
temporary Warrant Certificates, the Company shall execute, and the Warrant Agent
shall countersign and deliver in exchange therefor, one or more Definitive
Warrant Certificates representing in the aggregate a like number
<PAGE> 13
10
of Warrants. Until so exchanged, the holder of a temporary Warrant Certificate
shall in all respects be entitled to the same benefits under this Agreement as a
holder of a Definitive Warrant Certificate.
2.7 Separation of Warrants and Notes. The Notes and Warrants will not be
separately transferable until the Separation Date. The "Separation Date" will be
the earliest of (i) November 15, 1998, (ii) the commencement of an exchange
offer or the effectiveness of a Shelf Registration Statement with respect to the
Notes, (iii) the Exercisability Date and (iv) such other date as the Initial
Purchaser will determine in its sole discretion. The surrender of a Unit
Certificate for separate Warrant and Note certificates is herein referred to as
a "Separation" and the related Warrants being referred to as "Separated." Upon
Separation of the Warrants and the Notes, the Global Warrants shall be
transferred to and deposited with the Warrant Agent, as custodian for, and
registered in the name of DTC or its nominee, duly executed by the Company and
countersigned by the Warrant Agent as provided herein.
2.8 Registration, Registration of Transfers and Exchanges. The Company will
keep, at the office or agency maintained by the Company for such purpose, a
register or registers in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of, and registration
of transfer and exchange of, Warrants as provided herein. Each person designated
by the Company from time to time as a Person authorized to register the transfer
and exchange of the Warrants is hereinafter called, individually and
collectively, the "Warrant Registrar." The Company hereby initially appoints the
Warrant Agent as Warrant Registrar. Upon written notice to the Warrant Agent and
any acting Warrant Registrar, the Company may appoint a successor Warrant
Registrar for such purposes.
The Company will at all times designate one Person (who may be the
Company and who need not be a Warrant Registrar) to act as repository of a
master list of names and addresses of the holders of Warrants (the "Warrant
Register"). The Warrant Agent will act as such repository unless and until some
other Person is, by written notice from the Company to the Warrant Agent and the
Warrant Registrar, designated by the Company to act as such. In the event the
Warrant Registrar is not the repository, the Company shall cause the Warrant
Registrar to furnish to such repository, on a current basis, such information as
to all registrations of transfer and exchanges effected by the Warrant
Registrar, as may be necessary to enable such repository to maintain the Warrant
Register on as current a basis as is practicable.
When Warrants are presented to the Warrant Agent with a request to
register the transfer of the Warrants or exchange Warrants for an equal number
of Warrants of other authorized denominations, the Warrant Agent shall register
the transfer or make the exchange as requested if the requirements under this
Warrant Agreement as set forth herein for such transactions are met; provided,
however, that the Warrants presented or surrendered for registration of transfer
or exchange shall be duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Company and the Warrant Agent, duly
executed by the holder thereof or by his attorney, duly authorized in writing.
Furthermore, any Holder of a Global Warrant shall, by acceptance of
such Global Warrant, agree that transfers of beneficial interests in such Global
Warrant may be effected only through a book-entry system maintained by the
Holder of such Global Warrant (or its agent), and that ownership of a beneficial
interest in the Warrant shall be required to be reflected in a book entry.
<PAGE> 14
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All Warrants issued upon any registration of transfer or exchange of
Warrants shall be the valid obligations of the Company, evidencing the same
obligations, and entitled to the same benefits under this Agreement, as the
Warrants surrendered upon such registration of transfer or exchange.
2.9 Book-Entry Provisions for Global Warrants.
(a) Registered Owner of Global Warrants. Each Global Warrant initially shall (i)
be registered in the name of DTC for such global Warrant or the nominee of the
Depositary, (ii) be delivered to the Warrant Agent as custodian for such
Depositary and (iii) bear legends as set forth in Section 2.5.
Members of, or participants in, DTC ("Agent Members") shall have no
rights under this Agreement with respect to any Global Warrant held on their
behalf by DTC, or the Warrant Agent as its custodian, or under the Global
Warrant, and DTC may be treated by the Company, the Warrant Agent and any agent
of the Company or the Warrant Agent as the absolute owner of such Global Warrant
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Warrant Agent or any agent of the Company or the
Warrant Agent from giving effect to any written certification, proxy or other
authorization furnished by DTC or shall impair, as between DTC and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a Holder of any Warrant.
(b) Transfers of Global Warrants. Transfers of a Global Warrant shall be limited
to transfers of such Global Warrant in whole, but not in part, to DTC, its
successors or their respective nominees. Interests of beneficial owners in a
Global Warrant may be transferred in accordance with the rules and procedures of
DTC and the provisions of Section 2.9. If required to do so pursuant to any
applicable law or regulation, beneficial owners may obtain Warrants in
definitive form, in exchange for their beneficial interests in a Global Warrant
upon written request in accordance with DTC's and the Warrant Registrar's
procedures. In addition, Definitive Warrants shall be transferred to all
beneficial owners in exchange for their beneficial interests in a Global Warrant
if (i) DTC (A) notifies the Company that it is unwilling or unable to continue
as depository for the Global Warrant and the Company thereupon fails to appoint
a successor depository upon 90 days or (B) has ceased to be a clearing agency
registered under the Exchange Act and the Company thereupon fails to appoint a
successor depository upon 90 days, (ii) upon the continuance of an Event of
Default under the Indenture or (iii) the Company, at its option, notifies the
Warrant Agent in writing that it elects to cause issuance of Definitive
Warrants. In addition, beneficial interests in a Global Warrant may be exchanged
for Definitive Warrants upon request but only upon at least 20 days' prior
written notice given to the Warrant by or on behalf of DTC in accordance with
customary procedures. In all cases, Definitive Warrants delivered in exchange
for any Global Warrants or beneficial interest therein will be registered in
names, and issued in any approved denominations, requested by or on behalf of
DTC (in accordance with its customary procedures) and will bear, the Private
Placement Legend set forth in Section 2.5, if applicable, unless the Company
determines otherwise in compliance with applicable law.
(c) In connection with any transfer of a portion of the beneficial interest in a
Global Warrant pursuant to subsection (b) of this Section 2.9 to beneficial
owners who are
<PAGE> 15
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required to hold Definitive Warrants, the Warrant Registrar shall reflect on its
books and records the date and a decrease in the amount of such Global Warrant
in an amount equal to the amount of the beneficial interest in the Global
Warrant to be transferred, and the Company shall execute, and the Warrant Agent
shall countersign and deliver, one or more Definitive Warrants of like tenor and
amount.
(d) In connection with the transfer of an entire Global Warrant to beneficial
owners pursuant to subsection (b) of this Section 2.9, such Global Warrant shall
be deemed to be surrendered to the Warrant Agent for cancellation, and the
Company shall execute, and the Warrant Agent shall countersign and deliver, to
each beneficial owner identified by DTC in exchange for its beneficial interest
in such Global Warrant, an equal aggregate amount of Definitive Warrants of
authorized denominations.
(e) Any Definitive Warrant delivered in exchange for an interest in a Global
Warrant pursuant to subsection (c) or subsection (d) of this Section shall,
except as otherwise provided herein, bear the Private Placement Legend set forth
in Section 2.5, if applicable.
(f) The Holder of a Global Warrant may grant proxies and otherwise authorize any
Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Agreement or the Warrants.
<PAGE> 16
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2.10 Special Transfer Provisions.
(a) Rule 144A Global Warrant to Regulation S Global Warrant. If a Holder of a
beneficial interest in the Rule 144A Global Warrant deposited with DTC wishes at
any time to exchange its interest in such Rule 144A Global Warrant for an
interest in the Regulation S Global Warrant, or to transfer its interest in such
Rule 144A Global Warrant to a Person who wishes to take delivery thereof in the
form of an interest in such Regulation S Global Warrant, such Holder may,
subject to the rules and procedures of DTC and to the requirements set forth in
the following sentence, exchange or cause the exchange or transfer or cause the
transfer of such interest for an equivalent beneficial interest in such
Regulation S Global Warrant. Upon receipt by the Warrant Agent, as Transfer
Agent, of (1) instructions given in accordance with DTC's procedures from or on
behalf of a Holder of a beneficial interest in the Rule 144A Global Warrant,
directing the Warrant Agent (via DWAC), as Transfer Agent, to credit or cause to
be credited a beneficial interest in the Regulation S Global Warrant in an
amount equal to the beneficial interest in the Rule 144A Global Warrant to be
exchanged or transferred, (2) a written order given in accordance with DTC's
procedures containing information regarding the Euroclear or Cedel account to be
credited with such increase and the name of such account, and (3) a certificate
in the form of Exhibit C given by the Holder of such beneficial interest stating
that the exchange or transfer of such interest has been made pursuant to and in
accordance with Rule 904 of Regulation S or Rule 144 under the Securities Act,
the Warrant Agent, as Transfer Agent, shall promptly deliver appropriate
instructions to DTC (via DWAC), its nominee, or the custodian for DTC, as the
case may be, to reduce or reflect on its records a reduction of the Rule 144A
Global Warrant by the amount of the beneficial interest in such Rule 144A Global
Warrant to be so exchanged or transferred from the relevant participant, and the
Warrant Agent, as Transfer Agent, shall promptly deliver appropriate
instructions (via DWAC) to DTC, its nominee, or the custodian for DTC, as the
case may be, concurrently with such reduction, to increase or reflect on its
records an increase of the amount of such Regulation S Global Warrant by the
amount of the beneficial interest in such Rule 144A Global Warrant to be so
exchanged or transferred, and to credit or cause to be credited to the account
of the Person specified in such instructions (who shall be the agent member of
Euroclear or Cedel, or both, as the case may be) a beneficial interest in such
Regulation S Global Warrant equal to the reduction in the amount of such Rule
144A Global Warrant.
(b) Regulation S Global Warrant to Rule 144A Global Warrant. If a Holder of a
beneficial interest in the Regulation S Global Warrant wishes at any time to
exchange its interest in such Regulation S Global Warrant for an interest in the
Rule 144A Global Warrant, or to transfer its interest in such Regulation S
Global Warrant to a Person who wishes to take delivery thereof in the form of an
interest in such Rule 144A Global Warrant, such Holder may, subject to the rules
and procedures of Euroclear or Cedel and DTC, as the case may be, and to the
requirements set forth in the following sentence, exchange or cause the exchange
or transfer or cause the transfer of such interest for an equivalent beneficial
interest in such Rule 144A Global Warrant. Upon receipt by the Warrant Agent, as
Transfer Agent, of (l) instructions given in accordance with the procedures of
Euroclear or Cedel and DTC, as the case may be, from or on behalf of a
beneficial owner of an interest in the Regulation S Global Warrant directing the
Warrant Agent, as Transfer Agent, to credit or cause to be credited a beneficial
interest in the Rule 144A Global Warrant in an amount equal to the beneficial
interest in the Regulation S Global Warrant to be exchanged or transferred, (2)
a written order given in accordance with the
<PAGE> 17
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procedures of Euroclear or Cedel and DTC, as the case may be, containing
information regarding the account with DTC to be credited with such increase and
the name of such account, and (3) prior to the expiration of the Restricted
Period, a certificate in the form of Exhibit C given by the Holder of such
beneficial interest and stating that the Person transferring such interest in
such Regulation S Global Warrant reasonably believes that the Person acquiring
such interest in such Rule 144A Global Warrant is a Qualified Institutional
Buyer and is obtaining such beneficial interest in a transaction meeting the
requirements of Rule 144A and any applicable securities laws of any state of the
United States or any other jurisdiction, the Warrant Agent, as Transfer Agent,
shall promptly deliver (via DWAC) appropriate instructions to DTC, its nominee,
or the custodian for DTC, as the case may be, to reduce or reflect on its
records a reduction of the Regulation S Global Warrant by the amount of the
beneficial interest in such Regulation S Global Warrant to be exchanged or
transferred, and the Warrant Agent, as Transfer Agent, shall promptly deliver
(via DWAC) appropriate instructions to DTC, its nominee, or the custodian for
DTC, as the case may be, concurrently with such reduction, to increase or
reflect on its records an increase of the amount of such Rule 144A Global
Warrant by the amount of the beneficial interest in such Regulation S Global
Warrant to be so exchanged or transferred, and to credit or cause to be credited
to the account of the Person specified in such instructions a beneficial
interest in such Rule 144A Global Warrant equal to the reduction in the amount
of such Regulation S Global Warrant. After the expiration of the Restricted
Period, the certification requirement set forth in clause (3) of the second
sentence of this Section 2.10(b) will no longer apply to such transfers.
(c) Any beneficial interest in one of the Global Warrants that is transferred to
a Person who takes delivery in the form of an interest in the other Global
Warrant will, upon transfer, cease to be an interest in such Global Warrant and
become an interest in the other Global Warrant and, accordingly, will thereafter
be subject to all transfer restrictions and other procedures applicable to
beneficial interests in such other Global Warrant for as long as it remains such
an interest.
(d) Other Exchanges. In the event that a Global Warrant is exchanged for
Definitive Warrants in registered form pursuant to Section 2.9(b), such Warrants
may be exchanged or transferred for one another only in accordance with such
procedures as are substantially consistent with the provisions of Sections
2.10(a) and (b) above (including the certification requirements intended to
ensure that such exchanges or transfers comply with Rule 144, Rule 144A or
Regulation S, as the case may be) and as may be from time to time adopted by the
Company and the Warrant Agent.
(e) Private Placement Legend. Upon the transfer, exchange or replacement of
Warrants not bearing the Private Placement Legend, the Warrant Registrar shall
deliver Warrants that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Warrants bearing the Private Placement
Legend, the Warrant Registrar shall deliver only Warrants that bear the Private
Placement Legend unless there is delivered to the Warrant Registrar an Opinion
of Counsel reasonably satisfactory to the Company and the Warrant Agent to the
effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the Securities
Act.
(f) General. The provisions hereof shall be qualified in their entirety by any
applicable securities laws of the United States and any other applicable
jurisdiction and by the procedures of any applicable clearing agency, in each
case as in effect from time to time, and all such laws and clearing procedures
shall be deemed to be incorporated herein by reference. By its acceptance of any
Warrant bearing the Private Placement Legend, each Holder of such a Warrant
<PAGE> 18
15
acknowledges the restrictions on transfer of such Warrant set forth in this
Agreement and in the Private Placement Legend and agrees that it will transfer
such Warrant only as provided in this Agreement. The Warrant Agent shall not
register a transfer of any Warrant Certificate unless such transfer complies
with the restrictions on transfer of such Warrant Certificate set forth in this
Warrant Agreement.
(g) Resale Restriction Termination Date. The Company shall deliver to the
Warrant Agent an Officer's Certificate setting forth the dates on which the
Resale Restriction Termination Date terminates.
The Warrant Registrar shall retain copies of all letters, notices
and other written communications received pursuant to Section 2.9 or this
Section 2.10. The Company shall have the right to inspect and make copies of all
such letters, notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Warrant Registrar.
(i) No Obligation of the Warrant Agent. The Warrant Agent shall have no
responsibility or obligation to any beneficial owner of a Global Warrant, a
member of, or a participant in DTC or other Person with respect to any ownership
interest in the Warrants, with respect to the accuracy of the records of DTC or
its nominee or of any participant or member thereof or with respect to the
delivery to any participant, member, beneficial owner or other Person (other
than DTC) of any notice (including any notice of redemption) or the payment of
any amount, under or with respect to such Warrants. All notices and
communications with respect to the Warrants shall be given to the Holders and
all payments in respect of the Warrants represented by the Global Warrant shall
be made by wire transfer of immediately available funds to the accounts
specified by the Holder of the Global Warrant. With respect to Definitive
Warrants, the Company will make all payments by wire transfer of immediately
available funds to the accounts specified by the Holders thereof or, if no such
account is specified, by mailing a check to each such Holder's registered
address. The rights of beneficial owners in any Global Warrant shall be
exercised only through DTC subject to the applicable rules and procedures of
DTC. The Warrant Agent may rely and shall be fully protected and indemnified
pursuant to Section 6.5 in relying upon information furnished by DTC with
respect to any beneficial owners, its members and participants.
(ii) The Warrant Agent shall have no obligation or duty to monitor, determine
or inquire as to compliance with any restrictions on transfer imposed under this
Agreement or under applicable law with respect to any transfer of any interest
in any Warrant (including without limitation any transfers between or among DTC
participants, members or beneficial owners in any Global Warrant) other than to
require delivery of such certificates and other documentation of evidence as are
expressly required by, and to do so if and when expressly required by, the terms
of this Agreement, and to examine the same to determine substantial compliance
as to form with the express requirements hereof.
2.11 Offices for Exercise, etc. So long as any of the Warrants remain
outstanding, the Company will designate and maintain in the Borough of
Manhattan, The City of New York: (a) an office or agency where the Warrant
Certificates may be presented for exercise, (b) an office or agency where the
Warrant Certificates may be presented for registration of transfer and for
exchange (including the exchange of temporary Warrant Certificates for
<PAGE> 19
16
Definitive Warrant Certificates pursuant to Section 2.6 hereof), and (c) an
office or agency where notices and demands to or upon the Company in respect of
the Warrants or of this Agreement may be served. The Company may from time to
time change or rescind such designation, as it may deem desirable or expedient;
provided, however, that an office or agency shall at all times be maintained in
the Borough of Manhattan, The City of New York, as provided in the first
sentence of this Section. In addition to such office or offices or agency or
agencies, the Company may from time to time designate and maintain one or more
additional offices or agencies within or outside The City of New York, where
Warrant Certificates may be presented for exercise or for registration of
transfer or for exchange, and the Company may from time to time change or
rescind such designation, as it may deem desirable or expedient. The Company
will give to the Warrant Agent and the Warrant Registrar written notice of the
location of any such office or agency and of any change of location thereof. The
Company hereby designates the Warrant Agent at its corporate trust office in the
Borough of Manhattan, The City of New York (the "Warrant Agent Office"), as the
initial agency maintained for each such purpose. In case the Company shall fail
to maintain any such office or agency or shall fail to give such notice of the
location or of any change in the location thereof, presentations and demands may
be made and notice may be served at the Warrant Agent Office and the Company
appoints the Warrant Agent as its agent to receive all such presentations,
surrenders, notices and demands.
2.12 Cancellation. All Warrant Certificates surrendered for the purpose of
exercise (in whole or in part), exchange, substitution or transfer shall, if
surrendered to the Company or to any of its agents, be delivered to the Warrant
Agent for cancellation or in cancelled form, or if surrendered to the Warrant
Agent shall be cancelled by it, and no Warrant Certificates shall be issued in
lieu thereof except as expressly permitted by any of the provisions of this
Agreement. If the Company purchases or acquires Warrants and if the Company so
chooses, the Company may deliver to the Warrant Agent for cancellation and
retirement, and the Warrant Agent shall so cancel and retire (subject to the
record retention provisions of the Exchange Act), the Warrant Certificates
evidencing said Warrants. The Warrant Agent shall destroy such cancelled Warrant
Certificates, and in such case shall upon the written request of the Company
deliver a certificate of destruction thereof to the Company. The Warrant Agent
shall account promptly to the Company with respect to Warrants exercised and
concurrently pay to the Company all monies received by the Warrant Agent for the
purchase of the Warrant Shares through the exercise of such Warrants.
2.13 Lost, Stolen, Destroyed, Defaced or Mutilated Warrant Certificates. Upon
receipt by the Company and the Warrant Agent (or any agent of the Company or the
Warrant Agent, if requested by the Company) of evidence satisfactory to them of
the loss, theft, destruction, defacement, or mutilation of any Warrant
Certificate and of indemnity satisfactory to them (which may include posting a
bond) and, in the case of mutilation or defacement, upon surrender thereof to
the Warrant Agent for cancellation, then, in the absence of notice to the
Company or the Warrant Agent that such Warrant Certificate has been acquired by
a bona fide purchaser or holder in due course, the Company shall execute, and an
authorized signatory of the Warrant Agent shall manually countersign and
deliver, in exchange for or in lieu of the lost, stolen, destroyed, defaced or
mutilated Warrant Certificate, a new Warrant Certificate representing a like
number of Warrants, bearing a number or other distinguishing symbol not
contemporaneously outstanding. Upon the issuance of any new Warrant Certificate
under this Section, the Company may require the payment from the holder of such
Warrant Certificate of a sum sufficient to cover any tax, stamp tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Warrant Agent and the Warrant
Registrar) in connection therewith. Every substitute Warrant Certificate
executed and delivered pursuant to this Section in lieu of any lost, stolen or
destroyed Warrant
<PAGE> 20
17
Certificate shall constitute an additional contractual obligation of the
Company, whether or not the lost, stolen or destroyed Warrant Certificate shall
be at any time enforceable by anyone, and shall be entitled to the benefits of
(but shall be subject to all the limitations of rights set forth in) this
Agreement equally and proportionately with any and all other Warrant
Certificates duly executed and delivered hereunder. The provisions of this
Section 2.13 are exclusive with respect to the replacement of lost, stolen,
destroyed, defaced or mutilated Warrant Certificates and shall preclude (to the
extent lawful) any and all other rights or remedies notwithstanding any law or
statute existing or hereafter enacted to the contrary with respect to the
replacement of lost, stolen, destroyed, defaced or mutilated Warrant
Certificates.
The Warrant Agent is hereby authorized to countersign in accordance
with the provisions of this Agreement, and deliver the new Warrant Certificates
required pursuant to the provisions of this Section.
3. SECTION TERMS OF WARRANTS; EXERCISE OF WARRANTS.
3.1 Exercise Period. Subject to the terms of this Agreement, each Warrant Holder
shall have the right, which may be exercised commencing at the opening of
business on the Exercisability Date and until 5:00 p.m., New York City time on
the Expiration Date, to receive from the Company the number of fully paid and
nonassessable Warrant Shares which the Holder may at the time be entitled to
receive on exercise of such Warrants and payment of the Exercise Price then in
effect for such Warrant Shares. Each Warrant not exercised prior to 5:00 p.m.,
New York City time, on the Expiration Date shall become void and all rights
thereunder and all rights in respect thereof under this Agreement shall cease as
of such time.
Until the Separation Date, each $1,000 principal amount of Notes,
and Warrants which comprise each Unit, may not be separately transferred or
exchanged. The Warrant Agent shall coordinate its activities hereunder with the
Trustee under the Indenture and the Unit Agent under the Unit Agreement, and may
rely upon information provided by such Trustee regarding ownership or transfer
of the Notes and/or by the Unit Agent regarding ownership or transfer of the
Units.
The Company shall give notice not less than 90, and not more than
120, days prior to the Expiration Date to the Holders of the outstanding
Warrants to the effect that the Warrants will terminate and become void as of
5:00 p.m., New York City time, on the Expiration Date; provided, however, that
the failure by the Company to give such notice as provided in this Section shall
not affect such termination and becoming void of the Warrants as of 5:00 p.m.,
New York City time, on the Expiration Date.
3.2 Manner of Exercise. A Warrant may be exercised at any time on or after the
Exercisability Date and prior to the Expiration Date upon (i) surrender to the
Warrant Agent of the Warrant Certificates, together with the form of election to
purchase properly completed and executed by the Holder thereof and (ii) payment
to the Warrant Agent, for the account of the Company, of the Exercise Price for
each Ordinary Share or other securities issuable upon exercise of such Warrants.
The Exercise Price may be paid (i) in cash or by certified or official bank
check or by wire transfer to an account designated by the Company for such
purpose (a
<PAGE> 21
18
"Cash Exercise") or (ii) without the payment of cash, by reducing the number of
Ordinary Shares that would be obtainable upon the exercise of a Warrant and
payment of the Exercise Price in cash so as to yield a number of Ordinary Shares
upon the exercise of such Warrant equal to the product of (a) the number of
Ordinary Shares for which such Warrant is exercisable as of the date of exercise
(if the Exercise Price were being paid in cash) and (b) the Cashless Exercise
Ratio. An exercise of a Warrant in accordance with clause (ii) of the
immediately preceding sentence is herein called a "Cashless Exercise." In the
event of a Cashless Exercise of Warrants, the Company will purchase from the
holder thereof such number of Warrants as would have entitled the holder thereof
to receive the excess of the number of Ordinary Shares deliverable upon a Cash
Exercise over the number of Ordinary Shares deliverable upon a Cashless
Exercise, for a purchase price equal to the Exercise Price multiplied by the
excess of the number of Ordinary Shares purchasable upon a Cash Exercise over
the number of Ordinary Shares purchasable upon a Cashless Exercise. The Company
agrees to offset the purchase price referred to in the immediately preceding
sentence with the obligation to pay the Exercise Price in respect of the
Ordinary Shares deliverable upon a Cashless Exercise. Upon surrender of a
Warrant Certificate representing more than one Warrant in connection with the
holder's option to elect a Cashless Exercise, the number of Ordinary Shares
deliverable upon a Cashless Exercise shall be equal to the number of Ordinary
Shares issuable upon the exercise of Warrants that the holder specifies are to
be exercised pursuant to a Cashless Exercise multiplied by the Cashless Exercise
Ratio. All provisions of this Agreement shall be applicable with respect to a
surrender of a Warrant Certificate pursuant to a Cashless Exercise for less than
the full number of Warrants represented thereby. Upon surrender of the Warrant
Certificate and payment of the Exercise Price in accordance with this Agreement,
the Company will issue Ordinary Shares of the Company for each Warrant evidenced
by such Warrant Certificate, subject to adjustment as described herein. Whenever
there occurs a Cashless Exercise, the Company shall deliver to the Warrant Agent
a certificate setting forth the Cashless Exercise Ratio. The Warrant Agent shall
be entitled to rely on such certificate and shall be under no duty or
responsibility with respect to any such certificate, except to exhibit the same
from time to time, to any Holder desiring an inspection thereof during
reasonable business hours. The Warrant Agent shall not at any time be under any
duty or responsibility to any Holder to determine whether the Cashless Exercise
Ratio is correct or with respect to the method employed in determining the
Cashless Exercise Ratio or the validity or value of any Ordinary Shares.
3.3 Issuance of Warrant Shares. Subject to Section 2.13, upon the surrender of
Warrant Certificates and payment of the Exercise Price, as set forth above, the
Company shall issue Ordinary Shares in such name or names as the Holder may
designate, for the number of full Warrant Shares so purchased upon the exercise
of such Warrants or other securities or property to which it is entitled,
registered or otherwise to the Person or Persons entitled to receive the same,
together with cash as provided in Section 3.4 in respect of any fractional
Warrant Shares otherwise issuable upon such exercise. Such Ordinary Shares shall
be deemed to have been issued and any Person so designated shall be deemed to
have become a Holder of record of such Warrant Shares as of the date of the
surrender of such Warrant Certificates and payment of the per share Exercise
Price or upon a Cashless Exercise.
The Company hereby agrees that no service charge will be made for
registration of transfer or exchange upon surrender of any Warrant Certificate
at the office of the Warrant Agent maintained for that purpose. Holders may be
required to make payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration or
transfer or exchange of Warrant Certificates.
<PAGE> 22
19
3.4 Fractional Warrant Shares. The Company shall not be required to issue
fractional Warrant Shares on the exercise of Warrants. If more than one Warrant
shall be exercised in full at the same time by the same Holder, the number of
full Warrant Shares which shall be issuable upon such exercise shall be computed
on the basis of the aggregate number of Warrant Shares purchasable pursuant
thereto. If any fraction of a Warrant Share would, except for the provisions of
this Section 3.4, be issuable on the exercise of any Warrant (or specified
portion thereof), the Company may, at its option, pay an amount in cash equal to
the Current Market Value for one Warrant Share on the Business Day immediately
preceding the date the Warrant is exercised, multiplied by such fraction,
computed to the nearest whole Dutch guilder or Euro, as applicable.
3.5 Sufficient Authorized Share Capital.
The Company has and will maintain an authorized share capital
sufficient for the issuance of such number of Ordinary Shares as will be
issuable upon the exercise of all outstanding Warrants. Such Ordinary Shares,
when issued and paid for in accordance with the Warrant Agreement, will be duly
and validly issued, fully paid and nonassessable, free of preemptive rights and
free from all liens, charges and security interests with respect to the issue
thereof.
3.6 Payment of Taxes. The Company will pay all documentary stamp taxes
attributable to the initial issuance of the Warrants and the Warrant Shares
issuable upon the exercise of Warrants; provided, however, that the Company
shall not be required to pay any tax or taxes which may be payable in respect of
any transfer involved in the issue of any Warrant Certificates or Warrant Shares
in a name other than that of the Holder of a Warrant Certificate surrendered
upon the exercise of a Warrant, and the Company shall not be required to issue
or deliver such Warrant Certificates unless or until the Person or Persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
4. SECTION ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES ISSUABLE.
4.1 Adjustments. The Exercise Price and the number of Warrant Shares purchasable
upon the exercise of Warrants shall be subject to adjustment from time to time
as follows:
(a) Changes in Ordinary Shares. In the event that at any time or from time to
time after the date hereof the Company shall (i) pay a dividend or make a
distribution on its Ordinary Shares in Ordinary Shares or other shares of
capital stock, (ii) subdivide its outstanding Ordinary Shares into a larger
number of Ordinary Shares, (iii) combine its outstanding Ordinary Shares into a
smaller number of Ordinary Shares or (iv) increase or decrease the number of
Ordinary Shares outstanding by reclassification of its Ordinary Shares, then the
number of Ordinary Shares purchasable upon exercise of each Warrant immediately
after the happening of such event shall be adjusted (including by adjusting the
definition of "Warrant Shares") so that, after giving effect to such adjustment,
the Holder of each Warrant shall be entitled to receive the
<PAGE> 23
20
number of Ordinary Shares upon exercise that such Holder would have owned or
have been entitled to receive had such Warrants been exercised immediately prior
to the happening of the events described above (or, in the case of a dividend or
distribution of Ordinary Shares, immediately prior to the record date therefor).
An adjustment made pursuant to this Section 4.1(a) shall become effective
immediately after the effective date, retroactive to the record date therefor in
the case of a dividend or distribution in Ordinary Shares, and shall become
effective immediately after the effective date in the case of a subdivision,
combination or reclassification.
(b) Cash Dividends and Other Distributions. In case at any time or from time to
time after the date hereof the Company shall distribute to Holders of Ordinary
Shares (i) any dividend or other distribution of cash, evidences of its
indebtedness, shares of its capital stock or any other properties or securities
or (ii) any options, warrants or other rights to subscribe for or purchase any
of the foregoing (other than, in each case set forth in (i) and (ii), (x) any
dividend or distribution described in Section 4.1(a) or (y) any rights, options,
warrants or securities described in Section 4.1(c)) then the number of Warrant
Shares purchasable upon the exercise of each Warrant shall be increased to a
number determined by multiplying the number of Ordinary Shares issuable
immediately prior to the record date upon exercise of each Warrant by a
fraction, the numerator of which shall be the sum of (x) any cash distributed
per Warrant Share and (y) the Current Market Value of the portion, if any, of
the distribution applicable to one Warrant Share consisting of evidences of
indebtedness, shares of stock, securities, other property, warrants, options or
subscription of purchase rights and the denominator of which shall be the
Current Market Value of the Ordinary Shares comprising one Warrant Share
immediately after such dividend or other distribution. Such adjustment shall be
made whenever any distribution is made and shall become effective as of the date
of distribution, retroactive to the record date for any such distribution;
provided, however, that the Company is not required to make an adjustment
pursuant to this Section 4.1(b) if at the time of such distribution the Company
makes the same distribution to Holders of Warrants as it makes to holders of
Ordinary Shares pro rata based on the number of Ordinary Shares for which such
Warrants are exercisable (whether or not currently exercisable). No adjustment
shall be made pursuant to this Section 4.1(b) which shall have the effect of
decreasing the number of Warrant Shares purchasable upon exercise of each
Warrant.
(c) Rights Issue. In the event that at any time or from time to time after the
date hereof the Company shall issue, sell, distribute or otherwise grant any
rights to subscribe for or to purchase, or any options or warrants for the
purchase of, or any securities convertible or exchangeable into, Ordinary Shares
to all holders of Ordinary Shares, entitling such holders to subscribe for or
purchase Ordinary Shares or stock or securities convertible into Ordinary Shares
within 60 days after the record date for such issuance, sale, distribution or
other grant, as the case may be, and the sum of (a) the offering price of such
right, option, warrant or other security (on a per share basis) and (b) any
subscription, purchase, conversion or exchange price per share of Ordinary
Shares (the "Consideration") is lower at the record date for such issuance than
the then Current Market Value per share of such Ordinary Shares, the number of
Ordinary Shares thereafter purchasable shall be increased to a number determined
by multiplying the number of Ordinary Shares issuable immediately prior to the
record date upon exercise of each Warrant by a fraction, the numerator of which
shall be the number of Ordinary Shares outstanding on the date of issuance of
such rights, options, warrants or securities plus the number of additional
Ordinary Shares offered for subscription or purchase or into or for which such
securities are convertible or exchangeable, and the denominator of which shall
be the number of Ordinary Shares outstanding on the date of issuance of such
rights, options, warrants or securities plus the total number of Ordinary Shares
which could be purchased at the Current Market Value with the aggregate of the
Consideration with respect to such issuance, sale, distribution or other grant.
Such adjustment
<PAGE> 24
21
shall be made whenever such rights, options or warrants are issued and shall
become effective retroactively immediately after the record date for the
determination of stockholders entitled to receive such rights, options, warrants
or securities; provided however, that the Company is not required to make an
adjustment pursuant to this Section 4.1(c) if the Company shall make the same
distribution to Holders of Warrants. No adjustment shall be made pursuant to
this Section 4.1(c) which shall have the effect of decreasing the number of
Ordinary Shares purchasable upon exercise of each Warrant.
If the Company at any time shall issue two or more securities as a
unit and one or more of such securities shall be rights, options or warrants for
or securities convertible or exchangeable into, Ordinary Shares subject to this
Section 4.1(c), the consideration allocated to each such security shall be
determined in good faith by the Board.
(i) Combination; Liquidation. Except as provided in clause (ii) below, in the
event of certain consolidations, mergers or demergers of the Company, or the
sale of all or substantially all of the assets of the Company to another Person
(a "Combination"), each Warrant will thereafter be exercisable for the right to
receive the kind and amount of shares of stock or other securities or property
to which such holder would have been entitled as a result of such Combination
had the Warrants been exercised immediately prior thereto. Unless clause (ii) is
applicable to a Combination, if any Warrants shall be outstanding after a
Combination, the Company shall provide that the surviving or acquiring Person
(the "Successor Company") in such Combination will enter into an agreement with
the Warrant Agent confirming the Holders' rights pursuant to this Section 4.1(d)
and providing for adjustments, which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 4. The provisions of
this Section 4.1(d) shall similarly apply to successive Combinations involving
any Successor Company.
(ii) In the event of (A) a Combination, and, in connection therewith, the
consideration payable to the holders of Ordinary Shares in exchange for their
shares is payable solely in cash or (B) a dissolution, liquidation or winding-up
of the Company, then the holders of the Warrants will be entitled to receive
distributions on an equal basis with the holders of Ordinary Shares or other
securities issuable upon exercise of the Warrants, as if the Warrants had been
exercised immediately prior to such event, less the Exercise Price. Upon receipt
of such payment, if any, the Warrants will expire and the rights of holders
thereof will cease.
(iii) In the case of any such Combination, the surviving or acquiring Person as
described in this Section 4.1(d) and, in the event of any dissolution,
liquidation or winding-up of the Company, the Company, shall deposit promptly
with the Warrant Agent the funds, if any, necessary to pay to the holders of the
Warrants the amounts to which they are entitled as described above. After such
funds and the surrendered Warrant Certificates are received, the Warrant Agent
shall make payment to the Holders by delivering a check, or by wire transfer of
same-day funds, in such amount as is appropriate (or, in the case of
consideration other than cash, such other consideration as is appropriate) to
such Person or Persons as it may be directed in writing by the Holders
surrendering such Warrants.
(d) Tender Offers; Exchange Offers. In the event that the Company or any
subsidiary of the Company shall purchase Ordinary Shares pursuant to a tender
offer or an
<PAGE> 25
22
exchange offer for a price per Ordinary Share that is greater than the then
Current Market Value per share of Ordinary Shares in effect at the end of the
trading day immediately following the day on which such tender offer or exchange
offer expires, then the Company, or such subsidiary of the Company, shall,
within 10 Business Days of the expiry of such tender offer or exchange offer,
offer to purchase Warrants for comparable consideration per Ordinary Share based
on the number of Ordinary Shares which the Holders of such Warrants would
receive upon exercise of such Warrants (the "Offer") (such amount less the
Exercise Price in respect of such share, the "Per Share Consideration");
provided, however, if a tender offer is made for only a portion of the
outstanding Ordinary Shares, then such offer shall be made for such Ordinary
Shares issuable upon exercise of the Warrants in the same pro rata proportion.
The Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase such Warrants for the applicable Per Share
Consideration.
(e) Other Events. If any event occurs as to which the foregoing provisions of
this Section 4 are not strictly applicable or, if strictly applicable, would
not, in the good faith judgment of the Board, fairly and adequately protect the
purchase rights of the Warrants in accordance with the essential intent and
principles of such provisions, then the Board shall make such adjustments in the
application of such provisions, in accordance with such essential intent and
principles, as shall be reasonably necessary, in the good faith opinion of the
Board, to protect such purchase rights as aforesaid.
(f) When No Adjustment Required. Without limiting any other exception contained
in this Section 4.1, and in addition thereto, no adjustment need be made for:
(i) (A) grants to, exercises of Rights by, or issuances of equity
securities to employees, directors, consultants or advisors of the Company
or any of its subsidiaries and (B) exercises of Rights by, or issuances of
equity securities in connection with Rights previously issued to former
employees, former directors, former consultants (to the extent that all
such securities, other than those permitted by clause (ii) below, do not
have an aggregate value in excess of 15% of the equity value of the
Company on a fully diluted basis, as determined in good faith by the
Board). As used herein, "Right" shall mean any right, option, warrant or
convertible or exchangeable security containing the right to subscribe for
or acquire on or more Ordinary Shares, excluding the Warrants;
(ii) options, warrants or other agreements or rights to purchase capital
stock of the Company entered into or granted prior to the date of the
issuance of the Warrants or any issuance of capital stock pursuant thereto
or in connection therewith;
(iii) bona fide public offerings or private placements through investment
banks of international standing;
(iv) rights to purchase Ordinary Shares pursuant to a Company plan for
reinvestment of dividends or interest; and
(v) a change in the par value of Ordinary Shares (including a change from
par value to no par value or vice versa).
<PAGE> 26
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(g) Adjustment of Exercise Price. Whenever the number of Ordinary Shares
purchasable upon the exercise of each Warrant is adjusted, as provided under
this Section 4, the Exercise Price per Ordinary Share payable upon exercise of
such Warrant shall be adjusted (calculated to the nearest NLG 0.01) so that it
shall equal the price determined by multiplying such Exercise Price immediately
prior to such adjustment by a fraction the numerator of which shall be the
number of Ordinary Shares purchasable upon the exercise of each Warrant
immediately prior to such adjustment and the denominator of which shall be the
number of Ordinary Shares so purchasable immediately thereafter. Following any
adjustment to the Exercise Price pursuant to this Section 4, the amount payable,
when adjusted, shall never be less than the par value per Ordinary Share at the
time of such adjustment.
If after an adjustment, a Holder of a Warrant upon exercise of it
may receive shares of two or more classes of capital stock of the Company, the
Company shall determine the allocation of the adjusted Exercise Price between
such classes of shares in a manner that the Board deems fair and equitable to
the Holders. After such allocation, the exercise privilege and the Exercise
Price of each class of shares shall thereafter be subject to adjustment on terms
comparable to those applicable to Ordinary Shares under this Section 4.
Such adjustment shall be made successively whenever any event listed
above shall occur.
4.2 Superseding Adjustment. Upon the expiration of any rights, options,
warrants or conversion or exchange privileges which resulted in the adjustments
pursuant to this Section 4, if any thereof shall not have been exercised, the
number of Warrant Shares purchasable upon the exercise of each Warrant shall be
readjusted as if (A) the only Ordinary Shares issuable upon exercise of such
rights, options, warrants, conversion or exchange privileges were the Ordinary
Shares, if any, actually issued upon the exercise of such rights, options,
warrants or conversion or exchange privileges and (B) Ordinary Shares actually
issued, if any, were issuable for the consideration actually received by the
Company upon such exercise plus the aggregate consideration, if any, actually
received by the Company for the issuance, sale or grant of all such rights,
options, warrants or conversion or exchange privileges whether or not exercised;
provided, however, that no such readjustment shall (except by reason of an
intervening adjustment under Section 4.1(a)) have the effect of decreasing the
number of Warrant Shares purchasable upon the exercise of each Warrant by an
amount in excess of the amount of the adjustment initially made in respect of
the issuance, sale or grant of such rights, options, warrants or conversion or
exchange privileges.
4.3 Minimum Adjustment. The adjustments required by the preceding Sections of
this Section 4 shall be made whenever and as often as any specified event
requiring an adjustment shall occur, except that no adjustment of the number of
Ordinary Shares purchasable upon exercise of Warrants that would otherwise be
required shall be made (except in the case of a subdivision or combination of
Ordinary Shares, as provided for in Section 4.1(a)) unless and until such
adjustment either by itself or with other adjustments not previously made
increases or decreases by at least 1% of the number of Ordinary Shares
purchasable upon exercise of Warrants immediately prior to the making of such
adjustment. Any adjustment representing a change of less than such minimum
amount shall be carried forward and made as soon as such adjustment, together
with other adjustments required by this Section 4 and not
<PAGE> 27
24
previously made, would result in a minimum adjustment. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at the close of
business on the date of its occurrence. In computing adjustments under this
Section 4, fractional interests in Ordinary Shares shall be taken into account
to the nearest one-hundredth of a share.
4.4 Notice of Adjustment. Whenever the number of Ordinary Shares and other
property, if any, purchasable upon exercise of Warrants is adjusted, as herein
provided, the Company shall deliver to the Warrant Agent a certificate of a firm
of internationally recognized independent accountants (who may be the regular
accountants employed by the Company) setting forth, in reasonable detail, the
event requiring the adjustment and the method by which such adjustment was
calculated (including a description of the basis on which the Board determined
the fair market value of any evidences of indebtedness, other securities or
property or warrants or other subscription or purchase rights), and specifying
the number of Ordinary Shares purchasable upon exercise of Warrants after giving
effect to such adjustment. The Company shall promptly mail, or at the expense of
the Company cause the Warrant Agent to mail, a copy of such certificate to each
Holder in accordance with Section 7.2. The Warrant Agent shall be entitled to
rely on such certificate and shall be under no duty or responsibility with
respect to any such certificate, except to exhibit the same from time to time,
to any Holder desiring an inspection thereof during reasonable business hours.
The Warrant Agent shall not at any time be under any duty or responsibility to
any Holder to determine whether any facts exist which may require any adjustment
of the number of Ordinary Shares or other stock or property, purchasable on
exercise of the Warrants, or with respect to the nature or extent of any such
adjustment when made, or with respect to the method employed in making such
adjustment or the validity or value of any Ordinary Shares.
4.5 Notice of Certain Transactions. In the event that the Company shall
propose (a) to pay any dividend payable in securities of any class to the
holders of its Ordinary Shares or to make any other distribution to the holders
of its Ordinary Shares, (b) to offer the holders of its Ordinary Shares rights
to subscribe for or to purchase any securities convertible into Ordinary Shares
or Ordinary Shares or shares of stock of any class or any other securities,
rights or options, (c) to effect any reclassification of its Ordinary Shares,
capital reorganization or Combination or (d) to effect the voluntary or
involuntary dissolution, liquidation or winding-up of the Company, or in the
event of a tender offer or exchange offer described in Section 4.1(e), the
Company shall within 5 Business Days of making such proposal, tender offer or
exchange offer send to the Warrant Agent and the Warrant Agent shall within 5
Business Days thereafter send the Holders a notice (in such form as shall be
furnished to the Warrant Agent by the Company) of such proposed action or offer,
such notice to be mailed by the Company, or at the expense of the Company by the
Warrant Agent, to the Holders at their addresses as they appear in the Warrant
Register, which shall specify the record date for the purposes of such dividend,
distribution or rights, or the date such issuance or event is to take place and
the date of participation therein by the holders of Ordinary Shares, if any such
date is to be fixed, and shall briefly indicate the effect of such action on the
Ordinary Shares and on the number and kind of any other shares of stock and on
other property, if any, and the number of Ordinary Shares and other property, if
any, purchasable upon exercise of each Warrant after giving effect to any
adjustment which will be required as a result of such action. Such notice shall
be given by the Company as promptly as possible and, in the case of any action
covered by clause (a) or (b) above, at least 10 Business Days prior to the
record date for determining holders of the Ordinary Shares for purposes of such
action and, in the case of any other such action, at least 20 Business Days
prior to the date of the taking of such proposed action or the date of
participation therein by the holders of Ordinary Shares, whichever shall be the
earlier.
<PAGE> 28
25
4.6 Adjustment to Warrant Certificate. The form of Warrant Certificate need not
be changed because of any adjustment made pursuant to this Section 4, and
Warrant Certificates issued after such adjustment may state the same Exercise
Price and the same number of Ordinary Shares as are stated in any Warrant
Certificates issued prior to the adjustment. The Company, however, may at any
time in its sole discretion make any change in the form of Warrant Certificate
that it may deem appropriate to give effect to such adjustments and that does
not affect the substance of the Warrant Certificate, and any Warrant Certificate
thereafter issued or countersigned, whether in exchange or substitution for an
outstanding Warrant Certificate or otherwise, may be in the form as so changed.
4.7 Challenge to Good Faith Determination. Whenever the Board shall be required
to make a determination in good faith of the Current Market Value of any item
under Section 4, such determination may be challenged in good faith by the
Majority Holders.
4.8 Treasury Stock. The sale or other disposition of any issued Ordinary Shares
owned or held by or for the account of the Company shall be deemed an issuance
thereof and a repurchase thereof and designation of such shares as treasury
stock shall be deemed to be a redemption thereof for the purposes of this
Agreement.
5. SECTION Holders' Rights.
5.1 Registration Rights.
(a) Shelf Registration Statement. The Company agrees with and for the benefit of
the Holders of the Warrants, that upon exercise of the Warrants by the Holders
thereof, to file with the Commission a Registration Statement for an offering to
be made on a continuous basis pursuant to Rule 415 covering all of the Warrants
(the "Shelf Registration Statement"). The Shelf Registration Statement shall be
on Form F-1 or another appropriate form permitting registration of such Warrants
for resale by Holders in the manner or manners designated by them (including,
without limitation, one or more underwritten offerings). The Company shall not
permit any securities other than the Warrants to be included in the Shelf
Registration Statement. In addition, the Company agrees that it shall make all
required filings pursuant to all applicable state "Blue Sky" or securities laws.
(b) The Company shall use its best efforts to cause the Shelf Registration
Statement to be declared effective under the Securities Act (and to make any
required filings as may be necessary to comply with all applicable state "Blue
Sky" or securities laws) on or prior to the Exercisability Date and shall cause
such Shelf Registration Statement to remain effective under the Securities Act
(and all applicable state "Blue Sky" or securities laws) until the earlier of
(i) such time as all Warrants have been exercised and (ii) the Expiration Date
(the "Effectiveness Period"), or such shorter period ending when all Warrants
covered by the Shelf Registration Statement have been sold in the manner set
forth and as contemplated in the Shelf Registration Statement; provided the
obligation of the Company to cause the Shelf Registration Statement to be
declared effective with respect to Warrant Shares of any holder who did not
request inclusion of their Warrant Shares in the Initial Public Offering
pursuant to Section 5.2 shall be extended until the date which is 180 days after
the Exercisability Date.
<PAGE> 29
26
(c) Withdrawal of Stop Orders. If the Shelf Registration Statement ceases to be
effective for any reason at any time during the Effectiveness Period (other than
because of the sale of all of the securities registered thereunder), the Company
shall use its best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof.
(d) Supplements and Amendments. The Company shall promptly supplement and amend
the Shelf Registration Statement if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration Statement, if required by the Securities Act, or if requested by
the Holders of a majority of the Warrants covered by such Registration Statement
or by any underwriter of such Warrants based on a reasonable belief that such
supplement or amendment is required by law.
(e) Suspension of Shelf Registration Statement. During any consecutive 365-day
period, the Company shall be entitled to suspend the availability of the Shelf
Registration Statement for up to two 30 consecutive-day periods (except for the
30 consecutive-day period immediately prior to the Expiration Date) if the Board
determines in the exercise of its reasonable judgment that there is a valid
business purpose for such suspension and provides notice that such determination
was made to the holders of the Warrants; provided, however, that in no event
shall the Company be required to disclose the business purpose for such
suspension if the Company determines in good faith that such business purpose
must remain confidential.
(f) Registration Expenses. All expenses incident to the Company's performance of
or compliance with this Section 5.1 will be borne by the Company, including
without limitation: (i) all registration and filing fees and expenses; (ii) all
fees and expenses of compliance with federal securities and state Blue Sky or
securities laws; (iii) all expenses of printing (including printing certificates
for the Warrant Shares and printing of prospectuses), messenger and delivery
services; (iv) all fees and disbursements of counsel for the Company; (v) all
fees and disbursements of independent certified public accountants of the
Company (including the expenses of any special audit and comfort letters
required by or incident to such performance); and (vi) the Company's internal
expenses, the expenses of any annual or other audit and the fees and expenses of
any Person, including special experts, retained by the Company.
(g) Piggyback Registration Right. If the Company proposes to effect an Initial
Public Offering, the Company must, not later than the date of the initial filing
of a registration statement pertaining thereto, provide written notice thereof
to the holders of the Warrants. Each such holder will have the right, within 20
days after receipt of such notice, to request (which request will indicate the
intended method of distribution) that the Company include such holder's Warrant
Shares for sale pursuant to such registration statement.
(h) The Company will include in such Initial Public Offering all the Warrant
Shares for which it receives notice pursuant to Section 5.2(a), unless the
managing underwriter for such Initial Public Offering (the "Managing
Underwriter") determines that, in its opinion, the number of Warrant Shares that
the holders of Warrants (the "Requesting Holders") have requested to be sold in
such Initial Public Offering, plus the total number of Ordinary Shares that the
Company and any other selling stockholders entitled to sell Ordinary Shares in
such Initial Public Offering propose to sell in such Initial Public Offering,
exceed the maximum number of Ordinary Shares that may be distributed without
materially adversely affecting the price, timing or distribution of the Ordinary
Shares to be sold by the Company. In such event, the Company
<PAGE> 30
27
will be required to include in such Initial Public Offering only that number of
Ordinary Shares which the Managing Underwriter believes may be sold without
causing such adverse effect in the following order: (i) all the Ordinary Shares
that the Company proposes to sell in such Initial Public Offering and (ii)
Ordinary Shares of the Requesting Holders and all other Ordinary Shares that are
proposed to be sold by any holder of Ordinary Shares on a pro rata basis in an
aggregate number which is equal to the difference between the maximum number of
Ordinary Shares that may be distributed in such Initial Public Offering as
determined by the Managing Underwriter and the number of Ordinary Shares to be
sold in such Initial Public Offering pursuant to clause (i) above. The Company
will have the right to postpone or withdraw any registration statement prior to
the effective date without obligation to any Requesting Holder.
(i) Repurchase Offer. In the event that an Initial Public Offering has not been
completed on or prior to the fifth anniversary of the Issue Date (the
"Triggering Date"), the Company will be required to make an offer to purchase
(the "Repurchase Offer") all outstanding Warrants issued by it in cash at the
Repurchase Price no later than 120 days after the Triggering Date. If an Initial
Public Offering relating to the Company occurs at any time between the
Triggering Date and 90 days after the expiration date for a Repurchase Offer
pursuant to the preceding sentence, the Company will pay to each holder of
Warrants that were purchased in such offer an amount in cash equal to the number
of Warrants purchased multiplied by the excess, if any, of (i) the value, as
determined pursuant to the terms of an Initial Public Offering (net of
applicable underwriting discounts and placement fees) of the number of Warrant
Shares issuable upon the exercise of one Warrant over (ii) the Repurchase Price
paid by the Company for each Warrant in such Repurchase Offer.
(j) The Company will comply, to the extent applicable, with the requirements of
Rule 13e-4 under the Exchange Act and any other applicable securities laws or
regulations in connection with any repurchase offers for Warrants.
(k) Change of Control Equity Offer. If prior to the consummation of an Initial
Public Offering by the Company, a Change of Control (as defined in the
Indenture) occurs pursuant to which a Person (including such Person's Affiliates
and associates), other than a Permitted Holder, becomes the beneficial owner of
more than 50% of the total voting power of the Ordinary Shares of the Company,
and the Company is not eligible to, or elects not to, effect a Drag Along
Purchase, the Company shall make an offer to purchase (the "Change of Control
Equity Offer") any and all of the outstanding Warrants at cash purchase prices
at least equal to the Repurchase Price.
(l) Within 30 days of such Change of Control, the Company shall give notice of
the Change of Control Equity Offer to each holder of Warrants by first class
mail, postage prepaid, which notice shall govern the terms of the Change of
Control Equity Offer and shall (i) set forth the Repurchase Price to be paid for
Warrants tendered in the Change of Control Equity Offer, (ii) include the full
text of the fairness opinion delivered by an internationally recognized
investment bank in connection with the Change of Control, (iii) identify the
date on which the Change of Control Equity Offer will expire (the "Change of
Control Equity Offer Expiration Date"), which date shall not be less than 20
Business Days following the date of commencement of the Change of Control Equity
Offer, which commencement date shall be the date such notice is mailed to
holders of Warrants, (iv) explain the facts and circumstances of the
<PAGE> 31
28
Change of Control, (v) include a letter of transmittal which identifies where
Warrant Certificates tendered pursuant to the Change of Control Equity Offer are
to be delivered, (vi) state that, unless the Company defaults in the purchase of
the Warrants tendered pursuant to the Change of Control Equity Offer, Holders of
Warrants so tendered shall have no rights with respect to the Warrants tendered
after the Change of Control Expiration Date and the only remaining right of such
holders with respect thereto is to receive the Repurchase Price therefor
promptly after the Change of Control Equity Offer Expiration Date and (vii) that
holders whose Warrants are tendered for purchase in part only will be issued new
Warrant Certificates representing the number of unpurchased Warrants
surrendered.
(m) On the Change of Control Equity Offer Expiration Date, the Company will (i)
accept for purchase all Warrants tendered pursuant to the Change of Control
Equity Offer, (ii) promptly deliver to tendering holders of Warrants the
respective Repurchase Price therefor and (iii) issue and mail or deliver to
holders tendering a portion of their Warrants new Warrant Certificates
representing the number of Warrants equal to the unpurchased portion of the
Warrants surrendered.
(n) The Company will comply with the requirements of the Exchange Act and other
securities laws and regulations to the extent such laws and regulations are
applicable in connection with the Change of Control Equity Offer. To the extent
the provisions of any securities laws or regulations conflict with the Change of
Control Equity offer provisions of this Agreement, the Company shall comply with
the applicable securities laws and regulations and shall not be deemed to have
breached its obligations hereunder.
5.2 Drag Along Rights. If, prior to the consummation of an Initial Public
Offering, the Board and the holders of a majority of the Ordinary Shares
entitled to vote thereon approve a sale of the Company, the Company shall have
the right to require the holders of the Warrants to sell such Warrants to such
transferee; provided that the consideration to be received by such holders is
the same (in terms of price per share and in all other material respects, but
adjusted, in the case of Warrants, for the Exercise Price therefor) as that to
be received by the other holders and, in any event, shall be cash and/or
securities registered under the Securities Act and listed on a national
securities exchange or authorized for quotation on The Nasdaq Stock Market, Inc.
Any purchase of Warrants pursuant to this paragraph shall be deemed a "Drag
Along Purchase."
6. SECTION Warrant Agent.
6.1 Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent
to act as agent for the Company in accordance with provisions of this Agreement
and the Warrant Agent hereby accepts such appointment. The Company hereby agrees
that so long as any Units remain outstanding, the Warrant Agent may appoint the
Unit Agent to act as its agent with respect to its duties hereunder as provided
in the Unit Agreement.
(a) Rights and Duties of Warrant Agent. In acting under this Warrant Agreement
and in connection with the Warrant Certificates, the Warrant Agent is acting
solely as agent of the Company and does not assume any obligation or
relationship or agency or trust for or with any of the holders of Warrant
Certificates or beneficial owners of Warrants.
(b) The Warrant Agent may consult with counsel satisfactory to it (who may be
counsel for the Company), and the advice of such counsel shall be full and
complete
<PAGE> 32
29
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in accordance with the advice of
such counsel.
(c) The Warrant Agent shall be protected and shall incur no liability for or in
respect of any action taken or thing suffered by it in reliance upon any Warrant
Certificate, certificate of shares, notice, resolution, direction, consent,
certificate, affidavit, statement or other paper or document believed by it to
be genuine and to have been presented or signed by the proper parties.
(d) The Warrant Agent shall be obligated to perform only such duties as are
herein and in the Warrant Certificates specifically set forth and no implied
duties or obligations shall be read into this Agreement or the Warrant
Certificates against the Warrant Agent. The Warrant Agent shall not be under any
obligation to institute any action, suit or legal proceeding or to take any
other action which may tend to involve it in any expense or liability for which
it does not receive indemnity if such indemnity is requested. The Warrant Agent
shall not be accountable or under any duty or responsibility for the use by the
Company of any of the Warrant Certificates countersigned by the Warrant Agent
and delivered by it to the Holders or on behalf of the Holders pursuant to this
Agreement or for the application by the Company of the proceeds of the Warrants.
The Warrant Agent shall have no duty or responsibility in case of any default by
the Company in the performance of its covenants or agreements contained herein
or in the Warrant Certificates or in the case of the receipt of any written
demand from a Holder with respect to such default, including any duty or
responsibility to initiate or attempt to initiate any proceedings at law or
otherwise.
(e) The Warrant Agent shall not at any time be under any duty or responsibility
to any Holder to determine whether any facts exist that may require an
adjustment of the number of Ordinary Shares purchasable upon exercise of each
Warrant or the Exercise Price, or with respect to the nature or extent of any
adjustment when made, or with respect to the method employed, or herein or in
any supplemental agreement provided to be employed, in making the same. The
Warrant Agent shall not be responsible to determine the Cashless Exercise Ratio.
The Warrant Agent shall not be accountable with respect to the validity or value
of any Ordinary Shares or of any securities or property which may at any time be
issued or delivered upon the exercise of any Warrant or upon any adjustment
pursuant to Section 4, and it makes no representation with respect thereto. The
Warrant Agent shall not be responsible for any failure of the Company to make
any cash payment or to issue, transfer or deliver any Ordinary Shares or stock
certificates upon the surrender of any Warrant Certificate for the purpose of
exercise or upon any adjustment pursuant to Section 4, or to comply with any of
the covenants of the Company contained in Section 4.
(f) Before the Warrant Agent acts or refrains from acting with respect to any
matter contemplated by this Warrant Agreement, it may require from the Company:
(i) an Officers' Certificate of the Company stating that, in the opinion
of the signers, all conditions precedent, if any, provided for in
this Warrant Agreement relating to the proposed action have been
complied with; and
<PAGE> 33
30
(ii) an opinion of counsel for the Company stating that, in the opinion
of such counsel, all such conditions precedent have been complied
with.
Each Officers' Certificate or opinion of counsel with respect to
compliance with a condition or covenant provided for in this Warrant
Agreement shall include:
(1) a statement that the Person making such certificate
or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he
or she has made such examination or investigation as is
necessary to enable him or her to express an informed opinion
as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of
such Person, such condition or covenant has been complied
with.
provided, however, that with respect to matters of fact an Opinion of Counsel
may rely on an Officers' Certificate or certificates of public officials.
The Warrant Agent shall not be liable for any action it takes or
omits to take in good faith in reliance on any such certificate or opinion.
(g) The Warrant Agent shall keep copies of this Agreement and any notices given
or received hereunder by or from the Company available for inspection by the
Holders during normal business hours at its office. The Company shall supply the
Warrant Agent from time to time with such numbers of copies of this Agreement as
the Warrant Agent may request.
6.2 Individual Rights of Warrant Agent. The Warrant Agent and any stockholder,
director, officer or employee of the Warrant Agent may buy, sell or deal in any
of the Warrants or other securities of the Company or its affiliates or become
pecuniarily interested in transactions in which the Company or its affiliates
may be interested, or contract with or lend money to the Company or its
affiliates or otherwise act as fully and freely as though it were not the
Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant
Agent from acting in any other capacity for the Company or for any other legal
entity.
6.3 Warrant Agent's Disclaimer. The Warrant Agent shall not be responsible for
and makes no representation as to the validity or adequacy of this Agreement or
the Warrant Certificates and it shall not be responsible for any statement in
this Agreement or the Warrant Certificates other than its countersignature
thereon.
6.4 Compensation and Indemnity. The Company shall pay to the Warrant Agent from
time to time such compensation as the Company and the Warrant Agent shall from
time to time agree in writing for its acceptance of this Warrant Agreement and
services hereunder. The Company shall reimburse the Warrant Agent upon request
for all reasonable disbursements, expenses and advances (including reasonable
fees and expenses of counsel) incurred or made by it in addition to the
compensation for its services, except any such
<PAGE> 34
31
disbursements, expenses and advances as may be attributable to the Warrant
Agent's or any Agent's negligence or bad faith. Such expenses shall include the
reasonable compensation, disbursements and expenses of the Warrant Agent's
accountants, experts and counsel.
The Company shall indemnify each of the Warrant Agent and any
predecessor Warrant Agent for, and hold them harmless against, any and all loss,
damage, claim, expense or liability including taxes (other than taxes based on
the income of the Warrant Agent) incurred by the Warrant Agent without
negligence, willful misconduct or bad faith on its part in connection with
acceptance of administration of this trust and its duties under this Warrant
Agreement, including the reasonable expenses and attorneys' fees and expenses of
defending itself against any claim of liability arising hereunder. The Warrant
Agent shall notify the Company promptly of any claim asserted against the
Warrant Agent for which it may seek indemnity. However, the failure by the
Warrant Agent to so notify the Company shall not relieve the Company of its
obligations hereunder. The Company shall defend the claim and the Warrant Agent
shall cooperate in the defense (and may employ its own counsel satisfactory to
the Warrant Agent) at the Company's expense. The Warrant Agent may have separate
counsel and the Company shall pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its written
consent, which consent shall not be unreasonably withheld. The Company need not
reimburse any expense or indemnify against any loss or liability incurred by the
Warrant Agent as a result of the violation of this Warrant Agreement by the
Warrant Agent if such violation arose from the Warrant Agent's negligence or bad
faith.
To secure the Company's payment obligations in this Section 6.5, the
Warrant Agent shall have a senior lien against all money or property held or
collected by the Warrant Agent in its capacity as Warrant Agent.
When the Warrant Agent incurs expenses or renders services after an
Event of Default specified in the Indenture occurs, the expenses (including the
reasonable fees and expenses of its agents and counsel) and the compensation for
the services shall be preferred over the status of the Holders in a proceeding
under any Bankruptcy Law and are intended to constitute expenses of
administration under any Bankruptcy Law. The Company's obligations under this
Section 6.5 and any claim arising hereunder shall survive the termination of
this Warrant Agreement, the resignation or removal of any Warrant Agent, and any
rejection or termination under any Bankruptcy Law.
(a) Successor Warrant Agent. The Company agrees for the benefit of the Holders
that there shall at all times be a Warrant Agent hereunder until all the
Warrants have been exercised or are no longer exercisable.
(b) The Warrant Agent may at any time resign by giving written notice to the
Company of such intention on its part, specifying the date on which its desired
resignation shall become effective; provided, however, that such date shall not
be less than 30 days after the date on which such notice is given unless the
Company otherwise agrees. The Warrant Agent hereunder may be removed at any time
by the filing with it of an instrument in writing signed by or on behalf of the
Company and specifying such removal and the date when it shall become effective,
which date shall not be less than 30 days after such notice is given unless the
Warrant Agent otherwise agrees. Any removal under this Section 6.6 shall take
effect upon the
<PAGE> 35
32
appointment by the Company as hereinafter provided of a successor Warrant Agent
(which shall be a bank or trust company authorized under the laws of the
jurisdiction of its organization to exercise corporate trust powers) and the
acceptance of such appointment by such successor Warrant Agent.
(c) In case at any time the Warrant Agent shall resign, or shall be removed, or
shall become incapable of acting, or shall be adjudged a bankrupt or insolvent,
or shall commence a voluntary case under the Federal bankruptcy laws, as now or
hereafter constituted, or under any other applicable Federal or state
bankruptcy, insolvency or similar law or shall consent to the appointment of or
taking possession by a receiver, custodian, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Warrant Agent or its property or
affairs, or shall make an assignment for the benefit of creditors, or shall
admit in writing its inability to pay its debts generally as they become due, or
shall take corporate action in furtherance of any such action, or a decree or
order for relief by a court having jurisdiction in the premises shall have been
entered in respect of the Warrant Agent in an involuntary case under the Federal
bankruptcy laws, as now or hereafter constituted, or any other applicable
Federal or State bankruptcy, insolvency or similar law; or a decree order by a
court having jurisdiction in the premises shall have been entered for the
appointment of a receiver, custodian, liquidator, assignee, trustee,
sequestrator (or similar official) of the Warrant Agent or of its property or
affairs, or any public officer shall take charge or control of the Warrant Agent
or of its property or affairs for the purpose of rehabilitation, conservation,
winding up of or liquidation, a successor Warrant Agent, qualified as aforesaid,
shall be appointed by the Company by an instrument in writing, filed with the
successor Warrant Agent. Upon the appointment as aforesaid of a successor
Warrant Agent and acceptance by the successor Warrant Agent of such appointment,
the Warrant Agent shall cease to be Warrant Agent hereunder; provided, however,
that in the event of the resignation of the Warrant Agent hereunder, such
resignation shall be effective on the earlier of (i) the date specified in the
Warrant Agent's notice of resignation and (ii) the appointment and acceptance of
a successor Warrant Agent hereunder.
(d) Any successor Warrant Agent appointed hereunder shall execute, acknowledge
and deliver to its predecessor and to the Company an instrument accepting such
appointment hereunder, and thereupon such successor Warrant Agent, without any
further act, deed or conveyance, shall become vested with all the rights and
obligations of such predecessor with like effect as if originally named as
Warrant Agent hereunder, and such predecessor, upon payment of its charges and
disbursements then unpaid, shall thereupon become obligated to transfer, deliver
and pay over, and such successor Warrant Agent shall be entitled to receive, all
monies, securities and other property on deposit with or held by such
predecessor, as Warrant Agent hereunder.
(e) Any corporation into which the Warrant Agent hereunder may be merged or
consolidated, or any corporation resulting from any merger or consolidation to
which the Warrant Agent shall be a party, or any corporation to which the
Warrant Agent shall sell or otherwise transfer all or substantially all its
corporate trust business, provided that it shall be qualified as aforesaid,
shall be the successor Warrant Agent under this Agreement without the execution
or filing of any paper or any further act on the part of any of the parties
hereto.
7. SECTION Miscellaneous.
7.1 Reports. (a) The Company will file on a timely basis with the Commission, to
the extent such filings are accepted by the Commission and whether or not the
Company has a class of securities registered under the Exchange Act, (i) all
annual and quarterly
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33
financial statements and other financial information that would be required to
be contained in a filing with the Commission on Forms 20-F and 10-Q if the
Company were required to file such Forms (which financial statements shall be
prepared in accordance with U.S. GAAP), including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual financial information, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required to
be filed with the Commission on Form 8-K if the Company were required to file
such reports. Such quarterly financial information shall be filed with the
Commission within 45 days following the end of each fiscal quarter of the
Company, and such annual financial information shall be furnished within 90 days
following the end of each fiscal year of the Company. Such annual financial
information shall include the geographic segment financial information required
to be disclosed by the Company under Item 101(d) of Regulation S-K under the
Securities Act.
(b) The Company will also be required (a) to file with the Warrant
Agent, and provide to each holder of the Warrants or Warrant Shares, without
cost to such holder, copies of such reports and documents within 15 days after
the date on which the Company files such reports and documents with the
Commission or the date on which the Company would be required to file such
reports and documents if the Company were so required, and (b) if filing such
reports and documents with the Commission is not accepted by the Commission or
is prohibited under the Exchange Act, to supply at the Company's cost copies of
such reports and documents to any prospective holder of Warrants or Warrant
Shares promptly upon request. In addition, for so long as the Warrants or
Warrant Shares remain outstanding and the Company is not subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act nor exempt
from reporting under Rule 12g3-2(b) of the Exchange Act, the Company shall
furnish to the holders of Warrants and Warrant Shares and to prospective holders
thereof, upon their request, any information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act and, to any beneficial holder of
Warrants or Warrant Shares, information of the type that would be filed with the
Commission pursuant to the foregoing provisions, upon the request of any such
holder.
7.2 Notices to the Company and Warrant Agent. Any notice or demand authorized
by this Agreement to be given or made by the Warrant Agent or by the Holder of
any Warrant Certificate to or on the Company shall be sufficiently given or made
(i) five business days after deposited in the mail, first class or registered,
postage prepaid, (ii) one business day after being timely delivered to a
next-day air courier or (ii) when receipt is acknowledged by the addressee, if
telecopied, addressed (until another address is filed in writing by the Company
with the Warrant Agent), as follows:
VersaTel Telecom B.V.
Paasheuvelweg 39
1105 BV Amsterdam-Zuidoost
The Netherlands
Attention: Raj Raithatha
Telecopy: 31-20-501-1011
<PAGE> 37
34
with a copy to:
Stibbe Simont Monahan Duhot Lawyers
Strawinskylaan 2001
1077 ZZ Amsterdam
The Netherlands
Attention: Alfons F.J.A. Leitjen
Telecopy: 31-20-546-08-15
and
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: John D. Morrison, Jr.
Telecopy: (212) 848-7179
In case the Company shall fail to maintain such office or agency or
shall fail to give such notice of the location or of any change in the location
thereof, presentations may be made and notices and demands may be served at the
principal office of the Warrant Agent.
Any notice pursuant to this Agreement to be given by the Company or
by the Holder(s) of any Warrant Certificate to the Warrant Agent shall be
sufficiently given or made (i) five business days after deposited in the mail,
first-class or registered, postage prepaid, (ii) one business day after being
timely delivered to a next-day air courier or (ii) when receipt is acknowledged
by the addressee, if telecopied, addressed (until another address is filed in
writing by the Warrant Agent with the Company) to the Warrant Agent as follows:
United States Trust Company of New York
114 West 47th Street, 25th Floor
New York, New York 10036-1532
Attention: Gerard F. Ganey
Telecopy: (212) 852-1627
7.3 Supplements and Amendments. This Agreement may be amended by the parties
hereto without the consent of any Holder for the purpose of curing any
ambiguity, or of curing, correcting or supplementing any defective provision
contained herein or making any other provisions with respect to matters or
questions arising under this Agreement as the Company and the Warrant Agent may
deem necessary or desirable; provided, however, that such action shall not
affect adversely the rights of the Holders. Any amendment or supplement to this
Agreement that has or would have an adverse effect on the interests of the
Holders shall require the written consent of the Holders of a majority of the
outstanding Warrants. The consent of each holder of Warrants affected shall be
required for any amendment pursuant to which the Exercise Price would be
increased or the number of Ordinary Shares purchasable upon exercise of Warrants
would be decreased (other than pursuant to adjustments provided herein) or the
exercise period with respect to the Warrants would be shortened. In determining
whether the Holders of the required number of Warrants have concurred in any
direction, waiver or consent, Warrants owned by the Company or by any Affiliate
of the Company shall be disregarded and deemed not to be outstanding, except
that, for the purpose of determining whether the Warrant
<PAGE> 38
35
Agent shall be protected in relying on any such direction, waiver or consent,
only Warrants which the Warrant Agent knows are so owned shall be so
disregarded. Also, subject to the foregoing, only Warrants outstanding at the
time shall be considered in any such determination.
7.4 Severability. The provisions of this Agreement are severable, and if any
clause or provision shall be held invalid, illegal or unenforceable in whole or
in part in any jurisdiction, then such invalidity or unenforceability shall
affect in that jurisdiction only such clause or provision, or part thereof, and
shall not in any manner affect such clause or provision in any other
jurisdiction or any other clause or provision of this Agreement in any
jurisdiction.
7.5 Successors. All the covenants and provisions of this Agreement by or for the
benefit of the Company or the Warrant Agent shall bind and inure to the benefit
of their respective successors and assigns hereunder.
7.6 Termination. This Agreement (other than the Company's obligations with
respect to Warrants previously exercised) shall terminate at 5:00 p.m., New York
City time on the Expiration Date.
7.7 Governing Law. THIS WARRANT AGREEMENT AND THE WARRANTS SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
7.8 Submission to Jurisdiction; Appointment of Agent for Service; Waiver. To
the fullest extent permitted by applicable law, the Company irrevocably submits
to the non-exclusive jurisdiction of any federal or state court in the Borough
of Manhattan in the City of New York, County and State of New York, United
States of America, in any suit or proceeding based on or arising under this
Warrant Agreement and the Warrants, and irrevocably agrees that all claims in
respect of such suit or proceeding may be determined in any such court. The
Company, to the fullest extent permitted by applicable law, irrevocably and
fully waives the defense of an inconvenient forum to the maintenance of such
suit or proceeding and hereby irrevocably designates and appoints CT Corporation
(the "Authorized Agent"), as its authorized agent upon whom process may be
served in any such suit or proceeding. The Company represents that it has
notified the Authorized Agent of such designation and appointment and that the
Authorized Agent has accepted the same in writing. The Company hereby
irrevocably authorizes and directs its Authorized Agent to accept such service.
The Company further agrees that service of process upon its Authorized Agent and
written notice of said service to the Company mailed by first class mail or
delivered to its Authorized Agent shall be deemed in every respect effective
service of process upon the Company in any such suit or proceeding. Nothing
herein shall affect the right of any person to serve process in any other manner
permitted by law. The Company agrees that a final action in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other lawful manner. Notwithstanding the
foregoing, any action against the Company arising out of or based on this
Warrant Agreement, the Warrants or the transactions contemplated hereby may also
be instituted in any competent court in The Netherlands, and the Company
expressly accepts the jurisdiction of any such court in any such action.
The Company hereby irrevocably waives, to the extent permitted by
law, any immunity to jurisdiction to which it may otherwise be entitled
(including, without limitation,
<PAGE> 39
36
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
Warrant Agreement, the Warrant Certificates or the transactions contemplated
hereby.
The provisions of this Section 7.8 are intended to be effective upon
the execution of this Warrant Agreement and the Warrant Certificates without any
further action by the Company or the Warrant Agent and the introduction of a
true copy of this Warrant Agreement into evidence shall be conclusive and final
evidence as to such matters.
(a) Benefits of This Agreement. Nothing in this Agreement shall be construed to
give to any Person or corporation other than the Company, the Warrant Agent and
the holders of the Warrant Certificates any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Warrant Agent and the holders of the
Warrant Certificates.
(b) Prior to the exercise of the Warrants, no Holder of a Warrant Certificate,
as such, shall be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to receive dividends or subscription
rights, the right to vote, to consent, to exercise any preemptive right, to
receive any notice of meetings of stockholders for the election of directors of
the Company, to share in the assets of the Company in the event of the
liquidation, dissolution or winding up of the Company's affairs or any other
matter or to receive any notice of any proceedings of the Company, except as may
be specifically provided for herein.
(c) All rights of action in respect of this Agreement are vested in the Holders
of the Warrants, and any Holder of any Warrant, without the consent of the
Warrant Agent or the Holder of any other Warrant, may, on such Holder's own
behalf and for such Holder's own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Company suitable to enforce,
or otherwise in respect of, such Holder's rights hereunder, including the right
to exercise, exchange or surrender for purchase such Holder's Warrants in the
manner provided in this Agreement.
7.9 Counterparts. This Agreement may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but one and the
same instrument.
7.10 Table of Contents. The table of contents and headings of the Sections of
this Agreement have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any of
the terms or provisions hereof.
<PAGE> 40
37
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
VERSATEL TELECOM B.V.
By: OPEN SKIES INTERNATIONAL, INC.,
as Managing Director
By: /s/ R. Gary Mesch
------------------------------
Name: R. Gary Mesch
Title: President and Treasurer
UNITED STATES TRUST COMPANY OF NEW YORK,
as Warrant Agent
By: /s/ Gerard F. Ganey
-----------------------------------
Name:
Title:
<PAGE> 41
EXHIBIT A TO
WARRANT AGREEMENT
[FORM OF FACE OF GLOBAL WARRANT CERTIFICATE]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER REPRESENTATIVE OF DTC AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO
A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF
THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTIONS 2.9 AND 2.10 OF THE WARRANT AGREEMENT.
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN
AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S, (2) AGREES THAT
IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF
TIME AS PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT OR ANY SUCCESSOR
PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF
ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE
LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A
<PAGE> 42
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
(3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED
A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY
AND THE WARRANT AGENT SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM,
AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OR
TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED
AND DELIVERED BY THE TRANSFEROR TO THE WARRANT AGENT, THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT.
<PAGE> 43
CUSIP No._____________
No. ___ _____ Warrants
WARRANT CERTIFICATE
VERSATEL TELECOM B.V.
THIS CERTIFIES THAT, _______________, or its registered assigns, is
the registered holder of the number of Warrants set forth above (the
"Warrants"). Each Warrant entitles the holder thereof (the "Holder"), at its
option and subject to the provisions contained herein and in the Warrant
Agreement dated as of May 27, 1998 (the "Warrant Agreement"), between the
Company and United States Trust Company of New York, as Warrant Agent (the
"Warrant Agent", which term includes any successor Warrant Agent under the
Warrant Agreement), to purchase from VersaTel Telecom B.V., a company organized
under the laws of The Netherlands (the "Company"), 6.667 Warrant Shares per
Warrant at the exercise price of NLG 5.10 per share (the "Exercise Price"), or
by Cashless Exercise. This Warrant is subject to the terms and provisions
contained in the Warrant Agreement, to all of which terms and provisions the
Holder of this Warrant Certificate consents by acceptance hereof. The Warrant
Agreement is hereby incorporated herein by reference and made a part hereof.
Reference is hereby made to the Warrant Agreement for a full statement of the
respective rights, limitations of rights, duties and obligations of the Company,
the Warrant Agent and the Holders of the Warrants. Capitalized terms used but
not defined herein shall have the meanings ascribed thereto in the Warrant
Agreement. This Warrant Certificate shall terminate and become void as of 5:00
p.m. on May 15, 2008 (the "Expiration Date") or upon the exercise hereof as to
all the Ordinary Shares subject hereto. The Exercise Price and the number of
Warrant Shares purchasable upon exercise of the Warrants shall be subject to
adjustment from time to time as set forth in the Warrant Agreement.
AS PROVIDED IN THE WARRANT AGREEMENT UNTIL THE EARLIEST OF (i)
NOVEMBER 15, 1998, (ii) THE COMMENCEMENT OF AN EXCHANGE OFFER OR THE
EFFECTIVENESS OF A SHELF REGISTRATION STATEMENT WITH RESPECT TO THE NOTES, (iii)
THE EXERCISABILITY DATE AND (iv) SUCH OTHER DATE AS THE INITIAL PURCHASER WILL
DETERMINE IN ITS SOLE DISCRETION, EACH $1,000 PRINCIPAL AMOUNT OF NOTES AND ONE
WARRANT WHICH COLLECTIVELY COMPRISE EACH UNIT MAY NOT BE TRANSFERRED OR
EXCHANGED SEPARATELY.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by
the Warrant Agent, as such term is used in the Warrant Agreement.
THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE WARRANT
AGREEMENT AND THE WARRANTS WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF.
<PAGE> 44
IN WITNESS WHEREOF, VersaTel Telecom B.V. has caused this Warrant
Certificate to be executed on behalf of the Company by two Officers of the
Company.
Dated: May __, 1998
VERSATEL TELECOM B.V.
By: OPEN SKIES INTERNATIONAL, INC.,
AS MANAGING DIRECTOR
By: ___________________________________
Name: R. Gary Mesch
Title: President and Treasurer
By: _______________________________________
Name:
Title:
<PAGE> 45
Countersigned:
United States Trust Company of New York,
as Warrant Agent
By________________________________
Authorized Signatory
<PAGE> 46
[FORM OF REVERSE OF WARRANT CERTIFICATE]
This Warrant Certificate is issued under and in accordance with the
Warrant Agreement. A copy of the Warrant Agreement may be obtained for
inspection by the Holder hereof upon written request to the Warrant Agent at
United States Trust Company of New York, 114 West 47th Street, New York, New
York, 10036-1532.
Warrants may be exercised at any time commencing at the opening of
business on the Exercisability Date and until 5:00 p.m., New York City time on
the Expiration Date. Subject to the terms of the Warrant Agreement, the Warrants
may be exercised in whole or in part (i) by surrender of this Warrant
Certificate with the form of election to purchase Warrant Shares attached hereto
duly executed and with the simultaneous payment of the Exercise Price in cash to
the Warrant Agent for the account of the Company at the office of the Warrant
Agent or (ii) by Cashless Exercise. Payment of the Exercise Price in cash shall
be made in cash or by certified or official bank check payable to the order of
the Company or by wire transfer of funds to an account designated by the Company
for such purpose. Payment by Cashless Exercise shall be made by the surrender of
a Warrant or Warrants represented by one or more Warrant Certificates and
without payment of the Exercise Price in cash, in exchange for the issuance of
such number of Ordinary Shares equal to the product of (1) the number of
Ordinary Shares for which such Warrant would otherwise then be nominally
exercised if payment of the Exercise Price were being made in cash and (2) the
Cashless Exercise Ratio.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the number of Ordinary Shares issuable upon the
exercise of each Warrant shall, subject to certain conditions, be adjusted.
In the event the Company enters into a Combination following which
this Warrant remains outstanding, the Holder hereof will be entitled to receive
upon exercise of the Warrants the shares of capital stock or other securities or
other property of such surviving entity as such Holder would have been entitled
to receive upon or as the result of such Combination had the Holder exercised
its Warrants immediately prior to such Combination; provided, however, that in
the event that, in connection with such Combination, consideration to holders of
Ordinary Shares in exchange for their shares is payable solely in cash or in the
event of the dissolution, liquidation or winding-up of the Company, the Holder
hereof will be entitled to receive distributions on an equal basis with the
holders of Ordinary Shares or other securities issuable upon exercise of the
Warrants, as if the Warrants had been exercised immediately prior to such
events, less the Exercise Price.
The Company may require payment of a sum sufficient to pay all
taxes, assessments or other governmental charges in connection with the transfer
or exchange of the Warrant Certificates pursuant to Section 3.6 of the Warrant
Agreement but not for any exchange or original issuance (not involving a
transfer) with respect to temporary Warrant Certificates, the exercise of the
Warrants or the Warrant Shares.
<PAGE> 47
Upon any partial exercise of the Warrants, there shall be
countersigned and issued to the Holder hereof a new Warrant Certificate in
respect of the Warrant Shares as to which the Warrants shall not have been
exercised. This Warrant Certificate may be exchanged at the office of the
Warrant Agent by presenting this Warrant Certificate properly endorsed with a
request to exchange this Warrant Certificate for other Warrant Certificates
evidencing an equal number of Warrants. In the event any fractional Warrant
Shares would have to be issued upon the exercise of the Warrants, the Company
may, at its option, pay an amount in cash equal to the Current Market Value for
one Warrant Share on the Business Day immediately preceding the date the Warrant
is exercised, multiplied by such fraction, computed to the nearest whole Dutch
guilder in lieu of issuing such fractional share.
Pursuant to the Warrant Agreement, the Company has certain
registration obligations with respect to the Ordinary Shares issuable upon
exercise of the Warrants.
Pursuant to the Warrant Agreement, if the Company proposes to effect
an Initial Public Offering, it shall be obligated to include the Warrant Shares
of holders who request to have such Warrant Shares included; provided, however,
that the Managing Underwriter may, under certain conditions, limit the number of
such Warrant Shares to be included in the Initial Public Offering.
Pursuant to the Warrant Agreement, in the event that an Initial
Public Offering has not occurred by the Triggering Date, the Company will be
required to make an offer to purchase all outstanding Warrants in cash at the
Repurchase Price.
Pursuant to the Warrant Agreement, under certain circumstances in
the event of a Change of Control, the Company shall make an offer to purchase
any and all of the outstanding Warrants at cash purchase prices at least equal
to the Repurchase Price. In addition, in the event of a sale of the Company, the
Company has the power to require holders of the Warrants to sell such Warrants
to the transferee.
The Warrants do not entitle any holder hereof to any of the rights
of a stockholder of the Company. All Ordinary Shares issuable by the Company
upon the exercise of the Warrants shall, upon such issue, be duly and validly
issued and fully paid and non-assessable.
The Holder in whose name the Warrant Certificate is registered may
be deemed and treated by the Company and the Warrant Agent as the absolute owner
of the Warrant Certificate for all purposes whatsoever and neither the Company
nor the Warrant Agent shall be affected by notice to the contrary.
This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Warrant Agent.
<PAGE> 48
FORM OF ELECTION TO PURCHASE WARRANT SHARES
(to be executed only upon exercise of Warrants)
[ ]
The undersigned hereby irrevocably elects to exercise ___________
Warrants at an exercise price per Warrant Share of NLG________ to acquire an
equal number of Warrant Shares on the terms and conditions specified in the
within Warrant Certificate and the Warrant Agreement therein referred to,
surrenders this Warrant Certificate and all right, title and interest therein to
, and directs that the Ordinary Shares deliverable upon the exercise of such
Warrants be registered or placed in the name and at the address specified below
and delivered thereto.
Date: ________________, ____
_______________________________(1)
(Signature of Owner)
_______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
Signature Guaranteed by:
_______________________________
- --------
(1) The signature must correspond with the name as written upon the face of
the within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed by a national
bank or trust company or by a member firm of any national securities
exchange.
<PAGE> 49
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Any unexercised Warrants evidenced by the within Warrant Certificate to be
issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
<PAGE> 50
SCHEDULE A
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL WARRANTS(2)
The following increases or decreases in this Global Warrant have been made:
<TABLE>
<CAPTION>
Date of Amount of Amount of Number of Signature of
Exchange decrease in increase in Warrants of authorized
Number of Number of this Global officer of
Warrants of this Warrants of this Warrant Warrant Agent
Global Warrant Global Warrant following
such decrease
or increase
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- --------
(2) This is to be included only if the Warrant is in global form.
</TABLE>
<PAGE> 51
EXHIBIT B TO
WARRANT AGREEMENT
[FORM OF FACE OF DEFINITIVE WARRANT CERTIFICATE]
<PAGE> 52
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN
AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S, (2) AGREES THAT
IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF
TIME AS PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT OR ANY SUCCESSOR
PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF
ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE
LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
(3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED
A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY
AND THE WARRANT AGENT SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM,
AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OR
TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED
AND DELIVERED BY THE TRANSFEROR TO THE WARRANT AGENT, THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT.
<PAGE> 53
CUSIP No._____________
No. ___ _____ Warrants
WARRANT CERTIFICATE
VERSATEL TELECOM B.V.
THIS CERTIFIES THAT, _______________ is the owner of _____ Warrants
(the "Warrants") as described above, transferable only on the books of the
Company by the holder thereof in person or by his or her duly authorized
attorney, on surrender of the Certificate properly endorsed. This Warrant
entitles the holder thereof (the "Holder"), at its option and subject to the
provisions contained herein and in the Warrant Agreement, dated as of May 27,
1998 (the "Warrant Agreement"), between the Company and United States Trust
Company of New York, as Warrant Agent (the "Warrant Agent", which term includes
any successor Warrant Agent under the Warrant Agreement), to purchase from
VersaTel Telecom B.V., a company organized under the laws of The Netherlands
(the "Company"), 6.667 Warrant Shares per Warrant at the exercise price per
share of NLG 5.10 (the "Exercise Price"), or by Cashless Exercise. This Warrant
is subject to the terms and provisions contained in the Warrant Agreement, to
all of which terms and provisions the Holder of this Warrant Certificate
consents by acceptance hereof. The Warrant Agreement is hereby incorporated
herein by reference and made a part hereof. Reference is hereby made to the
Warrant Agreement for a full statement of the respective rights, limitations of
rights, duties and obligations of the Company, the Warrant Agent and the Holders
of the Warrants. Capitalized terms used but not defined herein shall have the
meanings ascribed thereto in the Warrant Agreement. This Warrant Certificate
shall terminate and become void as of 5:00 p.m. on May 15, 2008 (the "Expiration
Date") or upon the exercise hereof as to all the Ordinary Shares subject hereto.
The Exercise Price and the number of Warrant Shares purchasable upon exercise of
the Warrants shall be subject to adjustment from time to time as set forth in
the Warrant Agreement.
AS PROVIDED IN THE WARRANT AGREEMENT UNTIL THE EARLIEST OF (i)
NOVEMBER 15, 1998, (ii) THE COMMENCEMENT OF AN EXCHANGE OFFER OR THE
EFFECTIVENESS OF A SHELF REGISTRATION STATEMENT WITH RESPECT TO THE NOTES, (iii)
THE EXERCISABILITY DATE AND (iv) SUCH OTHER DATE AS THE INITIAL PURCHASER WILL
DETERMINE IN ITS SOLE DISCRETION, EACH $1,000 PRINCIPAL AMOUNT OF NOTES AND ONE
WARRANT WHICH COLLECTIVELY COMPRISE EACH UNIT MAY NOT BE TRANSFERRED OR
EXCHANGED SEPARATELY.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by
the Warrant Agent, as such term is used in the Warrant Agreement.
<PAGE> 54
THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE WARRANT
AGREEMENT AND THE WARRANTS WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF.
IN WITNESS WHEREOF, VersaTel Telecom B.V. has caused this Warrant
Certificate to be executed on behalf of the Company by two Officers of the
Company.
Dated: May __, 1998
VERSATEL TELECOM B.V.
By: OPEN SKIES INTERNATIONAL, INC.,
as Managing Director
By: ___________________________________
Name: R. Gary Mesch
Title: President and Treasurer
By: _______________________________________
Name:
Title:
<PAGE> 55
Countersigned:
United States Trust Company of New York,
as Warrant Agent
By________________________________
Authorized Signatory
<PAGE> 56
[FORM OF REVERSE OF WARRANT CERTIFICATE]
This Warrant Certificate is issued under and in accordance with the
Warrant Agreement. A copy of the Warrant Agreement may be obtained for
inspection by the Holder hereof upon written request to the Warrant Agent at
United States Trust Company of New York, 114 West 47th Street, New York, New
York, 10036-1532.
Warrants may be exercised at any time commencing at the opening of
business on the Exercisability Date and until 5:00 p.m., New York City time on
the Expiration Date. Subject to the terms of the Warrant Agreement, the Warrants
may be exercised in whole or in part (i) by surrender of this Warrant
Certificate with the form of election to purchase Warrant Shares attached hereto
duly executed and with the simultaneous payment of the Exercise Price in cash to
the Warrant Agent for the account of the Company at the office of the Warrant
Agent or (ii) by Cashless Exercise. Payment of the Exercise Price in cash shall
be made in cash or by certified or official bank check payable to the order of
the Company or by wire transfer of funds to an account designated by the Company
for such purpose. Payment by Cashless Exercise shall be made by the surrender of
a Warrant or Warrants represented by one or more Warrant Certificates and
without payment of the Exercise Price in cash, in exchange for the issuance of
such number of Ordinary Shares equal to the product of (1) the Exercise Price
and the number of Ordinary Shares for which such Warrant would otherwise then be
nominally exercised if payment of the Exercise Price were being made in cash and
(2) the Cashless Exercise Ratio.
The Warrant Agreement provides that upon the occurrence of certain
events the number of Ordinary Shares issuable upon the exercise of each Warrant
shall, subject to certain conditions, be adjusted.
In the event the Company enters into a Combination following which
this Warrant remains outstanding, the Holder hereof will be entitled to receive
upon exercise of the Warrants the shares of capital stock or other securities or
other property of such surviving entity as such Holder would have been entitled
to receive upon or as the result of such Combination had the Holder exercised
its Warrants immediately prior to such Combination; provided, however, that in
the event that, in connection with such Combination, consideration to holders of
Ordinary Shares in exchange for their shares is payable solely in cash or in the
event of the dissolution, liquidation or winding-up of the Company, the Holder
hereof will be entitled to receive distributions on an equal basis with the
holders of Ordinary Shares or other securities issuable upon exercise of the
Warrants, as if the Warrants had been exercised immediately prior to such
events, less the Exercise Price.
The Company may require payment of a sum sufficient to pay all
taxes, assessments or other governmental charges in connection with the transfer
or exchange of the Warrant Certificates pursuant to Section 3.6 of the Warrant
Agreement but not for any exchange or original issuance (not involving a
transfer) with respect to temporary Warrant Certificates, the exercise of the
Warrants or the Warrant Shares.
Upon any partial exercise of the Warrants, there shall be
countersigned and issued to the Holder hereof a new Warrant Certificate in
respect of the Warrant Shares as to which the
<PAGE> 57
Warrants shall not have been exercised. This Warrant Certificate may be
exchanged at the office of the Warrant Agent by presenting this Warrant
Certificate properly endorsed with a request to exchange this Warrant
Certificate for other Warrant Certificates evidencing an equal number of
Warrants. In the event any fractional Warrant Shares would have to be issued
upon the exercise of the Warrants, the Company may, at its option, pay an amount
in cash equal to the Current Market Value for one Warrant Share on the Business
Day immediately preceding the date the Warrant is exercised, multiplied by such
fraction, computed to the nearest whole Dutch guilder in lieu of issuing such
fractional share.
Pursuant to the Warrant Agreement, the Company has certain
registration obligations with respect to the Ordinary Shares issuable upon
exercise of the Warrants.
Pursuant to the Warrant Agreement, if the Company proposes to effect
an Initial Public Offering, it shall be obligated to include the Warrant Shares
of holders who request to have such Warrant Shares included; provided, however,
that the Managing Underwriter may, under certain conditions, limit the number of
such Warrant Shares to be included in the Initial Public Offering.
Pursuant to the Warrant Agreement, in the event that an Initial
Public Offering has not occurred by the Triggering Date, the Company will be
required to make an offer to purchase all outstanding Warrants in cash at the
Repurchase Price.
Pursuant to the Warrant Agreement, under certain circumstances in
the event of a Change of Control, the Company shall make an offer to purchase
any and all of the outstanding Warrants at cash purchase prices at least equal
to the Repurchase Price. In addition, in the event of a sale of the Company, the
Company has the power to require holders of the Warrants to sell such Warrants
to the transferee.
The Warrants do not entitle any holder hereof to any of the rights
of a stockholder of the Company. All Ordinary Shares issuable by the Company
upon the exercise of the Warrants shall, upon such issue, be duly and validly
issued and fully paid and non-assessable.
The Holder of this Warrant Certificate may be deemed and treated by
the Company and the Warrant Agent as the absolute owner of the Warrant
Certificate for all purposes whatsoever and neither the Company nor the Warrant
Agent shall be affected by notice to the contrary.
This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Warrant Agent.
<PAGE> 58
FORM OF ELECTION TO PURCHASE WARRANT SHARES
(to be executed only upon exercise of Warrants)
[ ]
The undersigned hereby irrevocably elects to exercise
____________________ Warrants at an exercise price per Warrant Share of
NLG________ to acquire an equal number of Warrant Shares on the terms and
conditions specified in the within Warrant Certificate and the Warrant Agreement
therein referred to, surrenders this Warrant Certificate and all right, title
and interest therein to , and directs that the Ordinary Shares deliverable upon
the exercise of such Warrants be registered or placed in the name and at the
address specified below and delivered thereto.
Date: ________________, ____
_______________________________(3)
(Signature of Owner)
_______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
Signature Guaranteed by:
_______________________________
- ----------------
(3) The signature must correspond with the name as written upon the face of
the within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed by a national
bank or trust company or by a member firm of any national securities
exchange.
<PAGE> 59
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Any unexercised Warrants evidenced by the within Warrant Certificate to be
issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
<PAGE> 60
EXHIBIT C TO
WARRANT AGREEMENT
FORM OF TRANSFER CERTIFICATE
FOR TRANSFER FROM RULE 144A GLOBAL
WARRANT TO REGULATION S GLOBAL WARRANT
(Transfers pursuant to Section 2.10(a)
of the Warrant Agreement)
VersaTel Telecom B.V.
c/o United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Re:VersaTel Telecom B.V.
Reference is hereby made to the Warrant Agreement dated as of May
27, 1998 (the "Warrant Agreement") between VersaTel Telecom B.V. and United
States Trust Company of New York, as Warrant Agent. Capitalized terms used but
not defined herein shall have the meanings given them in the Warrant Agreement.
This letter relates to the Warrants beneficially held through interests in the
144A Global Warrant (CUSIP No. _________) with DTC in the name of ________(the
"Transferor") account no.__. The Transferor hereby requests that on [INSERT
DATE] such beneficial interest in the Rule 144A Global Warrant be transferred or
exchanged for an interest in the Regulation S Global Warrant (CUSIP (CINS) No.
_________) in the same number of Warrants and transfer to (account no.
________).
In connection with such request and in respect of such Warrants the Transferor
does hereby certify that such transfer has been effected in accordance with the
transfer restrictions set forth in the Warrant Agreement and the Warrants and
pursuant to and in accordance with 904 of Regulation S under the United States
Securities Act of 1933, as amended (the "Securities Act"), and accordingly the
Transferor further certifies that:
(A) (1) the offer of the Warrants was not made to a person in the United
States;
<PAGE> 61
(2) either (a) at the time the buy order was originated, the transferee
was outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States, or
(b) the transaction was executed in, on or through the facilities of a
designated offshore securities market and neither the Transferor nor any
person acting on our behalf knows that the transaction was prearranged
with a buyer in the United States,
(3) no directed selling efforts have been made in contravention of the
requirements of 904(b) of Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
OR
(B)Such transfer is being made in accordance with Rule 144A under
the Securities Act.
<PAGE> 62
This certificate and the statements contained herein are made for your benefit
and the benefit of the Company. Terms used in this certificate and not otherwise
defined in the Warrant Agreement have the meanings set forth in Regulation S
under the Securities Act.
Dated: _____________, ____
[Name of Transferor]
By:________________________
Name:
Title:
Telephone No.:
Please print name and address (including zip code number)
<PAGE> 63
EXHIBIT D TO
WARRANT AGREEMENT
FORM OF TRANSFER CERTIFICATE
FOR TRANSFER FROM REGULATION S GLOBAL
WARRANT TO RULE 144A GLOBAL WARRANT
PRIOR TO EXPIRATION OF RESTRICTED PERIOD
(Transfers pursuant to Section 2.10(b)
of the Warrant Agreement)
VersaTel Telecom B.V.
c/o United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Re:VersaTel Telecom B.V.
Reference is hereby made to the Warrant Agreement dated as of May
__, 1998 (the "Warrant Agreement") between VersaTel Telecom B.V. and United
States Trust Company of New York, as Warrant Agent. Capitalized terms used but
not defined herein shall have the meanings given them in the Warrant Agreement.
This letter relates to the Warrants beneficially held through interests in the
Regulation S Global Warrant (CUSIP (CINS) No. _________) with [Euroclear]
[Cedel] (Common Code No. _______) through DTC in the name of _______________
(the "Transferor") [Euroclear] [Cedel] account no._______. The Transferor hereby
requests that on [INSERT DATE] such beneficial interest in the Regulation S
Global Warrant be transferred or exchanged for an interest in the Rule 144A
Global Warrant (CUSIP No. _________) in the same number of Warrants and transfer
to ______________ (DTC account no. ________).
In connection with such request, and in respect of such Warrants, the Transferor
does hereby certify that such Warrants are being transferred in accordance with
Rule 144A under the United States Securities Act of 1933, as amended (the
"Securities Act"), to a transferee that the Transfer or reasonably believes is
purchasing the Warrants for its own account or an account with respect to which
the transferee exercises sole investment discretion and the transferee and any
such account is a "qualified institutional buyer" within the meaning of Rule
144A, in each case in a transaction meeting the requirements of Rule 144A and in
accordance with any applicable securities laws of any state of the United States
or any other jurisdiction.
<PAGE> 64
This certificate and the statements contained herein are made for your benefit
and the benefit of the Company.
Dated:_______________, ____
[Name of Transferor]
By:___________________________
Name:
Title:
Telephone No.:
Please print name and address (including zip code number)
<PAGE> 1
Exhibit 10.4
EXECUTION COPY
WARRANT AGREEMENT
Dated as of December 3, 1998
between
VERSATEL TELECOM INTERNATIONAL N.V.
and
UNITED STATES TRUST COMPANY OF NEW YORK
as Warrant Agent
<PAGE> 2
TABLE OF CONTENTS
WARRANT AGREEMENT
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. Defined Terms 2
1.1 Certain Definitions 2
1.2 Rules of Construction 7
SECTION 2. Issuance, Form, Execution, Delivery and Registration of
Warrant Certificates 7
2.1 Issuance of Warrants 7
2.2 Execution of Warrant Certificates 7
2.3 Countersignature and Delivery 8
2.4 Form of Warrant Certificates 8
2.5 Restrictive Legends 9
2.6 Temporary Warrant Certificates 11
2.7 Separation of Warrants and Notes 11
2.8 Registration, Registration of Transfers and Exchanges 12
2.9 Book-Entry Provisions for Global Warrants 12
2.10 Special Transfer Provisions 14
2.11 Offices for Exercise, etc. 16
2.12 Cancellation 17
2.13 Lost, Stolen, Destroyed, Defaced or Mutilated Warrant
Certificates 17
SECTION 3. Terms of Warrants; Exercise of Warrants 18
3.1 Exercise Period 18
3.2 Manner of Exercise 18
3.3 Issuance of Warrant Shares 19
3.4 Fractional Warrant Shares 20
3.5 Sufficient Authorized Share Capital 20
3.6 Payment of Taxes 20
SECTION 4. Adjustment of Exercise Price and Number of Warrant Shares
Issuable 20
4.1 Adjustments 20
4.2 Superseding Adjustment 24
4.3 Minimum Adjustment 24
4.4 Notice of Adjustment 25
4.5 Notice of Certain Transactions 25
4.6 Adjustment to Warrant Certificate 26
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
4.7 Challenge to Good Faith Determination 26
4.8 Treasury Stock 26
SECTION 5. Holders' Rights 26
5.1 Registration Rights 26
5.2 Piggyback Registration Right 27
5.3 Repurchase Offer 28
5.4 Change of Control Equity Offer 28
5.5 Drag Along Rights 29
SECTION 6. Warrant Agent 29
6.1 Appointment of Warrant Agent 29
6.2 Rights and Duties of Warrant Agent 29
6.3 Individual Rights of Warrant Agent 31
6.4 Warrant Agent's Disclaimer 31
6.5 Compensation and Indemnity 31
6.6 Successor Warrant Agent 32
SECTION 7. Miscellaneous 33
7.1 Reports 34
7.2 Notices to the Company and Warrant Agent 34
7.3 Supplements and Amendments 35
7.4 Severability 36
7.5 Successors 36
7.6 Termination 36
7.7 Governing Law 36
7.8 Submission to Jurisdiction; Appointment of Agent for
Service; Waiver. 36
7.9 Benefits of This Agreement 37
7.10 Counterparts 37
7.11 Table of Contents 37
</TABLE>
EXHIBITS
EXHIBIT A - Form of Face of Global Warrant Certificate
EXHIBIT B - Form of Face of Definitive Warrant Certificate
EXHIBIT C - Form of Transfer Certificate for Transfer from Rule 144A Global
Warrant to Regulation S Global Warrant
<PAGE> 4
EXHIBIT D - Form of Transfer Certificate for Transfer from Regulation S Global
Warrant to Rule 144A Global Warrant
<PAGE> 5
Exhibit 10.4
WARRANT AGREEMENT dated as of December 3, 1998 (the
"Agreement") between VersaTel Telecom International N.V. (formerly known as
VersaTel Telecom B.V.), a company organized under the laws of The Netherlands
(the "Company"), and the United States Trust Company of New York, as warrant
agent (in such capacity, the "Warrant Agent").
W I T N E S S E T H :
WHEREAS, on October 15, 1998, the Company converted its legal
structure from a private company with limited liability (besloten vennootschap
met beperkte aansprakelijkheid) to a company with limited liability (naamloze
vennootschap) and in connection therewith created two classes of Ordinary
Shares, Class A Shares and Class B Shares, each with par value NLG 0.10 per
share (together, the "Ordinary Shares"); and
WHEREAS, the Company entered into a purchase agreement dated
November 17, 1998 (the "Purchase Agreement") with Lehman Brothers Inc., Lehman
Brothers International (Europe) and Paribas Corporation (the "Initial
Purchasers") pursuant to which the Company has agreed to sell to the Initial
Purchasers 150,000 units (the "Units") consisting of $1,000 principal amount of
its 13 1/4% Senior Notes due 2008 (the "Notes") to be issued under an indenture
dated as of December 3, 1998 (the "Indenture") by and between the Company and
the United States Trust Company of New York, as Trustee (in such capacity, the
"Trustee"), and one warrant (the "Warrants") to purchase 6.667 Class B Shares;
and
WHEREAS, prior to the separation of the Notes from the
Warrants issued as part of the Units as described herein, the Units shall be
issued pursuant to the Unit Agreement dated as of December 3, 1998 (the "Unit
Agreement") by and among the Company, the Warrant Agent, the Trustee and United
States Trust Company of New York, as unit agent (the "Unit Agent"); and
WHEREAS, the Warrants and the Notes shall not be separately
transferable until on or after the Separation Date (as defined below); and
WHEREAS, the Company desires the Warrant Agent to assist the
Company in connection with the issuance, exchange, cancellation, replacement and
exercise of the Warrants, and in this Agreement wishes to set forth, among other
things, the terms and conditions on which the Warrants may be issued, exchanged,
cancelled, replaced and exercised; and
WHEREAS, the Company desires the Warrant Agent to act on
behalf of the Company, and the Warrant Agent is willing so to act, in connection
with the issuance of Warrant Certificates (as defined below) and other matters
as provided herein;
<PAGE> 6
2
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, and for the purpose of defining the
respective rights and obligations of the Company, the Warrant Agent and the
Holders (as defined below), the parties hereto agree as follows:
1. SECTION DEFINED TERMS.
1.1 Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
"Affiliate" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as
applied to any Person, is defined to mean the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership
of voting securities, by contract or otherwise.
"Agent Members" has the meaning specified in Section 2.9(a)
hereof.
"Authorized Agent" has the meaning specified in Section 7.8
hereof.
"Bankruptcy Law" means (i) for purposes of the Company,
Faillissementswet and any similar statute, regulation or provision of
any other jurisdiction in which the Company is organized or conducting
business and (ii) for purposes of the Warrant Agent, Title 11, U.S.
Code or any similar United States Federal, state or foreign law for the
relief of creditors.
"Board" means the Board of Supervisory Directors of the
Company.
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banks in New York City and Amsterdam, The
Netherlands are authorized or required by law to close.
"Cash Exercise" has the meaning specified in Section 3.2
hereof.
"Cashless Exercise" has the meaning specified in Section 3.2
hereof.
"Cashless Exercise Ratio" means a fraction, the numerator of
which is the excess of the Current Market Value (as defined below) per
Ordinary Share on the Exercise Date over the Exercise Price per share
as of the Exercise Date and the denominator of which is the Current
Market Value per Ordinary Share on the Exercise Date.
"Change of Control Equity Offer" has the meaning specified in
Section 5.4(a) hereof.
"Change of Control Equity Offer Expiration Date" has the
meaning specified in Section 5.4(b) hereof.
"Cedel" means Cedel Bank, societe anonyme.
<PAGE> 7
3
"Class A Shares" means the Class A Shares, par value NLG 0.10
per share, of the Company.
"Class B Shares" means the Class B Shares, par value NLG 0.10
per share, of the Company.
"Combination" has the meaning specified in Section 4.1(d)
hereof.
"Commission" means the Securities and Exchange Commission.
"Consideration" has the meaning specified in Section 4.1(c)
hereof.
"Current Market Value," per Ordinary Share or any other
security at any date, means (i) if the security is not registered under
the Exchange Act, the fair market value of the security (without any
discount for lack of liquidity, the amount of such security offered to
be purchased or the fact that such securities may represent a minority
interest in a private company or a company under the control of another
Person) as determined in good faith by the Board and certified in a
board resolution that is delivered to the Warrant Agent, and determined
to be fair, from a financial point of view, to the holders of such
security or another security exercisable for such security, by an
Independent Financial Expert (as set forth in such Independent
Financial Expert's written fairness opinion); or (ii) if the security
is registered under the Exchange Act, the average of the last reported
sale price of the security (or the equivalent in an over-the-counter
market) for each Business Day (as defined herein) during the period
commencing 15 Business Days before such date and ending on the date one
day prior to such date, or if the security has been registered under
the Exchange Act for less than 15 consecutive Business Days before such
date, the average of the daily closing bid prices (or such equivalent)
for all of the Business Days before such date for which daily closing
bid prices are available (provided, however, that if the closing bid
price is not determinable for at least 10 Business Days in such period,
the "Current Market Value" of the security shall be determined as if
the security were not registered under the Exchange Act). The Company
shall pay the fees and expenses of any Independent Financial Expert in
the determination of Current Market Value.
"Definitive Warrants" means Warrants in definitive registered
form substantially in the form of Exhibit B.
"Depositary" has the meaning specified in Section 2.4 hereof.
"DTC" means The Depository Trust Company or its successors.
"DWAC" means the Depositary/Deposit Withdraw at Custodian
system.
"Euroclear" means Morgan Guaranty Trust Company of New York
(Brussels office), as operator of the Euroclear System.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended (or any successor act), and the rules and regulations
promulgated thereunder.
<PAGE> 8
4
"Exercise Date" means the date on which a Warrant is exercised
by the Holder thereof.
"Exercisability Date" means the date of the closing of an
Initial Public Offering (as defined below) by the Company.
"Exercise Price" means the purchase price per Warrant Share to
be paid upon the exercise of each Warrant, which price shall be NLG
5.10 per Warrant Share as adjusted in accordance with the terms hereof.
"Existing Warrants" means the warrants issued under the
Warrant Agreement, dated as of May 27, 1998, between the Company and
United States Trust Company of New York, as warrant agent, representing
the right to purchase 6.667 Ordinary Shares of the Company, subject to
adjustment pursuant to such Agreement.
"Expiration Date" means May 15, 2008.
"Global Warrants" has the meaning specified in Section 2.4
hereof.
"Holder" means the registered holder of a Warrant.
"Independent Financial Expert" means an internationally
recognized investment bank that does not (and whose directors,
executive officers and 5% stockholders do not) have a direct or
indirect financial interest in the Company or any of its subsidiaries
or Affiliates, which has not been for at least five years, and at the
time it is called upon to give independent financial advice to the
Company is not (and none of its directors, executive officers or 5%
stockholders is), a promoter, director, or officer of the Company or
any of its subsidiaries or Affiliates. The Independent Financial Expert
may be compensated and indemnified by the Company for opinions or
services it provides as an Independent Financial Expert.
"Initial Public Offering" means the first time a registration
statement filed under the Securities Act (other than the Shelf
Registration Statement) respecting an offering, whether primary or
secondary, of Ordinary Shares representing at least 15% of the total
issued and outstanding Ordinary Shares of the Company which is
underwritten on a firmly committed or best efforts basis, is declared
effective and the securities so registered are issued and sold.
"Issue Date" means December 3, 1998, the date on which the
Warrants are first issued.
"Majority Holders" means the Holders of a majority of the then
outstanding Warrants.
"Managing Underwriter" has the meaning specified in Section
5.2(b) hereof.
"Nasdaq National Market" means the Nasdaq Stock Market
National Market.
"Offer" has the meaning specified in Section 4.1(e) hereof.
<PAGE> 9
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"Offer Period" has the meaning specified in Section 4.1(e)
hereof.
"Offering" means the offering of the Units, the Notes and the
Warrants.
"Officer" means the principal executive officer, the principal
financial officer, the treasurer or the principal accounting officer of
the Company.
"Officers' Certificate" means a certificate signed on behalf
of the Company by two officers of the Company, one of whom must be the
principal executive officer, the principal financial officer, the
treasurer or the principal accounting officer of the Company.
"Ordinary Shares" has the meaning specified in the Preamble
hereto. References in this Agreement to Ordinary Shares underlying the
Warrants, or issued or deliverable upon exercise of the Warrants to the
Holders thereof, shall be deemed to refer to Class B Shares of the
Company.
"Per Share Consideration" has the meaning specified in Section
4.1(e) hereof.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company,
trust, unincorporated organization, government or any agency or
political subdivision thereof or any other entity.
"Private Placement Legend" has the meaning specified in
Section 2.5 hereof.
"Purchase Date" has the meaning specified in Section 4.1(e)
hereof.
"Qualified Institutional Buyer" or "QIB" shall have the
meaning specified in Rule 144A under the Securities Act.
"Regulation S" means Regulation S (including any successor
regulation thereto) under the Securities Act, as it may be amended from
time to time.
"Regulation S Global Warrants" has the meaning specified in
Section 2.4 hereof.
"Regulation S Warrants" has the meaning specified in Section
2.4 hereof.
"Representatives" has the meaning specified in Section 2.7
hereof.
"Repurchase Offer" has the meaning specified in Section 5.3(a)
hereof.
"Repurchase Price" means, in respect of a Warrant, (i) the
excess of the Current Market Value of an Ordinary Share of the Company
over the Exercise Price per Ordinary Share, multiplied by (ii) the
number of Warrant Shares that would be obtained if one Warrant was
exercised on the date of repurchase.
"Requesting Holders" has the meaning specified in Section
5.2(b) hereof.
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"Resale Restriction Termination Date" has the meaning
specified in Section 2.5 hereof.
"Restricted Period" has the meaning specified in Section 2.4
hereof.
"Right" has the meaning specified in Section 4.1(g) hereof.
"Rule 144A" means Rule 144A (including any successor
regulation thereto) under the Securities Act, as it may be amended from
time to time.
"Rule 144A Warrants" has the meaning specified in Section 2.4
hereof.
"Rule 144A Global Warrants" has the meaning specified in
Section 2.4 hereof. "Securities Act" means the Securities Act of 1933,
as amended.
"Separated" has the meaning specified in Section 2.7 hereof.
"Separation" has the meaning specified in Section 2.7 hereof.
"Separation Date" has the meaning specified in Section 2.7
hereof.
"Successor Company" has the meaning specified in Section
4.1(d) hereof.
"Triggering Date" has the meaning specified in Section 5.3(a)
hereof.
"Unit" means the $1,000 principal amount of Notes and one
Warrant that comprise each Unit.
"Unit Certificates" means the certificates evidencing the
Units to be delivered pursuant to the Purchase Agreement.
"Warrant Agent" means the United States Trust Company of New
York, or the successor or successors of such Warrant Agent appointed in
accordance with the terms hereof.
"Warrant Agent Office" has the meaning specified in Section
2.11 hereof.
"Warrant Certificates" means the certificates evidencing the
Warrants to be delivered pursuant to this Agreement, substantially in
the form of Exhibits A and B hereto.
"Warrant Register" has the meaning specified in Section 2.8
hereof.
"Warrant Registrar" has the meaning specified in Section 2.8
hereof.
"Warrant Shares" has the meaning specified in Section 2.1
hereof.
"Warrants" shall mean the Warrants issued hereunder and all
warrants issued upon transfer, division or combination of, or in
substitution for, any thereof. All Warrants shall at all times be
identical as to terms and conditions and date, except as to the number
of Class B Shares for which they may be exercised.
<PAGE> 11
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1.2 Rules of Construction. Unless the text otherwise required.
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with United States generally accepted accounting
principles ("U.S. GAAP") as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including, without limitation; and
(v) words in the singular include the plural and words in the
plural include the singular.
2. SECTION ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF WARRANT CERTIFICATES.
2.1 Issuance of Warrants. Warrants comprising part of the
Units shall be originally issued in connection with the issuance of the Units
and such Warrants shall not be separately transferable from the Notes until on
or after the Separation Date as provided in Section 2.7 hereof.
Each Warrant Certificate shall evidence the number of Warrants
specified therein, and each Warrant evidenced thereby shall represent the right,
subject to the provisions contained herein and therein, to purchase from the
Company (and the Company shall issue and sell to such Holder of the Warrant)
6.667 Class B Shares of the Company (the shares purchasable upon exercise of a
Warrant being hereinafter referred to as the "Warrant Shares," subject to
adjustment as provided in Section 4 hereof).
References in this Agreement to Ordinary Shares underlying the
Warrants, or issued or deliverable upon exercise of the Warrants to the Holders
thereof, shall be deemed to refer to Class B Shares of the Company.
2.2 Execution of Warrant Certificates. The Warrant
Certificates shall be executed on behalf of the Company by two Officers of the
Company. Such signatures may be the manual or facsimile signatures of the
present or any future such officers. Typographical and other minor errors or
defects in any such reproduction of any such signature shall not affect the
validity or enforceability of any Warrant Certificate that has been duly
countersigned and delivered by the Warrant Agent.
In case any officer of the Company who shall have signed any
of the Warrant Certificates shall cease to be such an officer before the Warrant
Certificate so signed shall be countersigned and delivered by the Warrant Agent
or disposed of by the Company, such Warrant Certificate nevertheless may be
countersigned and delivered or disposed of as though the Person
<PAGE> 12
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who signed such Warrant Certificate had not ceased to be such an officer of the
Company; and any Warrant Certificate may be signed on behalf of the Company by
such Persons as, at the actual date of the execution of such Warrant
Certificate, shall be the proper officers of the Company, although at the date
of the execution and delivery of this Agreement any such Person was not such an
officer.
2.3 Countersignature and Delivery. Subject to the immediately
following paragraph, Warrant Certificates shall be countersigned by manual
signature and dated the date of countersignature by the Warrant Agent and shall
not be valid for any purpose unless so countersigned and dated. The Warrant
Certificates shall be numbered and shall be registered in the Warrant Register.
Upon the receipt by the Warrant Agent of a written order of
the Company set forth in an Officers' Certificate, specifying the amount of
Warrants to be countersigned, whether the Warrants are to be Global Warrants or
Definitive Warrants, whether the Warrants are to bear the Private Placement
Legend set forth in Section 2.5, the date of such Warrants and such other
information as the Warrant Agent may reasonably request, the Warrant Agent is
authorized, to countersign the Warrant Certificates upon receipt from the
Company at any time and from time to time of the Warrant Certificates, duly
executed as provided in Section 2.2 hereof, and deliver them, without any
further action by the Company. Such countersignature shall be by a duly
authorized signatory of the Warrant Agent (although it shall not be necessary
for the same signatory to sign all Warrant Certificates).
In case any authorized signatory of the Warrant Agent who
shall have countersigned any of the Warrant Certificates shall cease to be such
an authorized signatory before the Warrant Certificate shall be disposed of by
the Company, such Warrant Certificate nevertheless may be delivered or disposed
of as though the Person who countersigned such Warrant Certificate had not
ceased to be such an authorized signatory of the Warrant Agent; and any Warrant
Certificate may be countersigned on behalf of the Warrant Agent by such Persons
as, at the actual time of countersignature of such Warrant Certificates, shall
be the duly authorized signatories of the Warrant Agent, although at the time of
the execution and delivery of this Agreement any such Person is not such an
authorized signatory.
The Warrant Agent's countersignature on all Warrant
Certificates shall be in substantially the form set forth in Exhibit A and B
hereto.
2.4 Form of Warrant Certificates. Warrants offered and sold to
Qualified Institutional Buyers in reliance upon Rule 144A in the United States
of America ("Rule 144A Warrants") shall be issued on the Issue Date in the form
of one or more global Warrants in registered global form ("Rule 144A Global
Warrants"). Rule 144A Global Warrants shall be deposited with the Warrant Agent,
as custodian for, and registered in the name of DTC or its nominee, duly
executed by the Company and countersigned by the Warrant Agent as provided
herein; provided that until such time as the Warrants Separate (as defined
below) from the Notes, the Rule 144A Global Warrants shall be registered in the
name of the Unit Agent and shall be represented by a U.S. Global Unit deposited
with the Unit Agent as custodian for and registered in the name of DTC or its
nominee.
Warrants offered and sold outside the United States of America
in reliance on Regulation S ("Regulation S Warrants") shall be issued on the
Issue Date in the form of one or more global Warrants in registered global form
(the "Regulation S Global Warrants"). Regulation S Global Warrants shall be
deposited with the Warrant Agent as custodian for, and registered in the name
of, DTC or its nominee, for credit to the subscribers' respective accounts at
<PAGE> 13
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Euroclear and Cedel, duly executed by the Company and countersigned by the
Warrant Agent as provided herein; provided that until such time as the Warrants
Separate from the Notes, the Regulation S Global Warrants shall be registered in
the name of the Unit Agent and shall be represented by a Regulation S Global
Unit deposited with the Unit Agent as custodian for, and registered in the name
of, DTC or its nominee, for credit to the subscribers' respective accounts at
Euroclear and Cedel. During a period of 40 days commencing on the latest of the
commencement of the Offering and the Issue Date (such period through and
including such 40th day, the "Restricted Period"), beneficial interests in the
Regulation S Global Warrants may be held only through Euroclear or Cedel (as
indirect participants in DTC). The Rule 144A Global Warrants and the Regulation
S Global Warrants are sometimes collectively referred to herein as the "Global
Warrants".
The Warrant Certificates evidencing the Global Warrants to be
delivered pursuant to this Agreement shall be substantially in the form set
forth in Exhibit A attached hereto. Such Global Warrants shall represent such of
the outstanding Warrants as shall be specified therein and each shall provide
that it shall represent the aggregate amount of outstanding Warrants from time
to time endorsed thereon and that the aggregate amount of outstanding Warrants
represented thereby may from time to time be decreased or increased, as
appropriate. Any endorsement of a Global Warrant to reflect the amount of any
increase or decrease in the amount of outstanding Warrants represented thereby
shall be made by the Warrant Agent and DTC in accordance with instructions given
by the holder thereof. The Depository Trust Company shall act as the Depositary
(the "Depositary") with respect to the Global Warrants until a successor, if
any, shall be appointed by the Company. Except as provided in Section 2.9(b),
owners of beneficial interests in a Global Warrant will not be entitled to
receive physical delivery of Definitive Warrants.
2.5 Restrictive Legends.
Global Warrants shall bear the following legend (the "Private
Placement Legend") on the face thereof:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF
THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON
AND IS ACQUIRING THIS SECURITY IN AN "OFFSHORE TRANSACTION"
PURSUANT TO RULE 904 OF REGULATION S, (2) AGREES THAT IT WILL
NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER
PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER
<PAGE> 14
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THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER)
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY
PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) AND (Y) SUCH
LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE
"RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY,
(B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG
AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS
THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE
COMPANY AND THE WARRANT AGENT SHALL HAVE THE RIGHT PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D) OR
(E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF
THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT
A CERTIFICATION OR TRANSFER IN THE FORM APPEARING ON THE OTHER
SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE WARRANT AGENT, THIS LEGEND WILL BE REMOVED
UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT.
The Global Warrants shall also bear the following legend on
the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC") TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME
OF CEDE & CO. OR SUCH OTHER REPRESENTATIVE OF DTC AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DTC),
ANY TRANSFER, PLEDGE OR
<PAGE> 15
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OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO.
OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED
TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTIONS 2.9 AND 2.10 OF THE WARRANT AGREEMENT DATED
AS OF DECEMBER 3, 1998.
2.6 Temporary Warrant Certificates. Pending the preparation of
definitive Warrant Certificates ("Definitive Warrant Certificates"), the Company
may execute, and the Warrant Agent shall countersign and deliver, temporary
Warrant Certificates, which are printed, lithographed, typewritten or otherwise
produced, substantially of the tenor of the Definitive Warrant Certificates in
lieu of which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Warrant
Certificates may determine, as evidenced by their execution of such Warrant
Certificates.
If temporary Warrant Certificates are issued, the Company will
cause Definitive Warrant Certificates to be prepared without unreasonable delay.
After the preparation of Definitive Warrant Certificates, the temporary Warrant
Certificates shall be exchangeable for Definitive Warrant Certificates upon
surrender of the temporary Warrant Certificates at any office or agency
maintained by the Company for that purpose pursuant to Section 2.11 hereof.
Subject to the provisions of Section 3.6 hereof, such exchange shall be without
charge to the holder. Upon surrender for cancellation of any one or more
temporary Warrant Certificates, the Company shall execute, and the Warrant Agent
shall countersign and deliver in exchange therefor, one or more Definitive
Warrant Certificates representing in the aggregate a like number of Warrants.
Until so exchanged, the holder of a temporary Warrant Certificate shall in all
respects be entitled to the same benefits under this Agreement as a holder of a
Definitive Warrant Certificate.
2.7 Separation of Warrants and Notes. The Notes and Warrants
will not be separately transferable until the Separation Date. The "Separation
Date" will be the earliest of (i) May 15, 1999, (ii) the commencement of an
exchange offer or the effectiveness of a Shelf Registration Statement with
respect to the Notes, (iii) the Exercisability Date and (iv) such other date as
Lehman Brothers Inc. and Lehman Brothers International (Europe), as
representatives of the Initial Purchasers (the "Representatives"), will
determine in their sole discretion. The surrender of a Unit Certificate for
separate Warrant and Note certificates is herein referred to as a "Separation"
and the related Warrants being referred to as "Separated." Upon Separation of
the Warrants and the Notes, the Global Warrants shall be transferred to and
deposited with the Warrant Agent, as custodian for, and registered in the name
of DTC or its nominee, duly executed by the Company and countersigned by the
Warrant Agent as provided herein.
<PAGE> 16
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2.8 Registration, Registration of Transfers and Exchanges. The
Company will keep, at the office or agency maintained by the Company for such
purpose, a register or registers in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of, and registration of transfer and exchange of, Warrants as provided herein.
Each person designated by the Company from time to time as a Person authorized
to register the transfer and exchange of the Warrants is hereinafter called,
individually and collectively, the "Warrant Registrar." The Company hereby
initially appoints the Warrant Agent as Warrant Registrar. Upon written notice
to the Warrant Agent and any acting Warrant Registrar, the Company may appoint a
successor Warrant Registrar for such purposes.
The Company will at all times designate one Person (who may be
the Company and who need not be a Warrant Registrar) to act as repository of a
master list of names and addresses of the holders of Warrants (the "Warrant
Register"). The Warrant Agent will act as such repository unless and until some
other Person is, by written notice from the Company to the Warrant Agent and the
Warrant Registrar, designated by the Company to act as such. In the event the
Warrant Registrar is not the repository, the Company shall cause the Warrant
Registrar to furnish to such repository, on a current basis, such information as
to all registrations of transfer and exchanges effected by the Warrant
Registrar, as may be necessary to enable such repository to maintain the Warrant
Register on as current a basis as is practicable.
When Warrants are presented to the Warrant Agent with a
request to register the transfer of the Warrants or exchange Warrants for an
equal number of Warrants of other authorized denominations, the Warrant Agent
shall register the transfer or make the exchange as requested if the
requirements under this Warrant Agreement as set forth herein for such
transactions are met; provided, however, that the Warrants presented or
surrendered for registration of transfer or exchange shall be duly endorsed or
accompanied by a written instruction of transfer in form satisfactory to the
Company and the Warrant Agent, duly executed by the holder thereof or by his
attorney, duly authorized in writing.
Furthermore, any Holder of a Global Warrant shall, by
acceptance of such Global Warrant, agree that transfers of beneficial interests
in such Global Warrant may be effected only through a book-entry system
maintained by the Holder of such Global Warrant (or its agent), and that
ownership of a beneficial interest in the Warrant shall be required to be
reflected in a book entry.
All Warrants issued upon any registration of transfer or
exchange of Warrants shall be the valid obligations of the Company, evidencing
the same obligations, and entitled to the same benefits under this Agreement, as
the Warrants surrendered upon such registration of transfer or exchange.
2.9 Book-Entry Provisions for Global Warrants.
(a) Registered Owner of Global Warrants. Each Global Warrant
initially shall (i) be registered in the name of DTC or its nominee, (ii) be
delivered to the Warrant Agent as custodian for the Depositary and (iii) bear
legends as set forth in Section 2.5.
Members of, or participants in, DTC ("Agent Members") shall
have no rights under this Agreement with respect to any Global Warrant held on
their behalf by DTC, or the Warrant Agent as its custodian, or under the Global
Warrant, and DTC may be treated by the Company, the Warrant Agent and any agent
of the Company or the Warrant Agent as the absolute owner of such Global Warrant
for all purposes whatsoever. Notwithstanding the
<PAGE> 17
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foregoing, nothing herein shall prevent the Company, the Warrant Agent or any
agent of the Company or the Warrant Agent from giving effect to any written
certification, proxy or other authorization furnished by DTC or shall impair, as
between DTC and its Agent Members, the operation of customary practices
governing the exercise of the rights of a Holder of any Warrant.
(b) Transfers of Global Warrants. Transfers of a Global
Warrant shall be limited to transfers of such Global Warrant in whole, but not
in part, to DTC, its successors or their respective nominees. Interests of
beneficial owners in a Global Warrant may be transferred in accordance with the
rules and procedures of DTC and the provisions of this Section 2.9. If required
to do so pursuant to any applicable law or regulation, beneficial owners may
obtain Warrants in definitive form, in exchange for their beneficial interests
in a Global Warrant upon written request in accordance with DTC's and the
Warrant Registrar's procedures. In addition, Definitive Warrants shall be
transferred to all beneficial owners in exchange for their beneficial interests
in a Global Warrant if (i) DTC (A) notifies the Company that it is unwilling or
unable to continue as Depositary for the Global Warrant and the Company
thereupon fails to appoint a successor depositary upon 90 days notice or (B) has
ceased to be a clearing agency registered under the Exchange Act and the Company
thereupon fails to appoint a successor depositary upon 90 days notice, (ii) an
Event of Default under the Indenture occurs and is continuing or (iii) the
Company, at its option, notifies the Warrant Agent in writing that it elects to
cause issuance of Definitive Warrants. In addition, beneficial interests in a
Global Warrant may be exchanged for Definitive Warrants upon request but only
upon at least 20 days' prior written notice given to the Warrant Agent by or on
behalf of DTC in accordance with customary procedures. In all cases, Definitive
Warrants delivered in exchange for any Global Warrants or beneficial interest
therein will be registered in names, and issued in any approved denominations,
requested by or on behalf of DTC (in accordance with its customary procedures)
and will bear the Private Placement Legend set forth in Section 2.5, if
applicable, unless the Company determines otherwise in compliance with
applicable law.
(c) In connection with any transfer of a portion of the
beneficial interest in a Global Warrant pursuant to subsection (b) of this
Section 2.9 to beneficial owners who are required to hold Definitive Warrants,
the Warrant Registrar shall reflect on its books and records the date and a
decrease in the amount of such Global Warrant in an amount equal to the amount
of the beneficial interest in the Global Warrant to be transferred, and the
Company shall execute, and the Warrant Agent shall countersign and deliver, one
or more Definitive Warrants of like tenor and amount.
(d) In connection with the transfer of an entire Global
Warrant to beneficial owners pursuant to subsection (b) of this Section 2.9,
such Global Warrant shall be deemed to be surrendered to the Warrant Agent for
cancellation, and the Company shall execute, and the Warrant Agent shall
countersign and deliver, to each beneficial owner identified by DTC in exchange
for its beneficial interest in such Global Warrant, an equal aggregate amount of
Definitive Warrants of authorized denominations.
(e) Any Definitive Warrant delivered in exchange for an
interest in a Global Warrant pursuant to subsection (c) or subsection (d) of
this Section shall, except as otherwise provided herein, bear the Private
Placement Legend set forth in Section 2.5, if applicable.
<PAGE> 18
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(f) The Holder of a Global Warrant may grant proxies and
otherwise authorize any Person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Agreement or the Warrants.
2.10 Special Transfer Provisions.
(a) Rule 144A Global Warrant to Regulation S Global Warrant.
If a Holder of a beneficial interest in the Rule 144A Global Warrant deposited
with the Warrant Agent, as custodian for DTC, wishes at any time to exchange its
interest in such Rule 144A Global Warrant for an interest in the Regulation S
Global Warrant, or to transfer its interest in such Rule 144A Global Warrant to
a Person who wishes to take delivery thereof in the form of an interest in such
Regulation S Global Warrant, such Holder may, subject to the rules and
procedures of DTC and to the requirements set forth in the following sentence,
exchange or cause the exchange or transfer or cause the transfer of such
interest for an equivalent beneficial interest in such Regulation S Global
Warrant. Upon receipt by the Warrant Agent, as Transfer Agent, of (1)
instructions given in accordance with DTC's procedures from or on behalf of a
Holder of a beneficial interest in the Rule 144A Global Warrant, directing (via
DWAC) the Warrant Agent, as Transfer Agent, to credit or cause to be credited a
beneficial interest in the Regulation S Global Warrant in an amount equal to the
beneficial interest in the Rule 144A Global Warrant to be exchanged or
transferred, (2) a written order given in accordance with DTC's procedures
containing information regarding the Euroclear or Cedel account to be credited
with such increase and the name of such account, and (3) a certificate in the
form of Exhibit C given by the Holder of such beneficial interest stating that
the exchange or transfer of such interest has been made pursuant to and in
accordance with Rule 904 of Regulation S or Rule 144 under the Securities Act,
the Warrant Agent, as Transfer Agent, shall promptly deliver appropriate
instructions (via DWAC) to DTC, its nominee, or the custodian for DTC, as the
case may be, to reduce or reflect on its records a reduction of the Rule 144A
Global Warrant by the amount of the beneficial interest in such Rule 144A Global
Warrant to be so exchanged or transferred from the relevant participant, and the
Warrant Agent, as Transfer Agent, shall promptly deliver appropriate
instructions (via DWAC) to DTC, its nominee, or the custodian for DTC, as the
case may be, concurrently with such reduction, to increase or reflect on its
records an increase of the amount of such Regulation S Global Warrant by the
amount of the beneficial interest in such Rule 144A Global Warrant to be so
exchanged or transferred, and to credit or cause to be credited to the account
of the Person specified in such instructions (who shall be the agent member of
Euroclear or Cedel, or both, as the case may be) a beneficial interest in such
Regulation S Global Warrant equal to the reduction in the amount of such Rule
144A Global Warrant.
(b) Regulation S Global Warrant to Rule 144A Global Warrant.
If a Holder of a beneficial interest in the Regulation S Global Warrant wishes
at any time to exchange its interest in such Regulation S Global Warrant for an
interest in the Rule 144A Global Warrant, or to transfer its interest in such
Regulation S Global Warrant to a Person who wishes to take delivery thereof in
the form of an interest in such Rule 144A Global Warrant, such Holder may,
subject to the rules and procedures of Euroclear or Cedel and DTC, as the case
may be, and to the requirements set forth in the following sentence, exchange or
cause the exchange or transfer or cause the transfer of such interest for an
equivalent beneficial interest in such Rule 144A Global Warrant. Upon receipt by
the Warrant Agent, as Transfer Agent, of (l) instructions given in accordance
with the procedures of Euroclear or Cedel and DTC, as the case may be, from or
on behalf of a beneficial owner of an interest in the Regulation S Global
Warrant directing the Warrant Agent, as Transfer Agent, to credit or cause to be
credited a beneficial interest in the Rule 144A Global Warrant in an amount
equal to the beneficial interest in the Regulation S Global Warrant to be
exchanged or transferred, (2) a written order given in accordance with the
<PAGE> 19
15
procedures of Euroclear or Cedel and DTC, as the case may be, containing
information regarding the account with DTC to be credited with such increase and
the name of such account, and (3) prior to the expiration of the Restricted
Period, a certificate in the form of Exhibit D given by the Holder of such
beneficial interest and stating that the Person transferring such interest in
such Regulation S Global Warrant reasonably believes that the Person acquiring
such interest in such Rule 144A Global Warrant is a Qualified Institutional
Buyer and is obtaining such beneficial interest in a transaction meeting the
requirements of Rule 144A and any applicable securities laws of any state of the
United States or any other jurisdiction, the Warrant Agent, as Transfer Agent,
shall promptly deliver (via DWAC) appropriate instructions to DTC, its nominee,
or the custodian for DTC, as the case may be, to reduce or reflect on its
records a reduction of the Regulation S Global Warrant by the amount of the
beneficial interest in such Regulation S Global Warrant to be exchanged or
transferred, and the Warrant Agent, as Transfer Agent, shall promptly deliver
(via DWAC) appropriate instructions to DTC, its nominee, or the custodian for
DTC, as the case may be, concurrently with such reduction, to increase or
reflect on its records an increase of the amount of such Rule 144A Global
Warrant by the amount of the beneficial interest in such Regulation S Global
Warrant to be so exchanged or transferred, and to credit or cause to be credited
to the account of the Person specified in such instructions a beneficial
interest in such Rule 144A Global Warrant equal to the reduction in the amount
of such Regulation S Global Warrant. After the expiration of the Restricted
Period, the certification requirement set forth in clause (3) of the second
sentence of this Section 2.10(b) will no longer apply to such transfers.
(c) Any beneficial interest in one of the Global Warrants that
is transferred to a Person who takes delivery in the form of an interest in the
other Global Warrant will, upon transfer, cease to be an interest in such Global
Warrant and become an interest in the other Global Warrant and, accordingly,
will thereafter be subject to all transfer restrictions and other procedures
applicable to beneficial interests in such other Global Warrant for as long as
it remains such an interest.
(d) Other Exchanges. In the event that a Global Warrant is
exchanged for Definitive Warrants in registered form pursuant to Section 2.9(b),
such Warrants may be exchanged or transferred for one another only in accordance
with such procedures as are substantially consistent with the provisions of
Sections 2.10(a) and (b) above (including the certification requirements
intended to ensure that such exchanges or transfers comply with Rule 144, Rule
144A or Regulation S, as the case may be) and as may be from time to time
adopted by the Company and the Warrant Agent.
(e) Private Placement Legend. Upon the transfer, exchange or
replacement of Warrants not bearing the Private Placement Legend, the Warrant
Registrar shall deliver Warrants that do not bear the Private Placement Legend.
Upon the transfer, exchange or replacement of Warrants bearing the Private
Placement Legend, the Warrant Registrar shall deliver only Warrants that bear
the Private Placement Legend unless there is delivered to the Warrant Registrar
an opinion of counsel reasonably satisfactory to the Company and the Warrant
Agent to the effect that neither such legend nor the related restrictions on
transfer are required in order to maintain compliance with the provisions of the
Securities Act.
<PAGE> 20
16
(f) General. The provisions hereof shall be qualified in their
entirety by any applicable securities laws of the United States and any other
applicable jurisdiction and by the procedures of any applicable clearing agency,
in each case as in effect from time to time, and all such laws and clearing
procedures shall be deemed to be incorporated herein by reference. By its
acceptance of any Warrant bearing the Private Placement Legend, each Holder of
such a Warrant acknowledges the restrictions on transfer of such Warrant set
forth in this Agreement and in the Private Placement Legend and agrees that it
will transfer such Warrant only as provided in this Agreement. The Warrant Agent
shall not register a transfer of any Warrant Certificate unless such transfer
complies with the restrictions on transfer of such Warrant Certificate set forth
in this Warrant Agreement.
(g) Resale Restriction Termination Date. The Company shall
deliver to the Warrant Agent an Officer's Certificate setting forth the dates on
which the Resale Restriction Termination Date terminates.
The Warrant Registrar shall retain copies of all letters,
notices and other written communications received pursuant to Section 2.9 or
this Section 2.10. The Company shall have the right to inspect and make copies
of all such letters, notices or other written communications at any reasonable
time upon the giving of reasonable written notice to the Warrant Registrar.
(i) No Obligation of the Warrant Agent. The Warrant Agent
shall have no responsibility or obligation to any beneficial owner of a Global
Warrant, a member of, or a participant in DTC or other Person with respect to
any ownership interest in the Warrants, with respect to the accuracy of the
records of DTC or its nominee or of any participant or member thereof or with
respect to the delivery to any participant, member, beneficial owner or other
Person (other than DTC) of any notice (including any notice of redemption) or
the payment of any amount, under or with respect to such Warrants. All notices
and communications with respect to the Warrants shall be given to the Holders
and all payments in respect of the Warrants represented by the Global Warrant
shall be made by wire transfer of immediately available funds to the accounts
specified by the Holder of the Global Warrant. With respect to Definitive
Warrants, the Company will make all payments by wire transfer of immediately
available funds to the accounts specified by the Holders thereof or, if no such
account is specified, by mailing a check to each such Holder's registered
address. The rights of beneficial owners in any Global Warrant shall be
exercised only through DTC subject to the applicable rules and procedures of
DTC. The Warrant Agent may rely and shall be fully protected and indemnified
pursuant to Section 6.5 in relying upon information furnished by DTC with
respect to any beneficial owners, its members and participants.
(ii) The Warrant Agent shall have no obligation or duty to
monitor, determine or inquire as to compliance with any restrictions on transfer
imposed under this Agreement or under applicable law with respect to any
transfer of any interest in any Warrant (including without limitation any
transfers between or among DTC participants, members or beneficial owners in any
Global Warrant) other than to require delivery of such certificates and other
documentation of evidence as are expressly required by, and to do so if and when
expressly required by, the terms of this Agreement, and to examine the same to
determine substantial compliance as to form with the express requirements
hereof.
2.11 Offices for Exercise, etc. So long as any of the Warrants
remain outstanding, the Company will designate and maintain in the Borough of
Manhattan, The City of New York: (a) an office or agency where the Warrant
Certificates may be presented for exercise, (b) an office or agency where the
Warrant Certificates may be presented for registration of
<PAGE> 21
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transfer and for exchange (including the exchange of temporary Warrant
Certificates for Definitive Warrant Certificates pursuant to Section 2.6
hereof), and (c) an office or agency where notices and demands to or upon the
Company in respect of the Warrants or of this Agreement may be served. The
Company may from time to time change or rescind such designation, as it may deem
desirable or expedient; provided, however, that an office or agency shall at all
times be maintained in the Borough of Manhattan, The City of New York, as
provided in the first sentence of this Section. In addition to such office or
offices or agency or agencies, the Company may from time to time designate and
maintain one or more additional offices or agencies within or outside The City
of New York, where Warrant Certificates may be presented for exercise or for
registration of transfer or for exchange, and the Company may from time to time
change or rescind such designation, as it may deem desirable or expedient. The
Company will give to the Warrant Agent and the Warrant Registrar written notice
of the location of any such office or agency and of any change of location
thereof. The Company hereby designates the Warrant Agent at its corporate trust
office in the Borough of Manhattan, The City of New York (the "Warrant Agent
Office"), as the initial agency maintained for each such purpose. In case the
Company shall fail to maintain any such office or agency or shall fail to give
such notice of the location or of any change in the location thereof,
presentations and demands may be made and notice may be served at the Warrant
Agent Office and the Company appoints the Warrant Agent as its agent to receive
all such presentations, surrenders, notices and demands.
2.12 Cancellation. All Warrant Certificates surrendered for
the purpose of exercise (in whole or in part), exchange, substitution or
transfer shall, if surrendered to the Company or to any of its agents, be
delivered to the Warrant Agent for cancellation or in cancelled form, or if
surrendered to the Warrant Agent shall be cancelled by it, and no Warrant
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. If the Company purchases or acquires
Warrants and if the Company so chooses, the Company may deliver to the Warrant
Agent for cancellation and retirement, and the Warrant Agent shall so cancel and
retire (subject to the record retention provisions of the Exchange Act), the
Warrant Certificates evidencing said Warrants. The Warrant Agent shall destroy
such cancelled Warrant Certificates, and in such case shall upon the written
request of the Company deliver a certificate of destruction thereof to the
Company. The Warrant Agent shall account promptly to the Company with respect to
Warrants exercised and concurrently pay to the Company all monies received by
the Warrant Agent for the purchase of the Warrant Shares through the exercise of
such Warrants.
2.13 Lost, Stolen, Destroyed, Defaced or Mutilated Warrant
Certificates. Upon receipt by the Company and the Warrant Agent (or any agent of
the Company or the Warrant Agent, if requested by the Company) of evidence
satisfactory to them of the loss, theft, destruction, defacement, or mutilation
of any Warrant Certificate and of indemnity satisfactory to them (which may
include posting a bond) and, in the case of mutilation or defacement, upon
surrender thereof to the Warrant Agent for cancellation, then, in the absence of
notice to the Company or the Warrant Agent that such Warrant Certificate has
been acquired by a bona fide purchaser or holder in due course, the Company
shall execute, and an authorized signatory of the Warrant Agent shall manually
countersign and deliver, in exchange for or in lieu of the lost, stolen,
destroyed, defaced or mutilated Warrant Certificate, a new Warrant Certificate
representing a like number of Warrants, bearing a number or other distinguishing
symbol not contemporaneously outstanding. Upon the issuance of any new Warrant
Certificate under this
<PAGE> 22
18
Section, the Company may require the payment from the Holder of such Warrant
Certificate of a sum sufficient to cover any tax, stamp tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Warrant Agent and the Warrant
Registrar) in connection therewith. Every substitute Warrant Certificate
executed and delivered pursuant to this Section in lieu of any lost, stolen or
destroyed Warrant Certificate shall constitute an additional contractual
obligation of the Company, whether or not the lost, stolen or destroyed Warrant
Certificate shall be at any time enforceable by anyone, and shall be entitled to
the benefits of (but shall be subject to all the limitations of rights set forth
in) this Agreement equally and proportionately with any and all other Warrant
Certificates duly executed and delivered hereunder. The provisions of this
Section 2.13 are exclusive with respect to the replacement of lost, stolen,
destroyed, defaced or mutilated Warrant Certificates and shall preclude (to the
extent lawful) any and all other rights or remedies notwithstanding any law or
statute existing or hereafter enacted to the contrary with respect to the
replacement of lost, stolen, destroyed, defaced or mutilated Warrant
Certificates.
The Warrant Agent is hereby authorized to countersign in
accordance with the provisions of this Agreement, and deliver the new Warrant
Certificates required pursuant to the provisions of this Section.
3. SECTION TERMS OF WARRANTS; EXERCISE OF WARRANTS.
3.1 Exercise Period. Subject to the terms of this Agreement,
each Warrant Holder shall have the right, which may be exercised commencing at
the opening of business on the Exercisability Date and until 5:00 p.m., New York
City time on the Expiration Date, to receive from the Company the number of
fully paid and nonassessable Warrant Shares which the Holder may at the time be
entitled to receive on exercise of such Warrants and payment of the Exercise
Price then in effect for such Warrant Shares. Each Warrant not exercised prior
to 5:00 p.m., New York City time, on the Expiration Date shall become void and
all rights thereunder and all rights in respect thereof under this Agreement
shall cease as of such time.
Until the Separation Date, each $1,000 principal amount of
Notes and one Warrant which comprise each Unit, may not be separately
transferred or exchanged. The Warrant Agent shall coordinate its activities
hereunder with the Trustee under the Indenture and the Unit Agent under the Unit
Agreement, and may rely upon information provided by such Trustee regarding
ownership or transfer of the Notes and/or by the Unit Agent regarding ownership
or transfer of the Units.
The Company shall give notice not less than 90, and not more
than 120, days prior to the Expiration Date to the Holders of the outstanding
Warrants to the effect that the Warrants will terminate and become void as of
5:00 p.m., New York City time, on the Expiration Date; provided, however, that
the failure by the Company to give such notice as provided in this Section shall
not affect such termination and becoming void of the Warrants as of 5:00 p.m.,
New York City time, on the Expiration Date.
3.2 Manner of Exercise. A Warrant may be exercised at any time
on or after the Exercisability Date and prior to the Expiration Date upon (i)
surrender to the Warrant Agent of the Warrant Certificates, together with the
form of election to purchase properly completed and executed by the Holder
thereof and (ii) payment to the Warrant Agent, for the account of the Company,
of the Exercise Price for each Class B Share or other securities issuable upon
exercise of such Warrants. The Exercise Price may be paid (i) in cash or by
certified or official bank
<PAGE> 23
19
check or by wire transfer to an account designated by the Company for such
purpose (a "Cash Exercise") or (ii) without the payment of cash, by reducing the
number of Class B Shares that would be obtainable upon the exercise of a Warrant
and payment of the Exercise Price in cash so as to yield a number of Class B
Shares upon the exercise of such Warrant equal to the product of (a) the number
of Class B Shares for which such Warrant is exercisable as of the date of
exercise (if the Exercise Price were being paid in cash) and (b) the Cashless
Exercise Ratio. An exercise of a Warrant in accordance with clause (ii) of the
immediately preceding sentence is herein called a "Cashless Exercise." In the
event of a Cashless Exercise of Warrants, the Company will purchase from the
Holder thereof such number of Warrants as would have entitled the Holder thereof
to receive the excess of the number of Class B Shares deliverable upon a Cash
Exercise over the number of Class B Shares deliverable upon a Cashless Exercise,
for a purchase price equal to the Exercise Price multiplied by the excess of the
number of Class B Shares purchasable upon a Cash Exercise over the number of
Class B Shares purchasable upon a Cashless Exercise. The Company agrees to
offset the purchase price referred to in the immediately preceding sentence with
the obligation to pay the Exercise Price in respect of the Class B Shares
deliverable upon a Cashless Exercise. Upon surrender of a Warrant Certificate
representing more than one Warrant in connection with the Holder's option to
elect a Cashless Exercise, the number of Class B Shares deliverable upon a
Cashless Exercise shall be equal to the number of Class B Shares issuable upon
the exercise of Warrants that the Holder specifies are to be exercised pursuant
to a Cashless Exercise multiplied by the Cashless Exercise Ratio. All provisions
of this Agreement shall be applicable with respect to a surrender of a Warrant
Certificate pursuant to a Cashless Exercise for less than the full number of
Warrants represented thereby. Upon surrender of the Warrant Certificate and
payment of the Exercise Price in accordance with this Agreement, the Company
will issue Class B Shares of the Company for each Warrant evidenced by such
Warrant Certificate, subject to adjustment as described herein. Whenever there
occurs a Cashless Exercise, the Company shall deliver to the Warrant Agent a
certificate setting forth the Cashless Exercise Ratio. The Warrant Agent shall
be entitled to rely on such certificate and shall be under no duty or
responsibility with respect to any such certificate, except to exhibit the same
from time to time, to any Holder desiring an inspection thereof during
reasonable business hours. The Warrant Agent shall not at any time be under any
duty or responsibility to any Holder to determine whether the Cashless Exercise
Ratio is correct or with respect to the method employed in determining the
Cashless Exercise Ratio or the validity or value of any Class B Shares. In
connection with the exercise of Warrants pursuant to this Agreement, the Company
and the Warrant Agent may take any actions required by the introduction of the
Euro.
3.3 Issuance of Warrant Shares. Subject to Section 2.13, upon
the surrender of Warrant Certificates and payment of the Exercise Price, as set
forth above, the Company shall issue Class B Shares in such name or names as the
Holder may designate, for the number of full Warrant Shares so purchased upon
the exercise of such Warrants or other securities or property to which it is
entitled, registered or otherwise, to the Person or Persons entitled to receive
the same, together with cash as provided in Section 3.4 in respect of any
fractional Warrant Shares otherwise issuable upon such exercise. Such Class B
Shares shall be deemed to have been issued and any Person so designated shall be
deemed to have become a Holder of record of such Warrant Shares as of the date
of the surrender of such Warrant Certificates and payment of the per share
Exercise Price or upon a Cashless Exercise.
<PAGE> 24
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The Company hereby agrees that no service charge will be made
for registration of transfer or exchange upon surrender of any Warrant
Certificate at the office of the Warrant Agent maintained for that purpose.
Holders may be required to make payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any
registration or transfer or exchange of Warrant Certificates.
3.4 Fractional Warrant Shares. The Company shall not be
required to issue fractional Warrant Shares on the exercise of Warrants. If more
than one Warrant shall be exercised in full at the same time by the same Holder,
the number of full Warrant Shares which shall be issuable upon such exercise
shall be computed on the basis of the aggregate number of Warrant Shares
purchasable pursuant thereto. If any fraction of a Warrant Share would, except
for the provisions of this Section 3.4, be issuable on the exercise of any
Warrant (or specified portion thereof), the Company may, at its option, pay an
amount in cash equal to the Current Market Value for one Warrant Share on the
Business Day immediately preceding the date the Warrant is exercised, multiplied
by such fraction, computed to the nearest whole Dutch guilder.
3.5 Sufficient Authorized Share Capital.
The Company has and will maintain an authorized share capital
sufficient for the issuance of such number of Class B Shares as will be issuable
upon the exercise of all outstanding Warrants. Such Class B Shares, when issued
and paid for in accordance with the Warrant Agreement, will be duly and validly
issued, fully paid and nonassessable, free of preemptive rights and free from
all liens, charges and security interests with respect to the issue thereof.
3.6 Payment of Taxes. The Company will pay all documentary
stamp taxes attributable to the initial issuance of the Warrants and the Warrant
Shares issuable upon the exercise of Warrants; provided, however, that the
Company shall not be required to pay any tax or taxes which may be payable in
respect of any transfer involved in the issue of any Warrant Certificates or
Warrant Shares in a name other than that of the Holder of a Warrant Certificate
surrendered upon the exercise of a Warrant, and the Company shall not be
required to issue or deliver such Warrant Certificates unless or until the
Person or Persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
4. SECTION ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT
SHARES ISSUABLE.
4.1 Adjustments. The Exercise Price and the number of Warrant
Shares purchasable upon the exercise of Warrants shall be subject to adjustment
from time to time as follows:
(a) Changes in Ordinary Shares. In the event that at any time
or from time to time after the date hereof the Company shall (i) pay a dividend
or make a distribution on its Ordinary Shares in Ordinary Shares or other shares
of capital stock, (ii) subdivide its outstanding Ordinary Shares into a larger
number of Ordinary Shares, (iii) combine its outstanding Ordinary Shares into a
smaller number of Ordinary Shares or (iv) increase or decrease the number of
Ordinary Shares outstanding by reclassification of its Ordinary Shares, then the
number of Ordinary Shares purchasable upon exercise of each Warrant immediately
after the happening of such event shall be adjusted (including by adjusting the
definition of "Warrant Shares") so that,
<PAGE> 25
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after giving effect to such adjustment, the Holder of each Warrant shall be
entitled to receive the number of Ordinary Shares upon exercise that such Holder
would have owned or have been entitled to receive had such Warrants been
exercised immediately prior to the happening of the events described above (or,
in the case of a dividend or distribution of Ordinary Shares, immediately prior
to the record date therefor). An adjustment made pursuant to this Section 4.1(a)
shall become effective immediately after the effective date, retroactive to the
record date therefor in the case of a dividend or distribution in Ordinary
Shares, and shall become effective immediately after the effective date in the
case of a subdivision, combination or reclassification.
(b) Cash Dividends and Other Distributions. In case at any
time or from time to time after the date hereof the Company shall distribute to
holders of Ordinary Shares (i) any dividend or other distribution of cash,
evidences of its indebtedness, shares of its capital stock or any other
properties or securities or (ii) any options, warrants or other rights to
subscribe for or purchase any of the foregoing (other than, in each case set
forth in (i) and (ii), (x) any dividend or distribution described in Section
4.1(a) or (y) any rights, options, warrants or securities described in Section
4.1(c)) then the number of Warrant Shares purchasable upon the exercise of each
Warrant shall be increased to a number determined by multiplying the number of
Ordinary Shares issuable immediately prior to the record date upon exercise of
each Warrant by a fraction, the numerator of which shall be the sum of (x) any
cash distributed per Warrant Share and (y) the Current Market Value of the
portion, if any, of the distribution applicable to one Warrant Share consisting
of evidences of indebtedness, shares of stock, securities, other property,
warrants, options or subscription of purchase rights and the denominator of
which shall be the Current Market Value of the Ordinary Shares comprising one
Warrant Share immediately after such dividend or other distribution. Such
adjustment shall be made whenever any distribution is made and shall become
effective as of the date of distribution, retroactive to the record date for any
such distribution; provided, however, that the Company is not required to make
an adjustment pursuant to this Section 4.1(b) if at the time of such
distribution the Company makes the same distribution to Holders of Warrants as
it makes to holders of Ordinary Shares pro rata based on the number of Ordinary
Shares for which such Warrants are exercisable (whether or not currently
exercisable). No adjustment shall be made pursuant to this Section 4.1(b) which
shall have the effect of decreasing the number of Warrant Shares purchasable
upon exercise of each Warrant.
(c) Rights Issue. In the event that at any time or from time
to time after the date hereof the Company shall issue, sell, distribute or
otherwise grant any rights to subscribe for or to purchase, or any options or
warrants for the purchase of, or any securities convertible or exchangeable
into, Ordinary Shares to all holders of Ordinary Shares, entitling such holders
to subscribe for or purchase Ordinary Shares or stock or securities convertible
into Ordinary Shares within 60 days after the record date for such issuance,
sale, distribution or other grant, as the case may be, and the sum of (a) the
offering price of such right, option, warrant or other security (on a per share
basis) and (b) any subscription, purchase, conversion or exchange price per
share of Ordinary Shares (the "Consideration") is lower at the record date for
such issuance than the then Current Market Value per share of such Ordinary
Shares, the number of Ordinary Shares thereafter purchasable shall be increased
to a number determined by multiplying the number of Ordinary Shares issuable
immediately prior to the record date upon exercise of each Warrant by a
fraction, the numerator of which shall be the number of Ordinary Shares
outstanding on the date of issuance of such rights, options, warrants or
securities plus the number of additional Ordinary
<PAGE> 26
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Shares offered for subscription or purchase or into or for which such securities
are convertible or exchangeable, and the denominator of which shall be the
number of Ordinary Shares outstanding on the date of issuance of such rights,
options, warrants or securities plus the total number of Ordinary Shares which
could be purchased at the Current Market Value with the aggregate of the
Consideration with respect to such issuance, sale, distribution or other grant.
Such adjustment shall be made whenever such rights, options or warrants are
issued and shall become effective retroactively immediately after the record
date for the determination of stockholders entitled to receive such rights,
options, warrants or securities; provided, however, that the Company is not
required to make an adjustment pursuant to this Section 4.1(c) if the Company
shall make the same distribution to Holders of Warrants. No adjustment shall be
made pursuant to this Section 4.1(c) which shall have the effect of decreasing
the number of Ordinary Shares purchasable upon exercise of each Warrant.
If the Company at any time shall issue two or more securities
as a unit and one or more of such securities shall be rights, options or
warrants for or securities convertible or exchangeable into, Ordinary Shares
subject to this Section 4.1(c), the consideration allocated to each such
security shall be determined in good faith by the Board.
(i) Combination; Liquidation. Except as provided in clause
(ii) below, in the event of certain consolidations, mergers or demergers of the
Company, or the sale of all or substantially all of the assets of the Company to
another Person (a "Combination"), each Warrant will thereafter be exercisable
for the right to receive the kind and amount of shares of stock or other
securities or property to which such holder would have been entitled as a result
of such Combination had the Warrants been exercised immediately prior thereto.
Unless clause (ii) is applicable to a Combination, if any Warrants shall be
outstanding after a Combination, the Company shall provide that the surviving or
acquiring Person (the "Successor Company") in such Combination will enter into
an agreement with the Warrant Agent confirming the Holders' rights pursuant to
this Section 4.1(d) and providing for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
4. The provisions of this Section 4.1(d) shall similarly apply to successive
Combinations involving any Successor Company.
(ii) In the event of (A) a Combination, and, in connection
therewith, the consideration payable to the holders of Ordinary Shares in
exchange for their shares is payable solely in cash or (B) a dissolution,
liquidation or winding-up of the Company, then the Holders of the Warrants will
be entitled to receive distributions on an equal basis with the holders of
Ordinary Shares or other securities issuable upon exercise of the Warrants, as
if the Warrants had been exercised immediately prior to such event, less the
Exercise Price. Upon receipt of such payment, if any, the Warrants will expire
and the rights of Holders thereof will cease.
(iii) In the case of any such Combination, the surviving or
acquiring Person as described in this Section 4.1(d) and, in the event of any
dissolution, liquidation or winding-up of the Company, the Company, shall
deposit promptly with the Warrant Agent the funds, if any, necessary to pay to
the Holders of the Warrants the amounts to which they are entitled as described
above. After such funds and the surrendered Warrant Certificates are received,
the Warrant Agent shall make payment to the Holders by delivering a check, or by
wire transfer of same-day funds, in such amount as is appropriate (or, in the
case of consideration other than cash, such other consideration as is
appropriate) to such Person or Persons as it may be directed in writing by the
Holders surrendering such Warrants.
<PAGE> 27
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(d) Tender Offers; Exchange Offers. In the event that the
Company or any subsidiary of the Company shall purchase Ordinary Shares pursuant
to a tender offer or an exchange offer for a price per Ordinary Share that is
greater than the then Current Market Value per share of Ordinary Shares in
effect at the end of the trading day immediately following the day on which such
tender offer or exchange offer expires, then the Company, or such subsidiary of
the Company, shall, within 10 Business Days of the expiry of such tender offer
or exchange offer, offer to purchase Warrants for comparable consideration per
Ordinary Share based on the number of Ordinary Shares which the Holders of such
Warrants would receive upon exercise of such Warrants (the "Offer") (such amount
less the Exercise Price in respect of such share, the "Per Share
Consideration"); provided, however, that if a tender offer is made for only a
portion of the outstanding Ordinary Shares, then such offer shall be made for
such Ordinary Shares issuable upon exercise of the Warrants in the same pro rata
proportion.
The Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase such Warrants for the applicable Per Share
Consideration.
(e) Other Events. If any event occurs as to which the
foregoing provisions of this Section 4 are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the Board, fairly
and adequately protect the purchase rights of the Warrants in accordance with
the essential intent and principles of such provisions, then the Board shall
make such adjustments in the application of such provisions, in accordance with
such essential intent and principles, as shall be reasonably necessary, in the
good faith opinion of the Board, to protect such purchase rights as aforesaid.
(f) When No Adjustment Required. Without limiting any other
exception contained in this Section 4.1, and in addition thereto, no adjustment
need be made for:
(i) (A) grants to, exercises of Rights by, or issuances of
equity securities to employees, directors, consultants or advisors of
the Company or any of its subsidiaries and (B) exercises of Rights by,
or issuances of equity securities in connection with Rights previously
issued to former employees, former directors, former consultants (to
the extent that all such securities, other than those permitted by
clause (ii) below, do not have an aggregate value in excess of 15% of
the equity value of the Company on a fully diluted basis, as determined
in good faith by the Board). As used herein, "Right" shall mean any
right, option, warrant or convertible or exchangeable security
containing the right to subscribe for or acquire one or more Ordinary
Shares, excluding the Warrants;
(ii) options, warrants or other agreements or rights to
purchase capital stock of the Company entered into or granted prior to
the date of the issuance of the Warrants or any issuance of capital
stock pursuant thereto or in connection therewith;
(iii) bona fide public offerings or private placements through
investment banks of international standing;
<PAGE> 28
24
(iv) rights to purchase Ordinary Shares pursuant to a Company
plan for reinvestment of dividends or interest; and
(v) a change in the par value of Ordinary Shares (including a
change from par value to no par value or vice versa).
(g) Adjustment of Exercise Price. Whenever the number of
Ordinary Shares purchasable upon the exercise of each Warrant is adjusted, as
provided under this Section 4, the Exercise Price per Ordinary Share payable
upon exercise of such Warrant shall be adjusted (calculated to the nearest NLG
0.01) so that it shall equal the price determined by multiplying such Exercise
Price immediately prior to such adjustment by a fraction the numerator of which
shall be the number of Ordinary Shares purchasable upon the exercise of each
Warrant immediately prior to such adjustment and the denominator of which shall
be the number of Ordinary Shares so purchasable immediately thereafter.
Following any adjustment to the Exercise Price pursuant to this Section 4, the
amount payable, when adjusted, shall never be less than the par value per
Ordinary Share at the time of such adjustment.
If after an adjustment, a Holder of a Warrant upon exercise of
it may receive shares of two or more classes of capital stock of the Company,
the Company shall determine the allocation of the adjusted Exercise Price
between such classes of shares in a manner that the Board deems fair and
equitable to the Holders. After such allocation, the exercise privilege and the
Exercise Price of each class of shares shall thereafter be subject to adjustment
on terms comparable to those applicable to Ordinary Shares under this Section 4.
Such adjustment shall be made successively whenever any event
listed above shall occur.
4.2 Superseding Adjustment. Upon the expiration of any rights,
options, warrants or conversion or exchange privileges which resulted in the
adjustments pursuant to this Section 4, if any thereof shall not have been
exercised, the number of Warrant Shares purchasable upon the exercise of each
Warrant shall be readjusted as if (A) the only Ordinary Shares issuable upon
exercise of such rights, options, warrants, conversion or exchange privileges
were the Ordinary Shares, if any, actually issued upon the exercise of such
rights, options, warrants or conversion or exchange privileges and (B) Ordinary
Shares actually issued, if any, were issuable for the consideration actually
received by the Company upon such exercise plus the aggregate consideration, if
any, actually received by the Company for the issuance, sale or grant of all
such rights, options, warrants or conversion or exchange privileges whether or
not exercised; provided, however, that no such readjustment shall (except by
reason of an intervening adjustment under Section 4.1(a)) have the effect of
decreasing the number of Warrant Shares purchasable upon the exercise of each
Warrant by an amount in excess of the amount of the adjustment initially made in
respect of the issuance, sale or grant of such rights, options, warrants or
conversion or exchange privileges.
4.3 Minimum Adjustment. The adjustments required by the
preceding Sections of this Section 4 shall be made whenever and as often as any
specified event requiring an adjustment shall occur, except that no adjustment
of the number of Ordinary Shares purchasable upon exercise of Warrants that
would otherwise be required shall be made (except in the case of a subdivision
or combination of Ordinary Shares, as provided for in Section 4.1(a)) unless and
until such adjustment either by itself or with other adjustments not previously
made increases or decreases by at least 1% of the number of Ordinary Shares
purchasable upon exercise of Warrants immediately prior to the making of such
adjustment. Any adjustment
<PAGE> 29
25
representing a change of less than such minimum amount shall be carried forward
and made as soon as such adjustment, together with other adjustments required by
this Section 4 and not previously made, would result in a minimum adjustment.
For the purpose of any adjustment, any specified event shall be deemed to have
occurred at the close of business on the date of its occurrence. In computing
adjustments under this Section 4, fractional interests in Ordinary Shares shall
be taken into account to the nearest one-hundredth of a share.
4.4 Notice of Adjustment. Whenever the number of Ordinary
Shares and other property, if any, purchasable upon exercise of Warrants is
adjusted, as herein provided, the Company shall deliver to the Warrant Agent a
certificate of a firm of internationally recognized independent accountants (who
may be the regular accountants employed by the Company) setting forth, in
reasonable detail, the event requiring the adjustment and the method by which
such adjustment was calculated (including a description of the basis on which
the Board determined the fair market value of any evidences of indebtedness,
other securities or property or warrants or other subscription or purchase
rights), and specifying the number of Ordinary Shares purchasable upon exercise
of Warrants after giving effect to such adjustment. The Company shall promptly
mail, or at the expense of the Company cause the Warrant Agent to mail, a copy
of such certificate to each Holder in accordance with Section 7.2. The Warrant
Agent shall be entitled to rely on such certificate and shall be under no duty
or responsibility with respect to any such certificate, except to exhibit the
same from time to time, to any Holder desiring an inspection thereof during
reasonable business hours. The Warrant Agent shall not at any time be under any
duty or responsibility to any Holder to determine whether any facts exist which
may require any adjustment of the number of Ordinary Shares or other stock or
property, purchasable on exercise of the Warrants, or with respect to the nature
or extent of any such adjustment when made, or with respect to the method
employed in making such adjustment or the validity or value of any Ordinary
Shares.
4.5 Notice of Certain Transactions. In the event that the
Company shall propose (a) to pay any dividend payable in securities of any class
to the holders of its Ordinary Shares or to make any other distribution to the
holders of its Ordinary Shares, (b) to offer the holders of its Ordinary Shares
rights to subscribe for or to purchase any securities convertible into Ordinary
Shares or Ordinary Shares or shares of stock of any class or any other
securities, rights or options, (c) to effect any reclassification of its
Ordinary Shares, capital reorganization or Combination or (d) to effect the
voluntary or involuntary dissolution, liquidation or winding-up of the Company,
or in the event of a tender offer or exchange offer described in Section 4.1(e),
the Company shall within five (5) Business Days of making such proposal, tender
offer or exchange offer send to the Warrant Agent and the Warrant Agent shall
within five (5) Business Days thereafter send the Holders written notice (in
such form as shall be furnished to the Warrant Agent by the Company) of such
proposed action or offer, such notice to be mailed by the Company, or at the
expense of the Company by the Warrant Agent, to the Holders at their addresses
as they appear in the Warrant Register, which shall specify the record date for
the purposes of such dividend, distribution or rights, or the date such issuance
or event is to take place and the date of participation therein by the holders
of Ordinary Shares, if any such date is to be fixed, and shall briefly indicate
the effect of such action on the Ordinary Shares and on the number and kind of
any other shares of stock and on other property, if any, and the number of
Ordinary Shares and other property, if any, purchasable upon exercise of each
Warrant after giving effect to any adjustment which will be required as a result
of such action. Such notice
<PAGE> 30
26
shall be given by the Company as promptly as possible and, in the case of any
action covered by clause (a) or (b) above, at least 10 Business Days prior to
the record date for determining holders of the Ordinary Shares for purposes of
such action and, in the case of any other such action, at least 20 Business Days
prior to the date of the taking of such proposed action or the date of
participation therein by the holders of Ordinary Shares, whichever shall be the
earlier.
4.6 Adjustment to Warrant Certificate. The form of Warrant
Certificate need not be changed because of any adjustment made pursuant to this
Section 4, and Warrant Certificates issued after such adjustment may state the
same Exercise Price and the same number of Ordinary Shares as are stated in any
Warrant Certificates issued prior to the adjustment. The Company, however, may
at any time in its sole discretion make any change in the form of Warrant
Certificate that it may deem appropriate to give effect to such adjustments and
that does not affect the substance of the Warrant Certificate, and any Warrant
Certificate thereafter issued or countersigned, whether in exchange or
substitution for an outstanding Warrant Certificate or otherwise, may be in the
form as so changed.
4.7 Challenge to Good Faith Determination. Whenever the Board
shall be required to make a determination in good faith of the Current Market
Value of any item under Section 4, such determination may be challenged in good
faith by the Majority Holders.
4.8 Treasury Stock. The sale or other disposition of any
issued Ordinary Shares owned or held by or for the account of the Company shall
be deemed an issuance thereof and a repurchase thereof and designation of such
shares as treasury stock shall be deemed to be a redemption thereof for the
purposes of this Agreement.
5. SECTION HOLDERS' RIGHTS.
5.1 Registration Rights.
(a) Shelf Registration Statement. The Company agrees with and
for the benefit of the Holders of the Warrants, that upon exercise of the
Warrants by the Holders thereof, to file with the Commission a Registration
Statement for an offering to be made on a continuous basis pursuant to Rule 415
covering all of the Warrants (the "Shelf Registration Statement"). The Shelf
Registration Statement shall be on Form F-1 or another appropriate form
permitting registration of such Warrants for resale by Holders in the manner or
manners designated by them (including, without limitation, one or more
underwritten offerings). The Company shall not permit any securities other than
the Warrants (and the Existing Warrants and any other like warrants hereafter
issued) to be included in the Shelf Registration Statement. In addition, the
Company agrees that it shall make all required filings pursuant to all
applicable state "Blue Sky" or securities laws.
(b) The Company shall use its best efforts to cause the Shelf
Registration Statement to be declared effective under the Securities Act (and to
make any required filings as may be necessary to comply with all applicable
state "Blue Sky" or securities laws) on or prior to the Exercisability Date and
shall cause such Shelf Registration Statement to remain effective under the
Securities Act (and all applicable state "Blue Sky" or securities laws) until
the earlier of (i) such time as all Warrants have been exercised and (ii) the
Expiration Date (the "Effectiveness Period"), or such shorter period ending when
all Warrants covered by the Shelf Registration Statement have been sold in the
manner set forth and as contemplated in the Shelf Registration Statement;
provided that the obligation of the Company to cause the Shelf Registration
Statement to be declared effective with respect to Warrant Shares of any Holder
<PAGE> 31
27
who did not request inclusion of their Warrant Shares in the Initial Public
Offering pursuant to Section 5.2 shall be extended until the date which is 180
days after the Exercisability Date.
(c) Withdrawal of Stop Orders. If the Shelf Registration
Statement ceases to be effective for any reason at any time during the
Effectiveness Period (other than because of the sale of all of the securities
registered thereunder), the Company shall use its best efforts to obtain the
prompt withdrawal of any order suspending the effectiveness thereof.
(d) Supplements and Amendments. The Company shall promptly
supplement and amend the Shelf Registration Statement if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration Statement, if required by the Securities Act, or if requested
by the holders of a majority of the Warrants covered by such Registration
Statement or by any underwriter of such Warrants based on a reasonable belief
that such supplement or amendment is required by law.
(e) Suspension of Shelf Registration Statement. During any
consecutive 365-day period, the Company shall be entitled to suspend the
availability of the Shelf Registration Statement for up to two 30
consecutive-day periods (except for the 30 consecutive-day period immediately
prior to the Expiration Date) if the Board determines in the exercise of its
reasonable judgment that there is a valid business purpose for such suspension
and provides notice that such determination was made to the Holders of the
Warrants; provided, however, that in no event shall the Company be required to
disclose the business purpose for such suspension if the Company determines in
good faith that such business purpose must remain confidential.
(f) Registration Expenses. All expenses incident to the
Company's performance of or compliance with this Section 5.1 will be borne by
the Company, including without limitation: (i) all registration and filing fees
and expenses; (ii) all fees and expenses of compliance with federal securities
and state Blue Sky or securities laws; (iii) all expenses of printing (including
printing certificates for the Warrant Shares and printing of prospectuses),
messenger and delivery services; (iv) all fees and disbursements of counsel for
the Company; (v) all fees and disbursements of independent certified public
accountants of the Company (including the expenses of any special audit and
comfort letters required by or incident to such performance); and (vi) the
Company's internal expenses, the expenses of any annual or other audit and the
fees and expenses of any Person, including special experts, retained by the
Company.
(g) Piggyback Registration Right. If the Company proposes to
effect an Initial Public Offering, the Company must, not later than the date of
the initial filing of a registration statement pertaining thereto, provide
written notice thereof to the holders of the Warrants. Each such holder will
have the right, within 20 days after receipt of such notice, to request (which
request will indicate the intended method of distribution) that the Company
include such holder's Warrant Shares for sale pursuant to such registration
statement.
(h) The Company will include in such Initial Public Offering
all the Warrant Shares for which it receives notice pursuant to Section 5.2(a),
unless the managing underwriter for such Initial Public Offering (the "Managing
Underwriter") determines that, in its opinion, the number of Warrant Shares that
the Holders of Warrants (the "Requesting Holders") have
<PAGE> 32
28
requested to be sold in such Initial Public Offering, plus the total number of
Ordinary Shares that the Company and any other selling stockholders entitled to
sell Ordinary Shares in such Initial Public Offering propose to sell in such
Initial Public Offering, exceed the maximum number of Ordinary Shares that may
be distributed without materially adversely affecting the price, timing or
distribution of the Ordinary Shares to be sold by the Company. In such event,
the Company will be required to include in such Initial Public Offering only
that number of Ordinary Shares which the Managing Underwriter believes may be
sold without causing such adverse effect in the following order: (i) all of the
Ordinary Shares that the Company proposes to sell in such Initial Public
Offering and (ii) Ordinary Shares of the Requesting Holders and all other
Ordinary Shares that are proposed to be sold by any holder of Ordinary Shares on
a pro rata basis in an aggregate number which is equal to the difference between
the maximum number of Ordinary Shares that may be distributed in such Initial
Public Offering as determined by the Managing Underwriter and the number of
Ordinary Shares to be sold in such Initial Public Offering pursuant to clause
(i) above. The Company will have the right to postpone or withdraw any
registration statement prior to the effective date without obligation to any
Requesting Holder.
(i) Repurchase Offer. In the event that an Initial Public
Offering has not been completed on or prior to the fifth anniversary of the
Issue Date (the "Triggering Date"), the Company will be required to make an
offer to purchase (the "Repurchase Offer") all outstanding Warrants issued by it
in cash at the Repurchase Price no later than 120 days after the Triggering
Date. If an Initial Public Offering relating to the Company occurs at any time
between the Triggering Date and 90 days after the expiration date for a
Repurchase Offer pursuant to the preceding sentence, the Company will pay to
each Holder of Warrants that were purchased in such offer an amount in cash
equal to the number of Warrants purchased multiplied by the excess, if any, of
(i) the value, as determined pursuant to the terms of an Initial Public Offering
(net of applicable underwriting discounts and placement fees) of the number of
Warrant Shares issuable upon the exercise of one Warrant over (ii) the
Repurchase Price paid by the Company for each Warrant in such Repurchase Offer.
(j) The Company will comply, to the extent applicable, with
the requirements of Rule 13e-4 under the Exchange Act and any other applicable
securities laws or regulations in connection with any repurchase offers for
Warrants.
(k) Change of Control Equity Offer. If prior to the
consummation of an Initial Public Offering by the Company, a Change of Control
(as defined in the Indenture) occurs pursuant to which a Person (including such
Person's Affiliates and associates), other than a Permitted Holder, becomes the
beneficial owner of more than 50% of the total voting power of the Ordinary
Shares of the Company, and the Company is not eligible to, or elects not to,
effect a Drag Along Purchase (as defined below), the Company shall make an offer
to purchase (the "Change of Control Equity Offer") any and all of the
outstanding Warrants at cash purchase prices at least equal to the Repurchase
Price.
(l) Within 30 days of such Change of Control, the Company
shall give notice of the Change of Control Equity Offer to each holder of
Warrants by first class mail, postage prepaid, which notice shall govern the
terms of the Change of Control Equity Offer and shall (i) set forth the
Repurchase Price to be paid for Warrants tendered in the Change of Control
Equity Offer, (ii) include the full text of the fairness opinion delivered by an
internationally recognized investment bank in connection with the Change of
Control, (iii) identify the date on which the Change of Control Equity Offer
will expire (the "Change of Control Equity Offer Expiration Date"), which date
shall not be less than 20 Business Days following the date of commencement of
the Change of Control Equity Offer, which commencement date shall be the
<PAGE> 33
29
date such notice is mailed to holders of Warrants, (iv) explain the facts and
circumstances of the Change of Control, (v) include a letter of transmittal
which identifies where Warrant Certificates tendered pursuant to the Change of
Control Equity Offer are to be delivered, (vi) state that, unless the Company
defaults in the purchase of the Warrants tendered pursuant to the Change of
Control Equity Offer, Holders of Warrants so tendered shall have no rights with
respect to the Warrants tendered after the Change of Control Expiration Date and
the only remaining right of such holders with respect thereto is to receive the
Repurchase Price therefor promptly after the Change of Control Equity Offer
Expiration Date and (vii) that holders whose Warrants are tendered for purchase
in part only will be issued new Warrant Certificates representing the number of
unpurchased Warrants surrendered.
(m) On the Change of Control Equity Offer Expiration Date, the
Company will (i) accept for purchase all Warrants tendered pursuant to the
Change of Control Equity Offer, (ii) promptly deliver to tendering holders of
Warrants the respective Repurchase Price therefor and (iii) issue and mail or
deliver to holders tendering a portion of their Warrants new Warrant
Certificates representing the number of Warrants equal to the unpurchased
portion of the Warrants surrendered.
(n) The Company will comply with the requirements of the
Exchange Act and other securities laws and regulations to the extent such laws
and regulations are applicable in connection with the Change of Control Equity
Offer. To the extent the provisions of any securities laws or regulations
conflict with the Change of Control Equity offer provisions of this Agreement,
the Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations hereunder.
5.2 Drag Along Rights. If, prior to the consummation of an
Initial Public Offering, the Board and the holders of a majority of the Ordinary
Shares entitled to vote thereon approve a sale of the Company, the Company shall
have the right to require the holders of the Warrants to sell such Warrants to
such transferee; provided that the consideration to be received by such holders
is the same (in terms of price per share and in all other material respects, but
adjusted, in the case of Warrants, for the Exercise Price therefor) as that to
be received by the other holders and, in any event, shall be cash and/or
securities registered under the Securities Act and listed on a national
securities exchange or authorized for quotation on The Nasdaq Stock Market, Inc.
Any purchase of Warrants pursuant to this paragraph shall be deemed a "Drag
Along Purchase."
6. SECTION WARRANT AGENT.
6.1 Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as agent for the Company in accordance with provisions
of this Agreement and the Warrant Agent hereby accepts such appointment. The
Company hereby agrees that so long as any Units remain outstanding, the Warrant
Agent may appoint the Unit Agent to act as its agent with respect to its duties
hereunder as provided in the Unit Agreement.
(a) Rights and Duties of Warrant Agent. In acting under this
Warrant Agreement and in connection with the Warrant Certificates, the Warrant
Agent is acting solely as
<PAGE> 34
30
agent of the Company and does not assume any obligation or relationship or
agency or trust for or with any of the holders of Warrant Certificates or
beneficial owners of Warrants.
(b) The Warrant Agent may consult with counsel satisfactory to
it (who may be counsel for the Company), and the advice of such counsel shall be
full and complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in accordance with the
advice of such counsel.
(c) The Warrant Agent shall be protected and shall incur no
liability for or in respect of any action taken or thing suffered by it in
reliance upon any Warrant Certificate, certificate of shares, notice,
resolution, direction, consent, certificate, affidavit, statement or other paper
or document believed by it to be genuine and to have been presented or signed by
the proper parties.
(d) The Warrant Agent shall be obligated to perform only such
duties as are herein and in the Warrant Certificates specifically set forth and
no implied duties or obligations shall be read into this Agreement or the
Warrant Certificates against the Warrant Agent. The Warrant Agent shall not be
under any obligation to institute any action, suit or legal proceeding or to
take any other action which may tend to involve it in any expense or liability
for which it does not receive indemnity if such indemnity is requested. The
Warrant Agent shall not be accountable or under any duty or responsibility for
the use by the Company of any of the Warrant Certificates countersigned by the
Warrant Agent and delivered by it to the Holders or on behalf of the Holders
pursuant to this Agreement or for the application by the Company of the proceeds
of the Warrants. The Warrant Agent shall have no duty or responsibility in case
of any default by the Company in the performance of its covenants or agreements
contained herein or in the Warrant Certificates or in the case of the receipt of
any written demand from a Holder with respect to such default, including any
duty or responsibility to initiate or attempt to initiate any proceedings at law
or otherwise.
(e) The Warrant Agent shall not at any time be under any duty
or responsibility to any Holder to determine whether any facts exist that may
require an adjustment of the number of Ordinary Shares purchasable upon exercise
of each Warrant or the Exercise Price, or with respect to the nature or extent
of any adjustment when made, or with respect to the method employed, or herein
or in any supplemental agreement provided to be employed, in making the same.
The Warrant Agent shall not be responsible to determine the Cashless Exercise
Ratio. The Warrant Agent shall not be accountable with respect to the validity
or value of any Ordinary Shares or of any securities or property which may at
any time be issued or delivered upon the exercise of any Warrant or upon any
adjustment pursuant to Section 4, and it makes no representation with respect
thereto. The Warrant Agent shall not be responsible for any failure of the
Company to make any cash payment or to issue, transfer or deliver any Ordinary
Shares or stock certificates upon the surrender of any Warrant Certificate for
the purpose of exercise or upon any adjustment pursuant to Section 4, or to
comply with any of the covenants of the Company contained in Section 4.
(f) Before the Warrant Agent acts or refrains from acting with
respect to any matter contemplated by this Warrant Agreement, it may require
from the Company:
(i) an Officers' Certificate of the Company stating that, in
the opinion of the signers, all conditions precedent, if any, provided
for in this Warrant Agreement relating to the proposed action have been
complied with; and
<PAGE> 35
31
(ii) an opinion of counsel for the Company stating that, in
the opinion of such counsel, all such conditions precedent have been
complied with.
Each Officers' Certificate or opinion of counsel with respect
to compliance with a condition or covenant provided for in this Warrant
Agreement shall include:
(1) a statement that the Person making such
certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of
the examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person,
he or she has made such examination or investigation as is
necessary to enable him or her to express an informed opinion
as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion
of such Person, such condition or covenant has been complied
with.
provided, however, that with respect to matters of fact an opinion of counsel
may rely on an Officers' Certificate or certificates of public officials.
The Warrant Agent shall not be liable for any action it takes
or omits to take in good faith in reliance on any such certificate or opinion.
(g) The Warrant Agent shall keep copies of this Agreement and
any notices given or received hereunder by or from the Company available for
inspection by the Holders during normal business hours at its office. The
Company shall supply the Warrant Agent from time to time with such numbers of
copies of this Agreement as the Warrant Agent may request.
6.2 Individual Rights of Warrant Agent. The Warrant Agent and
any stockholder, director, officer or employee of the Warrant Agent may buy,
sell or deal in any of the Warrants or other securities of the Company or its
affiliates or become pecuniarily interested in transactions in which the Company
or its affiliates may be interested, or contract with or lend money to the
Company or its affiliates or otherwise act as fully and freely as though it were
not the Warrant Agent under this Agreement. Nothing herein shall preclude the
Warrant Agent from acting in any other capacity for the Company or for any other
legal entity.
6.3 Warrant Agent's Disclaimer. The Warrant Agent shall not be
responsible for and makes no representation as to the validity or adequacy of
this Agreement or the Warrant Certificates and it shall not be responsible for
any statement in this Agreement or the Warrant Certificates other than its
countersignature thereon.
6.4 Compensation and Indemnity. The Company shall pay to the
Warrant Agent from time to time such compensation as the Company and the Warrant
Agent shall from
<PAGE> 36
32
time to time agree in writing for its acceptance of this Warrant Agreement and
services hereunder. The Company shall reimburse the Warrant Agent upon request
for all reasonable disbursements, expenses and advances (including reasonable
fees and expenses of counsel) incurred or made by it in addition to the
compensation for its services, except any such disbursements, expenses and
advances as may be attributable to the Warrant Agent's or any Agent's negligence
or bad faith. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Warrant Agent's accountants, experts and
counsel.
The Company shall indemnify each of the Warrant Agent and any
predecessor Warrant Agent for, and hold them harmless against, any and all loss,
damage, claim, expense or liability including taxes (other than taxes based on
the income of the Warrant Agent) incurred by the Warrant Agent without
negligence, willful misconduct or bad faith on its part in connection with
acceptance of administration of this trust and its duties under this Warrant
Agreement, including the reasonable expenses and attorneys' fees and expenses of
defending itself against any claim of liability arising hereunder. The Warrant
Agent shall notify the Company promptly of any claim asserted against the
Warrant Agent for which it may seek indemnity. However, the failure by the
Warrant Agent to so notify the Company shall not relieve the Company of its
obligations hereunder. The Company shall defend the claim and the Warrant Agent
shall cooperate in the defense (and may employ its own counsel satisfactory to
the Warrant Agent) at the Company's expense. The Warrant Agent may have separate
counsel and the Company shall pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its written
consent, which consent shall not be unreasonably withheld. The Company need not
reimburse any expense or indemnify against any loss or liability incurred by the
Warrant Agent as a result of the violation of this Warrant Agreement by the
Warrant Agent if such violation arose from the Warrant Agent's negligence or bad
faith.
To secure the Company's payment obligations in this Section
6.5, the Warrant Agent shall have a senior lien against all money or property
held or collected by the Warrant Agent in its capacity as Warrant Agent.
When the Warrant Agent incurs expenses or renders services
after an Event of Default specified in the Indenture occurs, the expenses
(including the reasonable fees and expenses of its agents and counsel) and the
compensation for the services shall be preferred over the status of the Holders
in a proceeding under any Bankruptcy Law and are intended to constitute expenses
of administration under any Bankruptcy Law. The Company's obligations under this
Section 6.5 and any claim arising hereunder shall survive the termination of
this Warrant Agreement, the resignation or removal of any Warrant Agent, and any
rejection or termination under any Bankruptcy Law.
(a) Successor Warrant Agent. The Company agrees for the
benefit of the Holders that there shall at all times be a Warrant Agent
hereunder until all the Warrants have been exercised or are no longer
exercisable.
(b) The Warrant Agent may at any time resign by giving written
notice to the Company of such intention on its part, specifying the date on
which its desired resignation shall become effective; provided, however, that
such date shall not be less than 30 days after the date on which such notice is
given unless the Company otherwise agrees. The Warrant Agent hereunder may be
removed at any time by the filing with it of an instrument in writing signed by
or on behalf of the Company and specifying such removal and the date when it
shall become effective, which date shall not be less than 30 days after such
notice is given unless the Warrant Agent otherwise agrees. Any removal under
this Section 6.6 shall take effect upon the appointment by the Company as
hereinafter provided of a successor Warrant Agent (which shall
<PAGE> 37
33
be a bank or trust company authorized under the laws of the jurisdiction of its
organization to exercise corporate trust powers) and the acceptance of such
appointment by such successor Warrant Agent.
(c) In case at any time the Warrant Agent shall resign, or
shall be removed, or shall become incapable of acting, or shall be adjudged a
bankrupt or insolvent, or shall commence a voluntary case under the Federal
bankruptcy laws, as now or hereafter constituted, or under any other applicable
Federal or state bankruptcy, insolvency or similar law or shall consent to the
appointment of or taking possession by a receiver, custodian, liquidator,
assignee, trustee, sequestrator (or other similar official) of the Warrant Agent
or its property or affairs, or shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts generally as
they become due, or shall take corporate action in furtherance of any such
action, or a decree or order for relief by a court having jurisdiction in the
premises shall have been entered in respect of the Warrant Agent in an
involuntary case under the Federal bankruptcy laws, as now or hereafter
constituted, or any other applicable Federal or State bankruptcy, insolvency or
similar law; or a decree order by a court having jurisdiction in the premises
shall have been entered for the appointment of a receiver, custodian,
liquidator, assignee, trustee, sequestrator (or similar official) of the Warrant
Agent or of its property or affairs, or any public officer shall take charge or
control of the Warrant Agent or of its property or affairs for the purpose of
rehabilitation, conservation, winding up of or liquidation, a successor Warrant
Agent, qualified as aforesaid, shall be appointed by the Company by an
instrument in writing, filed with the successor Warrant Agent. Upon the
appointment as aforesaid of a successor Warrant Agent and acceptance by the
successor Warrant Agent of such appointment, the Warrant Agent shall cease to be
Warrant Agent hereunder; provided, however, that in the event of the resignation
of the Warrant Agent hereunder, such resignation shall be effective on the
earlier of (i) the date specified in the Warrant Agent's notice of resignation
and (ii) the appointment and acceptance of a successor Warrant Agent hereunder.
(d) Any successor Warrant Agent appointed hereunder shall
execute, acknowledge and deliver to its predecessor and to the Company an
instrument accepting such appointment hereunder, and thereupon such successor
Warrant Agent, without any further act, deed or conveyance, shall become vested
with all the rights and obligations of such predecessor with like effect as if
originally named as Warrant Agent hereunder, and such predecessor, upon payment
of its charges and disbursements then unpaid, shall thereupon become obligated
to transfer, deliver and pay over, and such successor Warrant Agent shall be
entitled to receive, all monies, securities and other property on deposit with
or held by such predecessor, as Warrant Agent hereunder.
(e) Any corporation into which the Warrant Agent hereunder may
be merged or consolidated, or any corporation resulting from any merger or
consolidation to which the Warrant Agent shall be a party, or any corporation to
which the Warrant Agent shall sell or otherwise transfer all or substantially
all its corporate trust business, provided that it shall be qualified as
aforesaid, shall be the successor Warrant Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto.
7. SECTION MISCELLANEOUS.
<PAGE> 38
34
7.1 Reports. (a) The Company will file on a timely basis with
the Commission, to the extent such filings are accepted by the Commission and
whether or not the Company has a class of securities registered under the
Exchange Act, (i) all annual and quarterly financial statements and other
financial information that would be required to be contained in a filing with
the Commission on Forms 20-F and 10-Q if the Company were required to file such
Forms (which financial statements shall be prepared in accordance with U.S.
GAAP), including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual financial
information, a report thereon by the Company's certified independent accountants
and (ii) all current reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such reports. Such
quarterly financial information shall be filed with the Commission within 45
days following the end of each fiscal quarter of the Company, and such annual
financial information shall be furnished within 90 days following the end of
each fiscal year of the Company. Such annual financial information shall include
the geographic segment financial information required to be disclosed by the
Company under Item 101(d) of Regulation S-K under the Securities Act.
(b) The Company will also be required (a) to file with the
Warrant Agent, and provide to each holder of the Warrants or Warrant Shares,
without cost to such holder, copies of such reports and documents within 15 days
after the date on which the Company files such reports and documents with the
Commission or the date on which the Company would be required to file such
reports and documents if the Company were so required, and (b) if filing such
reports and documents with the Commission is not accepted by the Commission or
is prohibited under the Exchange Act, to supply at the Company's cost copies of
such reports and documents to any prospective holder of Warrants or Warrant
Shares promptly upon request. In addition, for so long as the Warrants or
Warrant Shares remain outstanding and the Company is not subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act nor exempt
from reporting under Rule 12g3-2(b) of the Exchange Act, the Company shall
furnish to the holders of Warrants and Warrant Shares and to prospective holders
thereof, upon their request, any information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act and, to any beneficial holder of
Warrants or Warrant Shares, information of the type that would be filed with the
Commission pursuant to the foregoing provisions, upon the request of any such
holder.
7.2 Notices to the Company and Warrant Agent. Any notice or
demand authorized by this Agreement to be given or made by the Warrant Agent or
by the Holder of any Warrant Certificate to or on the Company shall be
sufficiently given or made (i) five (5) Business Days after deposited in the
mail, first class or registered, postage prepaid, (ii) one Business Day after
being timely delivered to a next-day air courier or (ii) when receipt is
acknowledged by the addressee, if telecopied, addressed (until another address
is filed in writing by the Company with the Warrant Agent), as follows:
VersaTel Telecom International N.V.
Paalbergweg 36
1105 BV Amsterdam-Zuidoost
The Netherlands
Attention: Raj Raithatha
Telecopy: 31-20-501-1011
<PAGE> 39
35
with a copy to:
Stibbe Simont Monahan Duhot Lawyers
Strawinskylaan 2001
1077 ZZ Amsterdam
The Netherlands
Attention: Alfons F.J.A. Leijten
Telecopy: 31-20-546-08-15
and
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: John D. Morrison, Jr.
Telecopy: (212) 848-7179
In case the Company shall fail to maintain such office or
agency or shall fail to give such notice of the location or of any change in the
location thereof, presentations may be made and notices and demands may be
served at the principal office of the Warrant Agent.
Any notice pursuant to this Agreement to be given by the
Company or by the Holder(s) of any Warrant Certificate to the Warrant Agent
shall be sufficiently given or made (i) five (5) Business Days after deposited
in the mail, first-class or registered, postage prepaid, (ii) one Business Day
after being timely delivered to a next-day air courier or (ii) when receipt is
acknowledged by the addressee, if telecopied, addressed (until another address
is filed in writing by the Warrant Agent with the Company) to the Warrant Agent
as follows:
United States Trust Company of New York
114 West 47th Street, 25th Floor
New York, New York 10036-1532
Attention: Corporate Trust Administration
Telecopy: (212) 852-1627
7.3 Supplements and Amendments. This Agreement may be amended
by the parties hereto without the consent of any Holder for the purpose of
curing any ambiguity, or of curing, correcting or supplementing any defective
provision contained herein or making any other provisions with respect to
matters or questions arising under this Agreement as the Company and the Warrant
Agent may deem necessary or desirable; provided, however, that such action shall
not affect adversely the rights of the Holders. Any amendment or supplement to
this Agreement that has or would have an adverse effect on the interests of the
Holders shall require the written consent of the Majority Holders. The consent
of each Holder of Warrants affected shall be required for any amendment pursuant
to which the Exercise Price would be increased or the number of Ordinary Shares
purchasable upon exercise of Warrants would be decreased (other than pursuant to
adjustments provided herein) or the exercise period with respect to the Warrants
<PAGE> 40
36
would be shortened. In determining whether the Holders of the required number of
Warrants have concurred in any direction, waiver or consent, Warrants owned by
the Company or by any Affiliate of the Company shall be disregarded and deemed
not to be outstanding, except that, for the purpose of determining whether the
Warrant Agent shall be protected in relying on any such direction, waiver or
consent, only Warrants which the Warrant Agent knows are so owned shall be so
disregarded. Also, subject to the foregoing, only Warrants outstanding at the
time shall be considered in any such determination.
7.4 Severability. The provisions of this Agreement are
severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
7.5 Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
7.6 Termination. This Agreement (other than the Company's
obligations with respect to Warrants previously exercised) shall terminate at
5:00 p.m., New York City time on the Expiration Date.
7.7 Governing Law. THIS WARRANT AGREEMENT AND THE WARRANTS
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF NEW YORK.
7.8 Submission to Jurisdiction; Appointment of Agent for
Service; Waiver. To the fullest extent permitted by applicable law, the Company
irrevocably submits to the non-exclusive jurisdiction of any federal or state
court in the Borough of Manhattan in The City of New York, County and State of
New York, United States of America, in any suit or proceeding based on or
arising under this Warrant Agreement and the Warrants, and irrevocably agrees
that all claims in respect of such suit or proceeding may be determined in any
such court. The Company, to the fullest extent permitted by applicable law,
irrevocably and fully waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding and hereby irrevocably designates and
appoints CT Corporation System (the "Authorized Agent"), as its authorized agent
upon whom process may be served in any such suit or proceeding. The Company
represents that it has notified the Authorized Agent of such designation and
appointment and that the Authorized Agent has accepted the same in writing. The
Company hereby irrevocably authorizes and directs its Authorized Agent to accept
such service. The Company further agrees that service of process upon its
Authorized Agent and written notice of said service to the Company mailed by
first class mail or delivered to its Authorized Agent shall be deemed in every
respect effective service of process upon the Company in any such suit or
proceeding. Nothing herein shall affect the right of any person to serve process
in any other manner permitted by law. The Company agrees that a final action in
any such suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other lawful manner.
Notwithstanding the foregoing, any action against the Company arising out of or
based on this Warrant Agreement, the Warrants or the transactions contemplated
hereby may also be instituted in any competent court in The Netherlands, and the
Company expressly accepts the jurisdiction of any such court in any such action.
The Company hereby irrevocably waives, to the extent permitted
by law, any immunity to jurisdiction to which it may otherwise be entitled
(including, without limitation, immunity to pre-judgment attachment,
post-judgment attachment and execution) in any legal
<PAGE> 41
37
suit, action or proceeding against it arising out of or based on this Warrant
Agreement, the Warrant Certificates or the transactions contemplated hereby.
The provisions of this Section 7.8 are intended to be
effective upon the execution of this Warrant Agreement and the Warrant
Certificates without any further action by the Company or the Warrant Agent and
the introduction of a true copy of this Warrant Agreement into evidence shall be
conclusive and final evidence as to such matters.
(a) Benefits of This Agreement. Nothing in this Agreement
shall be construed to give to any Person or corporation other than the Company,
the Warrant Agent and the holders of the Warrant Certificates any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Warrant Agent and the
holders of the Warrant Certificates.
(b) Prior to the exercise of the Warrants, no Holder of a
Warrant Certificate, as such, shall be entitled to any rights of a stockholder
of the Company, including, without limitation, the right to receive dividends or
subscription rights, the right to vote, to consent, to exercise any preemptive
right, to receive any notice of meetings of stockholders for the election of
directors of the Company, to share in the assets of the Company in the event of
the liquidation, dissolution or winding up of the Company's affairs or any other
matter or to receive any notice of any proceedings of the Company, except as may
be specifically provided for herein.
(c) All rights of action in respect of this Agreement are
vested in the Holders of the Warrants, and any Holder of any Warrant, without
the consent of the Warrant Agent or the Holder of any other Warrant, may, on
such Holder's own behalf and for such Holder's own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company
suitable to enforce, or otherwise in respect of, such Holder's rights hereunder,
including the right to exercise, exchange or surrender for purchase such
Holder's Warrants in the manner provided in this Agreement.
7.9 Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
7.10 Table of Contents. The table of contents and headings of
the Sections of this Agreement have been inserted for convenience of reference
only, are not intended to be considered a part hereof and shall not modify or
restrict any of the terms or provisions hereof.
<PAGE> 42
38
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
VERSATEL TELECOM INTERNATIONAL N.V.
By: /s/ R. Gary Mesch
-------------------------------------
Name: R. Gary Mesch
Title: Managing Director
UNITED STATES TRUST COMPANY OF NEW YORK,
as Warrant Agent
By: /s/ Gerard F. Ganey
-------------------------------------
Name:
Title:
<PAGE> 43
EXHIBIT A TO
WARRANT AGREEMENT
[FORM OF FACE OF GLOBAL WARRANT CERTIFICATE]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER REPRESENTATIVE OF
DTC AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF
CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS
OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 2.9 AND 2.10 OF THE
WARRANT AGREEMENT DATED AS OF DECEMBER 3, 1998.
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S,
(2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH
SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT OR
ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE
REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER,
SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY, (B) PURSUANT
TO A
<PAGE> 44
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
(3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED
A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY
AND THE WARRANT AGENT SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM,
AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OR
TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED
AND DELIVERED BY THE TRANSFEROR TO THE WARRANT AGENT, THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT.
<PAGE> 45
CUSIP No._____________
No. ___ _____ Warrants
WARRANT CERTIFICATE
VERSATEL TELECOM INTERNATIONAL N.V.
THIS CERTIFIES THAT, _______________, or its registered
assigns, is the registered holder of the number of Warrants set forth above (the
"Warrants"). Each Warrant entitles the holder thereof (the "Holder"), at its
option and subject to the provisions contained herein and in the Warrant
Agreement dated as of December 3, 1998 (the "Warrant Agreement"), between the
Company and United States Trust Company of New York, as Warrant Agent (the
"Warrant Agent", which term includes any successor Warrant Agent under the
Warrant Agreement), to purchase from VersaTel Telecom International N.V., a
company organized under the laws of The Netherlands (the "Company"), 6.667
Warrant Shares per Warrant at the exercise price of NLG 5.10 per share (the
"Exercise Price"), or by Cashless Exercise. This Warrant is subject to the terms
and provisions contained in the Warrant Agreement, to all of which terms and
provisions the Holder of this Warrant Certificate consents by acceptance hereof.
The Warrant Agreement is hereby incorporated herein by reference and made a part
hereof. Reference is hereby made to the Warrant Agreement for a full statement
of the respective rights, limitations of rights, duties and obligations of the
Company, the Warrant Agent and the Holders of the Warrants. Capitalized terms
used but not defined herein shall have the meanings ascribed thereto in the
Warrant Agreement. This Warrant Certificate shall terminate and become void as
of 5:00 p.m. on May 15, 2008 (the "Expiration Date") or upon the exercise hereof
as to all the Ordinary Shares subject hereto. The Exercise Price and the number
of Warrant Shares purchasable upon exercise of the Warrants shall be subject to
adjustment from time to time as set forth in the Warrant Agreement. References
in this Warrant Certificate to Ordinary Shares underlying the Warrants, or
deliverable upon exercise of the Warrants to the Holders thereof, shall be
deemed to refer to Class B Shares of the Company.
AS PROVIDED IN THE WARRANT AGREEMENT UNTIL THE EARLIEST OF (i)
MAY 15, 1999, (ii) THE COMMENCEMENT OF AN EXCHANGE OFFER OR THE EFFECTIVENESS OF
A SHELF REGISTRATION STATEMENT WITH RESPECT TO THE NOTES, (iii) THE
EXERCISABILITY DATE AND (iv) SUCH OTHER DATE AS THE REPRESENTATIVES WILL
DETERMINE IN THEIR SOLE DISCRETION, EACH $1,000 PRINCIPAL AMOUNT OF NOTES AND
ONE WARRANT WHICH COLLECTIVELY COMPRISE EACH UNIT MAY NOT BE TRANSFERRED OR
EXCHANGED SEPARATELY.
Reference is hereby made to the further provisions of this
Warrant Certificate set forth on the reverse hereof and such further provisions
shall for all purposes have the same effect as though fully set forth at this
place.
This Warrant Certificate shall not be valid unless
countersigned by the Warrant Agent, as such term is used in the Warrant
Agreement.
<PAGE> 46
THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE
WARRANT AGREEMENT AND THE WARRANTS WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS
THEREOF.
<PAGE> 47
IN WITNESS WHEREOF, VersaTel Telecom International N.V. has
caused this Warrant Certificate to be executed on behalf of the Company by two
Officers of the Company.
Dated: December __, 1998
VERSATEL TELECOM INTERNATIONAL N.V.
By:
-------------------------------------
Name: R. Gary Mesch
Title: Managing Director
By:
-------------------------------------
Name:
Title:
<PAGE> 48
Countersigned:
UNITED STATES TRUST COMPANY OF NEW YORK,
as Warrant Agent
By
--------------------------------
Authorized Signatory
<PAGE> 49
[FORM OF REVERSE OF WARRANT CERTIFICATE]
This Warrant Certificate is issued under and in accordance
with the Warrant Agreement. A copy of the Warrant Agreement may be obtained for
inspection by the Holder hereof upon written request to the Warrant Agent at
United States Trust Company of New York, 114 West 47th Street, New York, New
York, 10036-1532. References in this Warrant Certificate to Ordinary Shares
underlying the Warrants, or deliverable upon exercise of the Warrants to the
Holders thereof, shall be deemed to refer to Class B Shares of the Company.
Warrants may be exercised at any time commencing at the
opening of business on the Exercisability Date and until 5:00 p.m., New York
City time on the Expiration Date. Subject to the terms of the Warrant Agreement,
the Warrants may be exercised in whole or in part (i) by surrender of this
Warrant Certificate with the form of election to purchase Warrant Shares
attached hereto duly executed and with the simultaneous payment of the Exercise
Price in cash to the Warrant Agent for the account of the Company at the office
of the Warrant Agent or (ii) by Cashless Exercise. Payment of the Exercise Price
in cash shall be made in cash or by certified or official bank check payable to
the order of the Company or by wire transfer of funds to an account designated
by the Company for such purpose. Payment by Cashless Exercise shall be made by
the surrender of a Warrant or Warrants represented by one or more Warrant
Certificates and without payment of the Exercise Price in cash, in exchange for
the issuance of such number of Ordinary Shares equal to the product of (1) the
number of Ordinary Shares for which such Warrant would otherwise then be
nominally exercised if payment of the Exercise Price were being made in cash and
(2) the Cashless Exercise Ratio.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price and the number of Ordinary Shares issuable
upon the exercise of each Warrant shall, subject to certain conditions, be
adjusted.
In the event the Company enters into a Combination following
which this Warrant remains outstanding, the Holder hereof will be entitled to
receive upon exercise of the Warrants the shares of capital stock or other
securities or other property of such surviving entity as such Holder would have
been entitled to receive upon or as the result of such Combination had the
Holder exercised its Warrants immediately prior to such Combination; provided,
however, that in the event that, in connection with such Combination,
consideration to holders of Ordinary Shares in exchange for their shares is
payable solely in cash or in the event of the dissolution, liquidation or
winding-up of the Company, the Holder hereof will be entitled to receive
distributions on an equal basis with the holders of Ordinary Shares or other
securities issuable upon exercise of the Warrants, as if the Warrants had been
exercised immediately prior to such events, less the Exercise Price.
The Company may require payment of a sum sufficient to pay all
taxes, assessments or other governmental charges in connection with the transfer
or exchange of the Warrant Certificates pursuant to Section 3.6 of the Warrant
Agreement but not for any exchange or original issuance (not involving a
transfer) with respect to temporary Warrant Certificates, the exercise of the
Warrants or the Warrant Shares.
<PAGE> 50
Upon any partial exercise of the Warrants, there shall be
countersigned and issued to the Holder hereof a new Warrant Certificate in
respect of the Warrant Shares as to which the Warrants shall not have been
exercised. This Warrant Certificate may be exchanged at the office of the
Warrant Agent by presenting this Warrant Certificate properly endorsed with a
request to exchange this Warrant Certificate for other Warrant Certificates
evidencing an equal number of Warrants. In the event any fractional Warrant
Shares would have to be issued upon the exercise of the Warrants, the Company
may, at its option, pay an amount in cash equal to the Current Market Value for
one Warrant Share on the Business Day immediately preceding the date the Warrant
is exercised, multiplied by such fraction, computed to the nearest whole Dutch
guilder in lieu of issuing such fractional share.
Pursuant to the Warrant Agreement, the Company has certain
registration obligations with respect to the Ordinary Shares issuable upon
exercise of the Warrants.
Pursuant to the Warrant Agreement, if the Company proposes to
effect an Initial Public Offering, it shall be obligated to include the Warrant
Shares of holders who request to have such Warrant Shares included; provided,
however, that the Managing Underwriter may, under certain conditions, limit the
number of such Warrant Shares to be included in the Initial Public Offering.
Pursuant to the Warrant Agreement, in the event that an
Initial Public Offering has not occurred by the Triggering Date, the Company
will be required to make an offer to purchase all outstanding Warrants in cash
at the Repurchase Price.
Pursuant to the Warrant Agreement, under certain circumstances
in the event of a Change of Control, the Company shall make an offer to purchase
any and all of the outstanding Warrants at cash purchase prices at least equal
to the Repurchase Price. In addition, in the event of a sale of the Company, the
Company has the power to require holders of the Warrants to sell such Warrants
to the transferee.
The Warrants do not entitle any holder hereof to any of the
rights of a stockholder of the Company, including, without limitation, the right
to receive dividends, to vote, to consent, to exercise any preemptive rights or
to receive notice as stockholders of the Company in respect of any stockholders'
meeting for election of directors of the Company. All Ordinary Shares issuable
by the Company upon the exercise of the Warrants shall, upon such issue, be duly
and validly issued and fully paid and non-assessable.
The Holder in whose name the Warrant Certificate is registered
may be deemed and treated by the Company and the Warrant Agent as the absolute
owner of the Warrant Certificate for all purposes whatsoever and neither the
Company nor the Warrant Agent shall be affected by notice to the contrary.
This Warrant Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Warrant Agent.
<PAGE> 51
FORM OF ELECTION TO PURCHASE WARRANT SHARES (to
be executed only upon exercise of Warrants)
[ ]
The undersigned hereby irrevocably elects to exercise
- ----------------
Warrants at an exercise price per Warrant Share of NLG
--------
to acquire an equal number of Warrant Shares on the terms and conditions
specified in the within Warrant Certificate and the Warrant Agreement therein
referred to, surrenders this Warrant Certificate and all right, title and
interest therein to , and directs that the Ordinary Shares deliverable
-------
upon the exercise of such Warrants be registered or placed in the name and at
the address specified below and delivered thereto.
Date:
----------------, ----
---------------------------------------(1)
(Signature of Owner)
----------------------------------------
(Street Address)
----------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
----------------------------------------
- --------------
(1) The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed by a national
bank or trust company or by a member firm of any national securities
exchange.
<PAGE> 52
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Any unexercised Warrants evidenced by the within Warrant Certificate to be
issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
<PAGE> 53
SCHEDULE A
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL WARRANTS(2)
The following increases or decreases in this Global Warrant have been made:
<TABLE>
<CAPTION>
Date of Amount of Amount of Number of Signature of
Exchange decrease in increase in Warrants of authorized
Number of Number of this Global officer of
Warrants of this Warrants of this Warrant Warrant Agent
Global Warrant Global Warrant following
such decrease
or increase
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- ---------
(2) This is to be included only if the Warrant is in global form.
<PAGE> 54
EXHIBIT B TO
WARRANT AGREEMENT
[FORM OF FACE OF DEFINITIVE WARRANT CERTIFICATE]
<PAGE> 55
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATION S,
(2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH
SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT OR
ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE
REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER,
SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY, (B) PURSUANT
TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE
TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY AND THE WARRANT AGENT SHALL
HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE
(D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE
FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OR TRANSFER IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE WARRANT AGENT, THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF
THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
<PAGE> 56
CUSIP No._____________
No. ___ _____ Warrants
WARRANT CERTIFICATE
VERSATEL TELECOM INTERNATIONAL N.V.
THIS CERTIFIES THAT, _______________ is the owner of _____
Warrants (the "Warrants") as described above, transferable only on the books of
the Company by the holder thereof in person or by his or her duly authorized
attorney, on surrender of the Certificate properly endorsed. This Warrant
entitles the holder thereof (the "Holder"), at its option and subject to the
provisions contained herein and in the Warrant Agreement, dated as of December
3, 1998 (the "Warrant Agreement"), between the Company and United States Trust
Company of New York, as Warrant Agent (the "Warrant Agent", which term includes
any successor Warrant Agent under the Warrant Agreement), to purchase from
VersaTel Telecom International N.V., a company organized under the laws of The
Netherlands (the "Company"), 6.667 Warrant Shares per Warrant at the exercise
price per share of NLG 5.10 (the "Exercise Price"), or by Cashless Exercise.
This Warrant is subject to the terms and provisions contained in the Warrant
Agreement, to all of which terms and provisions the Holder of this Warrant
Certificate consents by acceptance hereof. The Warrant Agreement is hereby
incorporated herein by reference and made a part hereof. Reference is hereby
made to the Warrant Agreement for a full statement of the respective rights,
limitations of rights, duties and obligations of the Company, the Warrant Agent
and the Holders of the Warrants. Capitalized terms used but not defined herein
shall have the meanings ascribed thereto in the Warrant Agreement. This Warrant
Certificate shall terminate and become void as of 5:00 p.m. on May 15, 2008 (the
"Expiration Date") or upon the exercise hereof as to all the Ordinary Shares
subject hereto. The Exercise Price and the number of Warrant Shares purchasable
upon exercise of the Warrants shall be subject to adjustment from time to time
as set forth in the Warrant Agreement. References in this Warrant Certificate to
Ordinary Shares underlying the Warrants, or deliverable upon exercise of the
Warrants to the Holders thereof, shall be deemed to refer to Class B Shares of
the Company.
AS PROVIDED IN THE WARRANT AGREEMENT UNTIL THE EARLIEST OF (i)
MAY 15, 1999, (ii) THE COMMENCEMENT OF AN EXCHANGE OFFER OR THE EFFECTIVENESS OF
A SHELF REGISTRATION STATEMENT WITH RESPECT TO THE NOTES, (iii) THE
EXERCISABILITY DATE AND (iv) SUCH OTHER DATE AS THE REPRESENTATIVES WILL
DETERMINE IN THEIR SOLE DISCRETION, EACH $1,000 PRINCIPAL AMOUNT OF NOTES AND
ONE WARRANT WHICH COLLECTIVELY COMPRISE EACH UNIT MAY NOT BE TRANSFERRED OR
EXCHANGED SEPARATELY.
Reference is hereby made to the further provisions of this
Warrant Certificate set forth on the reverse hereof and such further provisions
shall for all purposes have the same effect as though fully set forth at this
place.
This Warrant Certificate shall not be valid unless
countersigned by the Warrant Agent, as such term is used in the Warrant
Agreement.
<PAGE> 57
THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE
WARRANT AGREEMENT AND THE WARRANTS WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS
THEREOF.
IN WITNESS WHEREOF, VersaTel Telecom International N.V. has
caused this Warrant Certificate to be executed on behalf of the Company by two
Officers of the Company.
Dated: December __, 1998
VERSATEL TELECOM INTERNATIONAL N.V.
By:
-------------------------------------
Name: R. Gary Mesch
Title: Managing Director
By:
-------------------------------------
Name:
Title:
<PAGE> 58
Countersigned:
UNITED STATES TRUST COMPANY OF NEW YORK,
as Warrant Agent
By
---------------------------
Authorized Signatory
<PAGE> 59
[FORM OF REVERSE OF WARRANT CERTIFICATE]
This Warrant Certificate is issued under and in accordance
with the Warrant Agreement. A copy of the Warrant Agreement may be obtained for
inspection by the Holder hereof upon written request to the Warrant Agent at
United States Trust Company of New York, 114 West 47th Street, New York, New
York, 10036-1532. References in this Warrant Certificate to Ordinary Shares
underlying the Warrants, or deliverable upon exercise of the Warrants to the
Holders thereof, shall be deemed to refer to Class B Shares of the Company.
Warrants may be exercised at any time commencing at the
opening of business on the Exercisability Date and until 5:00 p.m., New York
City time on the Expiration Date. Subject to the terms of the Warrant Agreement,
the Warrants may be exercised in whole or in part (i) by surrender of this
Warrant Certificate with the form of election to purchase Warrant Shares
attached hereto duly executed and with the simultaneous payment of the Exercise
Price in cash to the Warrant Agent for the account of the Company at the office
of the Warrant Agent or (ii) by Cashless Exercise. Payment of the Exercise Price
in cash shall be made in cash or by certified or official bank check payable to
the order of the Company or by wire transfer of funds to an account designated
by the Company for such purpose. Payment by Cashless Exercise shall be made by
the surrender of a Warrant or Warrants represented by one or more Warrant
Certificates and without payment of the Exercise Price in cash, in exchange for
the issuance of such number of Ordinary Shares equal to the product of (1) the
Exercise Price and the number of Ordinary Shares for which such Warrant would
otherwise then be nominally exercised if payment of the Exercise Price were
being made in cash and (2) the Cashless Exercise Ratio.
The Warrant Agreement provides that upon the occurrence of
certain events the number of Ordinary Shares issuable upon the exercise of each
Warrant shall, subject to certain conditions, be adjusted.
In the event the Company enters into a Combination following
which this Warrant remains outstanding, the Holder hereof will be entitled to
receive upon exercise of the Warrants the shares of capital stock or other
securities or other property of such surviving entity as such Holder would have
been entitled to receive upon or as the result of such Combination had the
Holder exercised its Warrants immediately prior to such Combination; provided,
however, that in the event that, in connection with such Combination,
consideration to holders of Ordinary Shares in exchange for their shares is
payable solely in cash or in the event of the dissolution, liquidation or
winding-up of the Company, the Holder hereof will be entitled to receive
distributions on an equal basis with the holders of Ordinary Shares or other
securities issuable upon exercise of the Warrants, as if the Warrants had been
exercised immediately prior to such events, less the Exercise Price.
The Company may require payment of a sum sufficient to pay all
taxes, assessments or other governmental charges in connection with the transfer
or exchange of the Warrant Certificates pursuant to Section 3.6 of the Warrant
Agreement but not for any exchange or original issuance (not involving a
transfer) with respect to temporary Warrant Certificates, the exercise of the
Warrants or the Warrant Shares.
<PAGE> 60
Upon any partial exercise of the Warrants, there shall be
countersigned and issued to the Holder hereof a new Warrant Certificate in
respect of the Warrant Shares as to which the Warrants shall not have been
exercised. This Warrant Certificate may be exchanged at the office of the
Warrant Agent by presenting this Warrant Certificate properly endorsed with a
request to exchange this Warrant Certificate for other Warrant Certificates
evidencing an equal number of Warrants. In the event any fractional Warrant
Shares would have to be issued upon the exercise of the Warrants, the Company
may, at its option, pay an amount in cash equal to the Current Market Value for
one Warrant Share on the Business Day immediately preceding the date the Warrant
is exercised, multiplied by such fraction, computed to the nearest whole Dutch
guilder in lieu of issuing such fractional share.
Pursuant to the Warrant Agreement, the Company has certain
registration obligations with respect to the Ordinary Shares issuable upon
exercise of the Warrants.
Pursuant to the Warrant Agreement, if the Company proposes to
effect an Initial Public Offering, it shall be obligated to include the Warrant
Shares of holders who request to have such Warrant Shares included; provided,
however, that the Managing Underwriter may, under certain conditions, limit the
number of such Warrant Shares to be included in the Initial Public Offering.
Pursuant to the Warrant Agreement, in the event that an
Initial Public Offering has not occurred by the Triggering Date, the Company
will be required to make an offer to purchase all outstanding Warrants in cash
at the Repurchase Price.
Pursuant to the Warrant Agreement, under certain circumstances
in the event of a Change of Control, the Company shall make an offer to purchase
any and all of the outstanding Warrants at cash purchase prices at least equal
to the Repurchase Price. In addition, in the event of a sale of the Company, the
Company has the power to require holders of the Warrants to sell such Warrants
to the transferee.
The Warrants do not entitle any holder hereof to any of the
rights of a stockholder of the Company, including, without limitation, the right
to receive dividends, to vote, to consent, to exercise any preemptive rights or
to receive notice as stockholders of the Company in respect of any stockholders'
meeting for election of directors of the Company. All Ordinary Shares issuable
by the Company upon the exercise of the Warrants shall, upon such issue, be duly
and validly issued and fully paid and non-assessable.
The Holder of this Warrant Certificate may be deemed and
treated by the Company and the Warrant Agent as the absolute owner of the
Warrant Certificate for all purposes whatsoever and neither the Company nor the
Warrant Agent shall be affected by notice to the contrary.
This Warrant Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Warrant Agent.
<PAGE> 61
FORM OF ELECTION TO PURCHASE WARRANT SHARES
(to be executed only upon exercise of Warrants)
[ ]
The undersigned hereby irrevocably elects to exercise
Warrants at an exercise price per Warrant Share of
- ---------------
NLG to acquire an equal number of Warrant Shares on the terms and
--------
conditions specified in the within Warrant Certificate and the Warrant Agreement
therein referred to, surrenders this Warrant Certificate and all right, title
and interest therein to , and directs that the Ordinary Shares
----------
deliverable upon the exercise of such Warrants be registered or placed in the
name and at the address specified below and delivered thereto.
Date:
------------------, ----
---------------------------------------(3)
(Signature of Owner)
----------------------------------------
(Street Address)
----------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
----------------------------------------
- ---------
(3) The signature must correspond with the name as written upon the face of
the within Warrant Certificate in every particular, without alteration
or enlargement or any change whatever, and must be guaranteed by a
national bank or trust company or by a member firm of any national
securities exchange.
<PAGE> 62
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Any unexercised Warrants evidenced by the within Warrant Certificate to be
issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
<PAGE> 63
EXHIBIT C TO
WARRANT AGREEMENT
FORM OF TRANSFER CERTIFICATE
FOR TRANSFER FROM RULE 144A GLOBAL
WARRANT TO REGULATION S GLOBAL WARRANT
(Transfers pursuant to Section 2.10(a)
of the Warrant Agreement)
VersaTel Telecom International N.V.
c/o United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Re: VersaTel Telecom International N.V.
Reference is hereby made to the Warrant Agreement dated as of
December 3, 1998 (the "Warrant Agreement") between VersaTel Telecom
International N.V. and United States Trust Company of New York, as Warrant
Agent. Capitalized terms used but not defined herein shall have the meanings
given them in the Warrant Agreement.
This letter relates to the Warrants beneficially held through
interests in the Rule 144A Global Warrant (CUSIP No. _________) with DTC in the
name of ________ (the "Transferor") account no. ___. The Transferor hereby
requests that on [INSERT DATE] such beneficial interest in the Rule 144A Global
Warrant be transferred or exchanged for an interest in the Regulation S Global
Warrant (CUSIP (CINS) No. _________) in the same number of Warrants and transfer
to (account no. ________).
In connection with such request and in respect of such
Warrants the Transferor does hereby certify that such transfer has been effected
in accordance with the transfer restrictions set forth in the Warrant Agreement
and the Warrants and pursuant to and in accordance with 904 of Regulation S
under the United States Securities Act of 1933, as amended (the "Securities
Act"), and accordingly the Transferor further certifies that:
(A) (1) the offer of the Warrants was not made to a person in
the United States;
<PAGE> 64
(2) either (a) at the time the buy order was
originated, the transferee was outside the United States or we
and any person acting on our behalf reasonably believed that
the transferee was outside the United States, or (b) the
transaction was executed in, on or through the facilities of a
designated offshore securities market and neither the
Transferor nor any person acting on our behalf knows that the
transaction was prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in
contravention of the requirements of 904(b) of Regulation S,
as applicable; and
(4) the transaction is not part of a plan or scheme
to evade the registration requirements of the Securities Act.
OR
(B) Such transfer is being made in accordance with Rule 144
under the Securities Act.
<PAGE> 65
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company. Terms used in this certificate
and not otherwise defined in the Warrant Agreement have the meanings set forth
in Regulation S under the Securities Act.
Dated:
---------------, ----
[Name of Transferor]
By:
--------------------------
Name:
Title:
Telephone No.:
Please print name and address (including zip code number)
<PAGE> 66
EXHIBIT D TO
WARRANT AGREEMENT
FORM OF TRANSFER CERTIFICATE
FOR TRANSFER FROM REGULATION S GLOBAL
WARRANT TO RULE 144A GLOBAL WARRANT
PRIOR TO EXPIRATION OF RESTRICTED PERIOD
(Transfers pursuant to Section 2.10(b)
of the Warrant Agreement)
VersaTel Telecom International N.V.
c/o United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Re: VersaTel Telecom International N.V.
Reference is hereby made to the Warrant Agreement dated as of
December 3, 1998 (the "Warrant Agreement") between VersaTel Telecom
International N.V. and United States Trust Company of New York, as Warrant
Agent. Capitalized terms used but not defined herein shall have the meanings
given them in the Warrant Agreement.
This letter relates to the Warrants beneficially held through
interests in the Regulation S Global Warrant (CUSIP (CINS) No. _________) with
[Euroclear] [Cedel] (Common Code No. _______) through DTC in the name of
_______________ (the "Transferor") [Euroclear] [Cedel] account no._________. The
Transferor hereby requests that on [INSERT DATE] such beneficial interest in the
Regulation S Global Warrant be transferred or exchanged for an interest in the
Rule 144A Global Warrant (CUSIP No. _________) in the same number of Warrants
and transfer to ______________ (DTC account no. ________).
In connection with such request, and in respect of such
Warrants, the Transferor does hereby certify that such Warrants are being
transferred in accordance with Rule 144A under the United States Securities Act
of 1933, as amended (the "Securities Act"), to a transferee that the Transferor
reasonably believes is purchasing the Warrants for its own account or an account
with respect to which the transferee exercises sole investment discretion and
the transferee and any such account is a "qualified institutional buyer" within
the meaning of Rule 144A, in each case in a transaction meeting the requirements
of Rule 144A and in accordance with any applicable securities laws of any state
of the United States or any other jurisdiction.
<PAGE> 67
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
Dated:
---------------, ----
[Name of Transferor]
By:
--------------------------
Name:
Title:
Telephone No.:
Please print name and address (including zip code number)
<PAGE> 1
Exhibit 10.7
PARTICIPATION AND SHAREHOLDERS AGREEMENT
The undersigned,
1. TELECOM FOUNDERS B.V., a company incorporated under the laws of the
Netherlands with it statutory seat in Abcoude, hereinafter referred to
as "Founders", duly represented by its managing director Mr. Robert
Gary Mesch;
2. NESBIC C.V., a limited partnership organised under the laws of the
Netherlands with its registered seat in Utrecht, hereinafter referred
to as "Nesbic", duly represented by its managing partner Nesbic B.V.,
duly represented by Mr. Leo van Doorne by Power of Attorney;
3. CROMWILLD LIMITED, a company incorporated under the laws of the Isle of
Man, with registered office at 8 Myrtle Street, Douglas, Isle of Man,
hereinafter referred to as "Cromwilld", duly represented by its
managing director Mr. Aidan Phelan;
4. VERSATEL TELECOM B.V., a company incorporated under the laws of the
Netherlands, with its statutory seat in Amsterdam, hereinafter referred
to as the "Company", duly represented by its managing director Mr.
Robert Gary Mesch;
5. ROBERT GARY MESCH, residing in (1391 LZ) Abcoude at Koppeldijk 8,
hereinafter referred to as "Mesch";
6. OPEN SKIES INTERNATIONAL, INC., a US subchapter "S" corporation,
incorporated under the laws of the State of Colorado, USA, registered
in Denver, Colorado, hereinafter referred to as "Open Skies", duly
represented by its managing director Mr. Robert Gary Mesch;
<PAGE> 2
2
Parties 1, 2 and 3 and their successors in accordance with Article 15
hereinafter jointly and individually referred to as Shareholders and Shareholder
respectively.
Parties 1 up to 4 hereinafter jointly and individually referred to as Parties
and Party respectively.
WHEREAS Founders and Nesbic entered into a shareholders agreement on
August 29, 1995, hereinafter referred to as "the First
Financing Round Agreement";
WHEREAS Pursuant to the First Financing Round Agreement Founders
incorporated the Company on October 10, 1995;
WHEREAS Pursuant to the First Financing Round Agreement:
- Founders took 2,500,000 newly issued shares in the
Company (including those obtained at incorporation)
against payment of NLG 250,000;
- Nesbic took 2,450,000 newly issued shares in the
Company against payment of NLG 245,000;
- Nesbic provided the Company with 2 subordinated
convertible loans ("the First Financing Round Loans")
totalling NLG 2,355,000.
WHEREAS The current participation of Founders and Nesbic is as
reflected in the following schedule:
<TABLE>
<CAPTION>
Shareholder # Shares % Shares Loans (in NLG)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Founders 2,500,000 50.5 --
Nesbic 2,450,000 49.5 2,355,000
=========================================================================================
</TABLE>
<PAGE> 3
3
WHEREAS Pending the transaction contemplated in this Agreement Nesbic
has provided the Company with a bridge loan in the amount of
NLG 2,000,000;
WHEREAS The Company has been seeking additional financing up to appr.
NLG 6,250,000 and has found Shareholders willing to invest
this amount, hereinafter referred to as: "the Second Financing
Round";
WHEREAS Founders, Nesbic and Cromwilld are prepared to participate in
the Second Financing Round by subscribing to newly issued
shares in the Company;
WHEREAS As part of the Second Financing Round Nesbic and Cromwilld are
furthermore prepared to provide the Company with additional
subordinated convertible loans, hereinafter referred to as:
"the Second Financing Round Loans";
WHEREAS Cromwilld shall purchase from Nesbic part of Nesbic's shares
in the Company;
THEREFORE HAVE AGREED AS FOLLOWS:
ARTICLE 1. INTERPRETATION
In this Participation and Shareholders Agreement ("the Agreement") the following
expressions have, except where the context otherwise requires, the meaning as
defined in the clauses, mentioned after such expressions.
Agreement Article 1
Amended Articles of Association Article 7.1
Annual Business Plan Article 17.1
Company Introduction
<PAGE> 4
4
Closing Article 2.2
ESOP Article 16.1
First Financing Round Agreement Preamble
First Financing Round Loans Preamble
Founders Introduction
General Meeting of Shareholders Article 10.1
Management Board Article 9.1
Mesch Introduction
Nesbic Introduction
New Shareholder Article 15.1
Notary's Account Article 5.1
Cromwilld Introduction
Open Skies Introduction
Parties Introduction
Party Introduction
Receiving Shareholder Article 13.2
Second Closing Article 2.1
Second Financing Round Preamble
Second Financing Round Loans Preamble
Shareholder Introduction
Shareholders Introduction
Supervisory Board Article 10.1
<PAGE> 5
5
ARTICLE 2. TRANSFER OF SHARES
2.1 Nesbic herewith sells, and Cromwilld herewith purchases, 990,000 shares
of par value NLG 0.10 each in the capital of the Company numbered
3,960,001 up to and inclusive 4,950,000. The purchase price of these
shares is NLG 500,000. Transfer of full legal and beneficial title to
these shares will take place against payment of the purchase price by
Deed of Transfer attached to this Agreement as Annex 1. This Deed of
Transfer shall be executed before civil law notary Mr. H. van Wilsum or
his substitute at a closing, hereinafter referred to as: "the Second
Closing", to be held at the offices of Caron & Stevens/ Baker &
McKenzie, Amsterdam, before or ultimately on 27 December 1996.
2.2 Attached to this Agreement as Annex 2 is a draft statement by Founders
approving the transfer of shares as referred to in Article 2.2 and
waiving any preemptive rights of first refusal in accordance with the
Articles of Association of the Company. This statement shall be signed
and delivered by Founders at a closing, hereinafter referred to as:
"the Closing", to be held at the offices of Caron & Stevens/ Baker &
McKenzie, Amsterdam, starting with the immediately following the
execution of this Agreement.
ARTICLE 3. ISSUE OF SHARES
3.1 At the Closing Founders, Nesbic and Cromwilld shall take a shareholders
resolution authorising the management board of the Company to issue
shares to Founders, Nesbic and Cromwilld on the Second Closing and
after receipt of the payments as reflected in the following schedule:
<TABLE>
<CAPTION>
Issue to: Number of Shares: Payment to be made:
- ------------------------------------------------------------------------
<S> <C> <C>
Founders 198,000 NLG 249,998.76
Nesbic 1,646,000 NLG 2,078,272.50
</TABLE>
<PAGE> 6
6
<TABLE>
<CAPTION>
Issue to: Number of Shares: Payment to be made:
- ------------------------------------------------------------------------
<S> <C> <C>
Cromwilld 2,116,000 NLG 2,671,703.90
========================================================================
</TABLE>
3.2 Attached to this Agreement as Annex 3 is the shareholders resolution
authorising the Company to issue the shares as referred to in Article
3.1.
3.3 The new shares shall be issued at the Second Closing, by a Deed of
Issuance, in the form attached to this Agreement as Annex 4, to be
executed before civil law notary Mr. H. van Wilsum or his substitute.
ARTICLE 4. CONVERTIBLE SUBORDINATED LOANS
4.1 Effective as per the Second Closing Nesbic herewith sells and assigns,
and Cromwilld herewith purchases and accepts, part of its rights and
obligations under the First Financing Round Loans corresponding with
NLG 1,213,000 of the total principal amount of the First Financing
Round Loans of NLG 2,355,000. The purchase price to be paid by
Cromwilld to Nesbic is equal to the nominal value of that part of the
First Financing Round Loans transferred, NLG 1,213,000 and shall be due
and payable at the Second Closing. The Company herewith acknowledges
and accepts the assignment.
4.2 Nesbic and Cromwilld shall at the Second Closing each make available to
the company additional subordinated convertible loans of NLG 625,000 in
the preamble of this Agreement referred to as "the Second Financing
Round Loans".
4.3 The rights and obligations of Nesbic and Cromwilld on the one hand and
the Company on the other hand in respect of the First and Second
Financing Round Loans shall be as reflected in the loan agreements
attached to this Agreement as Annexes 5 and 6, which loan agreements:
<PAGE> 7
7
(i) shall be executed at the Closing;
(ii) shall replace existing agreements in respect of the First
Financing Round Loans; and
(iii) shall provide for a conversion in newly issued shares in the
capital of the Company up to at most, both loans together, 5%
in the capital of the Company after issuance.
ARTICLE 5. PAYMENTS
5.1 At or prior to the Second Closing the following payments shall be made:
(i) Cromwilld shall pay the purchase price due to Nesbic pursuant
to Article 2.2 by transferring by telephone transfer an amount
of five hundred thousand Netherlands Guilders (NLG 500,000) to
bank account number 54.31.72.201 at ABN AMRO Bank N.V. in the
name of Stichting Derdengelden notariaat Caron & Stevens ("the
Notary's Account");
(ii) Founders and Cromwilld shall pay to the Company the amounts
payable pursuant to Article 3.1, two hundred and forty nine
thousand nine hundred and ninety eight Netherlands Guilders
and seventy six cents (NLG 249.998,76) and two million six
hundred seventy one thousand and seven hundred and three
Netherlands Guilders and ninety cents (NLB 2.671.703,90)
respectively, by transferring these amounts by telephone
transfer to the Notary's Account;
(iii) Nesbic shall pay to the Company the amount payable pursuant to
Article 3.1 by:
- transferring by telephone transfer to the Notary's
Account an amount of twenty six thousand six hundred
and five Netherlands Guilders and eighty nine cents
(NLG 26,605.89); and
<PAGE> 8
8
- setting off Nesbic's obligation to pay the remaining
two million Netherlands Guilders (NLG 2,000,000)
against the Company's obligation to repay the bridge
loan of two million Netherlands Guilders (NLG
2,000,000) provided by Nesbic to the Company
increased with fifty one thousand six hundred sixty
six Netherlands Guilders and sixty one cents (NLG
51,666.61) interest as specified at Annex 7 attached
to this Agreement; the Company shall at the Closing
accept payment by means of the set off described
above.
(iv) Cromwilld shall pay the purchase price due to Nesbic pursuant
to Article 4.1 by transferring by telephone transfer an amount
of one million two hundred and thirteen thousand Netherlands
Guilders (NLG 1,213,000) to the Notary's Account;
(v) Nesbic and Cromwilld shall each pay to the Company the amounts
of the additional convertible loan referred to in Article 4.2
by transferring by telephone transfer six hundred twenty five
thousand Netherlands Guilders (NLG 625,000) to the Notary's
Account.
ARTICLE 6. INVESTMENT SCHEDULE
6.1 Following the transfer and issuance of shares referred to in Article 2
and 3 above and the execution of the loan agreements referred to in
Article 4 above the investment of the Shareholders in the Company is as
follows:
<TABLE>
<CAPTION>
Shareholder # Shares % Shares Loans (in NLG)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Founders 2,698,000 30.28 --
Nesbic 3,106,000 34.86 1,767,000
Cromwilld 3,106,000 34.86 1,838,000
================================================================================
</TABLE>
<PAGE> 9
9
ARTICLE 7. ARTICLES OF ASSOCIATION
7.1 At the Closing Shareholders shall take a shareholders resolution to
amend the articles of association of the Company, in accordance with
the shareholders resolution attached to this Agreement as Annex 8. The
amended articles of association, hereinafter referred to as: "the
Amended Articles of Association" will read in accordance with Annex 9
to this Agreement. The Amended Articles of Association will provide,
inter alia, for a Supervisory Board.
7.2 Until the articles of association of the Company have been amended the
Parties shall act as if amendment has already been effected.
ARTICLE 8. CONDITION PRECEDENT
8.1 The obligations of the Parties to this Agreement are all conditional
upon the Condition Precedent ("opschortende voorwaarde") that at the
Second Closing all Parties shall have complied with their obligations
pursuant to the Articles 2, 3, 4, 6 and 7 of this Agreement.
ARTICLE 9. MANAGEMENT BOARD
9.1 The present management board ("statutair bestuur") of the Company,
hereinafter referred to as "Management Board", composed of Mr. Robert
Gary Mesch, shall be replaced by Open Skies under the terms and
conditions as set forth in the Management Agreement attached to this
agreement as Annex 10. The Management Agreement shall be executed at
the Closing. At the Closing Founders and Nesbic shall take a
Shareholders Resolution appointing Open Skies and dismissing Mesch as
Managing Director of the Company. Mesch shall not have a claim in
consequence of this dismissal. A final draft of that Shareholders
Resolution is attached to this Agreement as Annex 11.
<PAGE> 10
10
9.2 The Company may terminate the Management Agreement forthwith upon Mesch
becoming unable to render services as the Manager defined in the
Management Agreement. Mesch shall not have any claim in consequence of
such dismissal.
9.3 If and when the Management Agreement is terminated.
(i) by the Company for reasons other than those specified in
Article 9.2 of this Agreement and the Articles 5.2, 5.3 and
5.4 of the Management Agreement;
(ii) by Open Skies for reasons that, would Open Skies be considered
an employee, would qualify as good cause ("dringende redenen"
as defined in 7A:1639 q BW) for Open Skies to resign;
(iii) by Open Skies due to the appointment without the consent of
Open Skies of one or more managing directors next to Mesch who
have signing authority independently of Mesch.
Versatel shall pay Open Skies the value of 2% of the shares in Versatel
or two times the annual management fee (as defined in Article 2 of the
Management Agreement, whichever is higher. The value of the shares
shall be determined in accordance with the provisions in the Articles
of Association of Versatel that arrange for a valuation of shares upon
transfer thereof.
9.4 Mesch shall fulfil and comply with all obligations imposed on the
Manager (as defined in the Management Agreement) by the Management
Agreement.
<PAGE> 11
11
ARTICLE 10. SUPERVISORY BOARD
10.1 The supervisory board ("raad van commissarissen") of the Company,
hereinafter referred to as: "the Supervisory Board", shall be composed
of four members, to be appointed by the general meeting of shareholders
("algemene vergadering van aandeelhouders") of the Company, hereinafter
referred to as "General Meeting of Shareholders". Nesbic and Cromwilld
each have the right to nominate one member of the Supervisory Board.
Founders have the right to nominate two members of the Supervisory
Board. The fourth member of the Supervisory Board, that shall be
appointed upon nomination of Founders, will have to be acceptable to
both Nesbic and Cromwilld. Nesbic and Cromwilld shall not withhold
their acceptance unreasonably. Shareholders shall vote as shareholders
of the Company in such manner that a member of the Supervisory Board
nominated by one of the Shareholders in accordance with the preceding,
will be appointed. If an Shareholder requests that the member of the
Supervisory Board nominated by him be dismissed, or suspended
Shareholders will vote for such dismissal or suspension.
10.2 The member of the Supervisory Board appointed upon nomination of
Nesbic, initially Mr. Leo van Doorne, shall be appointed chairman of
the Supervisory Board. The chairman of the Supervisory Board shall have
a casting vote if the Supervisory Board cannot reach a decision due to
a tie in votes. The Supervisory Director nominated by Cromwilld shall
initially be Mr. Denis O'Brien. One Supervisory Director nominated by
Founders shall initially be Mr. William Gregory Mesch. Nesbic
acknowledges the valuable relationship of Mr. Leo van Doorne with Mesch
and will therefor take into account this relationship in deciding on
the replacement of Leo van Doorne as a member of the board of
supervisory directors, if any.
10.3 Each member of the Supervisory Board will receive a remuneration of at
least NLG 12,500 on a yearly basis (including costs, expenses and
exclusive of VAT).
<PAGE> 12
12
10.4 The Supervisory Board shall meet at regular intervals but at least four
times a year or at the request of one of its members.
10.5 The Management Board shall require the prior approval of the
Supervisory Board for resolutions or when representing the Company in
transactions:
- to acquire, dispose of, encumber, rent, let or otherwise
acquire or grant any right to use or enjoy registered
property;
- to conclude agreements whereby the Company is granted a bank
credit;
- to borrow or lend moneys, except for the use of any bank
credit extended to the Company;
- to establish or terminate permanent, direct or indirect
cooperation with another enterprise;
- to participate directly or indirectly in the capital of
another enterprise or increase or decrease the extent of any
such participation;
- to make any investments outside the approved business plan for
amounts higher than NLG 50,000 and/or for periods longer than
one year;
- to provide security in personam or in rem;
- to appoint any such officers as contemplated in Article 19,
para. 2 of the Articles of Association, and determine their
powers and title;
- to conclude settlement agreements;
- to act in legal proceedings, including arbitration cases, with
the exception of commencing summary proceedings or any other
urgent legal action;
- to conclude or amend employment contracts involving an annual
remuneration in excess of the maximum premium income as
defined in the General Old-Age Pensions Act ("AOW");
- to set up pension schemes and grant pension rights in excess
of existing schemes;
<PAGE> 13
13
- to make a proposal for a merger ("juridische fusie") as
defined in Title 7, Book 2 of the Dutch Civil Code;
- to file a petition for a winding up order;
- to apply for a suspension of payments;
- to vote on shares held by the Company in other companies.
ARTICLE 11. FINANCING OF THE COMPANY
11.1 The Parties shall procure that any financing which may be required by
the Company shall be provided in the following order of priority:
(a) retained earnings;
(b) long term bank financing on the strength of the assets or
business to be acquired, such long term financing also to be
approved by the Supervisory Board;
(c) subordinated debenture loans to be provided by the
Shareholders (excluding Founders) in proportion to their
interests;
(d) increase of the capital of the Company with an effort to
minimise dilution.
11.2 Article 11.1 does not impose an obligation on the Parties to provide
further subordinated debentures or to take new shares in the capital of
the Company.
11.3 The dividend policy of the Company will be to distribute at least 50%
of its profits after tax, unless the financial position of the Company
in any year according to the opinion of the Board of Supervisory
Directors does not permit such distribution. No dividend payments are
allowed as long as the Company has not entirely redeemed the First and
Second Financing Round Loans.
<PAGE> 14
14
ARTICLE 12. ULTIMATE OWNERSHIP AND NON COMPETITION
12.1 Mr. Denis O'Brien represents and warrants that at the Closing and at
any time thereafter, until agreed otherwise by the Shareholders:
(i) he has a controlling interest in Cromwilld;
(ii) he owns at least 90% of the outstanding capital in Cromwilld;
(iii) he shall be sole director of Cromwilld or have a controlling
interest in the Board of Cromwilld.
12.2 At the Closing Mr. Denis O'Brien shall sign and deliver a non compete
letter on the form attached to this Agreement as Annex 12.
12.3 Mr. Denis O'Brien shall co-sign this agreement in acceptance of the
obligations imposed on him by this Article.
12.4 Mesch will at all times ultimately own more than 50% of all issued and
outstanding voting and equity shares in Founders.
ARTICLE 13. TRANSFER OF SHARES
13.1 Unless there is a written agreement between the Shareholders to the
contrary, the transfer of shares in the capital of the Company shall be
made in accordance with the Amended Articles of Association. The
remaining provisions of Article 13 shall comprise such an agreement. In
determining the price of the shares of the Company a bona fide offer of
a third party shall be taken into account.
13.2 If and when any of the Shareholders ("the Receiving Shareholder")
receives a bona fide third party offer to purchase (a proportion of)
its shares, it shall procure that such offer is extended,
<PAGE> 15
15
under the same terms and conditions to (a similar proportion of) the
shares held by the other Shareholders and the Receiving Shareholder
shall not sell and transfer (a proportion of) its shares to the third
party unless:
(i) the other Shareholders also sell and transfer (a similar
proportion of) their shares to the third party, or
(ii) the other Shareholders have given written notice to the
Receiving Shareholder that it/they do not want to invoke
either its/their right to co-sale under (i) or to invoke
Article 13.4 within 14 days from the offer having been
extended, or
(iii) the other Shareholders did not respond in writing to the
extended offer within 30 days of such offer having been
presented to the other Shareholders.
But upon fulfilment of (i), (ii) or (iii), the Receiving Shareholder
may transfer (a proportion of) its shares, and the Shareholders shall
be deemed to have waived their rights to be offered them under the
Amended Articles of Association.
13.3 If a third party offer made to an Shareholder contains non-cash items
such non-cash items shall also be part of the offer made to the other
Shareholders, unless:
- such non-cash items cannot be offered to the other
Shareholders; or
- the other Shareholders do not wish to accept such non-cash
items, in which case the non-cash items of the third party
offer shall be valued by the auditors of the Company and the
non-cash items shall be replaced by their corresponding value.
<PAGE> 16
16
13.4 In case a third party is prepared to acquire the shares of all
Shareholders on similar conditions and has made a bona fide offer to
that effect, and this Article 13.4 has been invoked under Article 13.2
the Shareholders will vote on the acceptance of the offer. If any of
the Shareholders does not wish to accept the offer of such third party
it is obliged to purchase the shares of the other Shareholders voting
in favour of the third party offer, against the price offered by the
third party (including non-cash values under Article 13.3). Transfer of
and payment of all such shares must take place within two months after
votes have been cast in respect of an offer of a third party.
ARTICLE 14. AFFILIATES
Nesbic, Cromwilld and Founders may transfer their shares to an affiliate
provided, however, that the ultimate legal and beneficial title of such shares
remains the same as it was prior to such transfer and that such affiliate
delivers prior written confirmation to assume all rights and obligations of the
transferor pursuant to this Agreement, in accordance with Article 15 of this
Agreement.
ARTICLE 15. NEW SHAREHOLDER
15.1 Parties undertake to procure that the provisions of this Agreement
shall be binding upon and inure to, any transferee of the shares in the
capital of the Company held by any Shareholder, including those taken
from the Company by original issue or re-issue of shares from and after
the date hereof. Parties hereby unconditionally and irrevocably
undertake not to sell, transfer, issue or otherwise dispose of any of
the shares held by them to a third party, hereinafter referred to as:
"New Shareholder", unless such New Shareholder has accepted and agreed
to be bound by any and all provisions of this Shareholders Agreement.
Upon such agreement and acceptance, such New Shareholder shall become a
party to this agreement.
<PAGE> 17
17
15.2 The Company shall not issue shares to any person or (legal) entity not
being a party to this Agreement, unless such person or (legal) entity
shall execute and acknowledge the terms hereof and agree to be bound
hereby.
ARTICLE 16 EMPLOYEE STOCK OPTION PLAN
16.1 Parties agree to implement an employee stock option plan ("the ESOP").
The ESOP shall provide for the granting of options on depository
receipt of shares that shall be issued by a trust ("Stichting
Administratiekantoor"). Nesbic, Cromwilld and Founders shall each make
a number of shares available to the Trust for the granting of options
under the ESOP corresponding with 1% of the total issued and
outstanding capital of the Company after the Second Financing Round
(and before conversion pursuant to the First and Second Financing Round
Loans). Founders shall also make available to the Trust the number of
shares required to enable the Trust to issue depository receipts of
shares if and when the existing or promised options on 150,000
depository receipts shares granted by Founders are exercised.
16.2 Parties agree to incorporate the Trust as customary in the Netherlands
for a trust that issues depository receipts of shares. The board of the
Trust shall be composed of the members of the Supervisory Board.
ARTICLE 17. FINANCIAL REPORTING
17.1 Each year an annual business plan ("the Annual Business Plan") shall be
presented to the Shareholders before November 15 of the preceding year.
<PAGE> 18
18
17.2 The Annual Business Plan has to be unanimously approved by the Board of
Supervisory Directors. If no unanimous decision on the approval can be
reached within 30 days, the business plan may be adapted by a simple
majority of the Supervisory Board.
17.3 Annual reports of the Company will be provided to Shareholders six
months after the fiscal year end.
17.4 The Management Board will give its best efforts to provide Shareholders
with Profit and loss account, balance sheet, cash flow statements and
management reports of the Company on a quarterly basis, within 15 days
after the end of each quarter.
ARTICLE 18. ACCOUNTANT
18.1 The Company shall operate its business and maintain its organisation in
such manner as to ensure that its registered accountant will issue an
unconditional approval ("goedkeurende verklaring zonder voorbehoud") on
the Annual Accounts of the Company.
18.2 The Management Board of the Company will instruct the registered
accountant to make annual management letters, which will be discussed
with the Management Board, the Supervisory Board, the Shareholders and
the registered accountant.
18.3 The Company will appoint for the first time Arthur Andersen as the
accountant of the Company.
<PAGE> 19
19
ARTICLE 19. TERM / TERMINATION / VALIDITY
19.1 Once this Agreement has come into force and effect, it shall remain in
force (1) until the date on which this Agreement is terminated by
written agreement of all of the Parties, or (2) if and as soon as the
Parties have jointly sold and transferred the entire issued and paid-up
share capital of the Company to a third party, or (3) the Parties have
effectively listed the entire share capital of the Company on any
securities market.
19.2 In the event one of the Parties has sold and transferred all its shares
in the Company in accordance with this Agreement and the Articles of
Association, it shall cease to be one the Parties.
ARTICLE 20. COSTS
20.1 All costs in connection with the drafting and execution of this
agreement with annexes shall be borne by the Company. All amounts
billed to the Company shall include costs plus expenses.
20.2 All costs made by advisors to Founders, Nesbic and Cromwilld in respect
of this Agreement with a maximum of NLG 10,000 each shall also be borne
by the Company.
ARTICLE 21. CONFLICT BETWEEN THIS AGREEMENT AND THE ARTICLES
If and when a conflict arises between this Agreement and the Articles of
Association of the Company, the provisions of this Agreement shall prevail.
<PAGE> 20
20
ARTICLE 22. ENTIRE AGREEMENT
22.1 This Agreement with the Annexes attached thereto constitutes the entire
Agreement between the Parties on the subject of this Agreement, and
this Agreement with Annexes supersedes and cancels any previous
agreements between the Parties on the subject of this Agreement,
including the First Financing Round Agreement.
ARTICLE 23. GOVERNING LAW
23.1 This agreement shall be governed entirely by Netherlands law.
ARTICLE 24. JURISDICTION
24.1 Any and all disputes arising from or connected with this Agreement or
any amendment hereof shall be settled exclusively by the competent
court at Amsterdam, the Netherlands, unless the Parties to such dispute
explicitly agree otherwise in writing.
ARTICLE 25. ANNEXES/COUNTERPARTS
25.1 The Annexes 1 up to and including 12 to this Agreement are considered
to be part of this Agreement.
25.2 This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original and all of which together shall
constitute one instrument.
<PAGE> 21
21
ARTICLE 26. NOTICES
26.1 Any notice or other communications hereunder, shall be sufficiently
given if in writing and personally delivered or send by registered
mail, postage prepaid and addressed to the following addresses or such
other addresses as the Parties shall be given notice of pursuant
hereto:
If to Telecom Founders B.V.:
Telecom Founders B.V. Copy to: Caron & Stevens/
Baambrugse Zuwe 61 Baker & McKenzie
3645 AB Vinkeveen Attn. Mr. Mic van Bremen
THE NETHERLANDS P.O. Box 2720
Telefax: 00 31 297 21 2039 1000 CS AMSTERDAM
THE NETHERLANDS
Telefax: 00 31 20 62 67 649
If to Nesbic C.V.:
Nesbic C.V. Copy to: Trenite Van Doorne
Savannahweg 17
3542 AW Utrecht Attn. Mr. John C. Jaakke
THE NETHERLANDS P.O. Box 75265
Telefax: 00 31 30 241 4833 1070 AG Amsterdam
THE NETHERLANDS
<PAGE> 22
22
If to Cromwilld Limited:
Cromwilld Limited Copy to: William Fry
8 Myrtle Street
Douglas Attn. Mr. Owen O'Connell
Isle of Man Fitzwilton House
Wilton Place
Dublin 2
Ireland
Telefax: 00 353 1 66 25 400
If to Versatel Telecom B.V.:
Versatel Telecom B.V. Copy to: Caron & Stevens/
Paalbergweg 36 Baker & McKenzie
1105 BV Amsterdam Attn. Mr. Mic van Bremen
THE NETHERLANDS P.O. Box 2720
Telefax: 00 31 20 430 4301 100 CS AMSTERDAM
THE NETHERLANDS
Telefax: 00 31 20 62 67 949
Agreed and signed in ____fold at __________, on __ December, 1996
/s/ R. Gary Mesch /s/ L. van Doorne
_____________________________ ______________________________
TELECOM FOUNDERS B.V. NESBIC C.V.
Represented by: Represented by:
Mr. Robert Gary Mesch Mr. Leo van Doorne
<PAGE> 23
23
/s/ A. Phelan /s/ L. van Doorne
- ----------------------------- -----------------------------
CROMWILLD LIMITED VERSATEL TELECOM B.V.
Represented by: Represented by:
Mr. Aiden Phelan Mr. Leo van Doorne
/s/ R. Gary Mesch /s/ R. Gary Mesch
- ----------------------------- -----------------------------
MR. ROBERT GARY MESCH OPEN SKIES INTERNATIONAL INC.
Represented by:
Mr. Robert Gary Mesch
/s/ D. O'Brien
- -----------------------------
MR. DENIS O'BRIEN (for the acceptance of obligations pursuant to Article 12).
<PAGE> 1
Exhibit 10.8
DATED May 26, 1999
EURO 45,378,022
LOAN AGREEMENT
for
VERSATEL TELECOM EUROPE B.V.
GUARANTEED BY
VERSATEL TELECOM INTERNATIONAL
N.V. AND OTHERS
AGENT AND SECURITY AGENT
NORTEL NETWORKS INTERNATIONAL
FINANCE & HOLDING B.V.
<PAGE> 2
CONTENTS
<TABLE>
<CAPTION>
CLAUSE HEADING PAGE
<S> <C> <C>
1 Interpretation................................................................................1
1.1 Definitions..........................................................................1
1.1 Interpretation......................................................................22
1.2 Majority Lenders....................................................................23
1.3 Agent's opinion.....................................................................23
2 The Facility.................................................................................23
2.1 The Facility........................................................................23
2.2 Purpose.............................................................................24
3 Conditions...................................................................................24
3.1 Documentary conditions precedent....................................................24
3.2 Further conditions..................................................................24
3.3 Waiver of conditions precedent......................................................24
3.4 Notification........................................................................25
4 The Loan.....................................................................................25
4.1 Drawdown............................................................................25
4.2 Amount of Advances..................................................................25
4.3 Termination of Commitments..........................................................26
4.4 Notification to Lenders.............................................................26
4.5 Application of proceeds.............................................................26
5 Repayment....................................................................................26
6 Prepayment...................................................................................26
6.1 Voluntary Prepayments...............................................................26
6.2 Additional voluntary prepayment.....................................................26
6.3 Mandatory Prepayment................................................................27
6.4 Application of prepayments to repayment instalments.................................28
6.5 Amounts payable on prepayment.......................................................28
6.6 Cancellation........................................................................28
6.7 Application of mandatory prepayments................................................29
6.8 Prepayments generally...............................................................29
7 Interest.....................................................................................29
7.1 Dates of payment....................................................................29
7.2 Rates of interest...................................................................29
7.3 Applicable Margin...................................................................29
7.4 Determination of Interest Periods...................................................30
7.5 Notification by the Agent...........................................................31
8 Interest for late payment....................................................................31
8.1 The Borrower's obligation to pay....................................................31
8.2 Normal rate.........................................................................31
8.3 Initial rate on acceleration of the Loan............................................31
8.4 Date of payment.....................................................................31
8.5 Notification by the Agent...........................................................31
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
9 Fees and expenses............................................................................31
9.1 Facility fee........................................................................31
9.2 Commitment commission...............................................................31
9.3 Expenses............................................................................32
9.4 Stamp and other duties..............................................................32
9.5 VAT.................................................................................32
10 Guarantee....................................................................................32
10.1 Covenant to pay.....................................................................32
10.2 Guarantors as principal debtors; indemnity..........................................33
10.3 Limitation..........................................................................33
10.4 No security taken by Guarantors.....................................................34
10.5 Interest............................................................................34
10.6 Continuing security and other matters...............................................34
10.7 New accounts........................................................................34
10.8 Liability unconditional.............................................................34
10.9 Collateral Instruments..............................................................35
10.10 Waiver of Guarantors' rights........................................................35
10.11 Suspense accounts...................................................................36
10.12 Settlements conditional.............................................................36
10.13 Guarantors to deliver up certain property...........................................36
10.14 Retention of this guarantee.........................................................36
10.15 Changes in constitution or reorganisations of Lenders...............................36
10.16 Other Guarantors....................................................................37
10.17 Acceding Guarantors.................................................................37
11 Representations..............................................................................38
11.1 Representations.....................................................................38
11.2 Due incorporation...................................................................38
11.3 The Documents.......................................................................38
11.4 Litigation..........................................................................38
11.5 The Accounts........................................................................39
11.6 Works councils......................................................................39
11.7 Choice of law.......................................................................39
11.8 Title to assets.....................................................................39
11.9 Intellectual Property Rights........................................................39
11.10 Project Agreements..................................................................40
11.11 Licences and Necessary Authorisations...............................................40
11.12 No withholding Taxes................................................................40
11.13 Telecommunications Laws.............................................................40
11.14 Environmental Matters...............................................................40
11.15 Information.........................................................................40
11.16 Notes...............................................................................41
11.17 Year 2000 Issue.....................................................................41
11.18 Books and records...................................................................41
11.19 Business Plan.......................................................................41
11.20 Default.............................................................................41
11.21 Repetition..........................................................................41
12 Information Undertakings.....................................................................42
12.1 General.............................................................................42
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
12.2 Defaults............................................................................43
13 Undertakings.................................................................................43
13.1 Obligors' undertakings..............................................................43
13.2 Purpose.............................................................................43
13.3 Consents............................................................................43
13.4 Compliance with licences etc. relating to the business of the Group.................43
13.5 Pari passu..........................................................................44
13.6 Insurance...........................................................................44
13.7 Environmental Licences..............................................................44
13.8 Environmental Claims................................................................44
13.9 Relevant Substances.................................................................44
13.10 Year 2000...........................................................................45
13.11 Intellectual Property Rights........................................................45
13.12 Change in basis of accounts.........................................................46
13.13 Financial Year End..................................................................46
13.14 Authorised Officers.................................................................47
13.15 Auditors............................................................................47
13.16 Inspection..........................................................................47
13.17 Taxes...............................................................................47
13.18 Subordination of loans from Subordinated Creditor...................................47
13.19 Business Plan.......................................................................47
13.20 Working capital.....................................................................48
13.21 Business............................................................................48
13.22 Maintenance of Systems and Software.................................................48
13.23 Permitted Acquisitions..............................................................48
14 Negative undertakings........................................................................49
14.1 Obligors' undertakings..............................................................49
14.2 Negative pledge.....................................................................49
14.3 Senior Debt and guarantees..........................................................49
14.4 Disposals...........................................................................50
14.5 Loans and guarantees................................................................50
14.6 Equity yield........................................................................50
14.7 Shareholders' meetings..............................................................50
14.8 New share issues....................................................................50
14.9 Amalgamation and merger.............................................................51
14.10 Change in business..................................................................52
14.11 Acquisitions and joint-ventures.....................................................52
14.12 Swaps and hedging...................................................................52
15 Operational and Financial covenants..........................................................52
15.1 Operational and Financial covenants.................................................52
15.3 Post Annualised Consolidated EBITDA position........................................55
15.4 Auditors certificate................................................................56
16 Default......................................................................................57
16.1 Events of Default...................................................................57
16.2 The Finance Documents...............................................................57
16.3 Cross-default.......................................................................58
16.4 Financial position..................................................................59
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C> <C>
16.5 Insolvency procedures...............................................................59
16.6 Legal process.......................................................................59
16.7 Compositions........................................................................60
16.8 Litigation..........................................................................60
16.9 Material Adverse Change.............................................................60
16.10 Abandonment of the Project..........................................................60
16.11 Project Agreements..................................................................60
16.12 Environmental matters...............................................................61
16.13 Telecommunications Laws.............................................................61
16.14 Licences............................................................................61
16.15 Restricted Persons..................................................................61
16.16 Consequences of Event of Default....................................................62
17 Payments.....................................................................................62
17.1 Payments by the Obligors............................................................62
17.2 Payments in the wrong currency......................................................63
17.3 Partial payments....................................................................63
17.4 Pro-rata payments...................................................................64
17.5 No release..........................................................................65
17.6 No charge...........................................................................65
17.7 Reconventioning.....................................................................65
18 Taxes........................................................................................65
18.1 Grossing-up.........................................................................65
18.2 Qualifying Person...................................................................66
18.3 Claw-back of Tax benefit............................................................66
19 Indemnity....................................................................................66
19.1 General indemnities.................................................................66
19.2 Environmental indemnity.............................................................67
20 Set-off......................................................................................67
20.1 Set-off.............................................................................67
20.2 Purchase of currencies..............................................................67
20.3 Notification........................................................................67
21 Calculations and certificates................................................................67
21.1 Calculations........................................................................67
21.2 Certificates........................................................................67
22 Market disruption............................................................................68
22.1 Problems with EURIBOR; unavailability of funds......................................68
23 Changes in Regulation........................................................................69
23.1 Circumstances when this clause applies..............................................69
23.2 Obligation to compensate the Lender.................................................69
23.3 Exceptions..........................................................................69
23.4 Mitigation..........................................................................70
23.5 Illegality..........................................................................70
24 Transfer.....................................................................................70
24.1 No transfers by the Obligors........................................................70
24.2 Transfers by the Lender: Transfer Agreements........................................70
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
<S> <C> <C>
24.3 Reliance on Transfer Certificate....................................................71
24.4 Authorisation of Agent..............................................................72
24.5 Construction of certain references..................................................72
24.6 Lending offices.....................................................................72
24.7 Disclosure of information...........................................................72
24.8 Confidentiality undertaking.........................................................72
24.9 Limitation on certain obligations...................................................73
24.10 Restrictions on transfers...........................................................73
24.11 Sub-participation...................................................................73
25 Agent, Security Agent and Reference Banks....................................................73
25.1 Appointment of Agent................................................................73
25.2 Agent's actions.....................................................................74
25.3 Agent's duties......................................................................74
25.4 Agent's rights......................................................................74
25.5 No liability of Security Agent and Agent............................................75
25.6 Non-reliance on Security Agent or Agent.............................................76
25.7 No Responsibility on Security Agent or Agent for certain matters....................76
25.8 Reliance on documents and professional advice.......................................77
25.9 Other dealings......................................................................77
25.10 Rights of Agent and Security Agent as Lender; no partnership........................77
25.11 Amendments and waivers..............................................................78
25.12 Reimbursement and indemnity by Lenders..............................................79
25.13 Retirement of Agent.................................................................79
25.14 Change of Reference Banks...........................................................80
25.15 Prompt distribution of proceeds.....................................................80
26 Decisions of Lenders and Agent...............................................................81
26.1 Obligations several.................................................................81
26.2 Interests several...................................................................81
26.3 Majority Lenders....................................................................81
26.4 Lenders acting together.............................................................82
27 Notices and other matters....................................................................82
27.1 Address for Notice..................................................................82
27.2 Notice to Agent.....................................................................83
27.3 No implied waiver, remedies cumulative..............................................83
27.4 Counterparts........................................................................83
28 Governing Law and Jurisdiction...............................................................83
28.1 Law.................................................................................83
28.2 Submission to jurisdiction..........................................................83
28.3 Agent for service of process........................................................84
28.4 Inconvenient forum..................................................................84
</TABLE>
<PAGE> 7
SCHEDULE
<TABLE>
<CAPTION>
<S> <C> <C>
1 Part A - Initial administrative details of the Banks.........................................85
Part B - Original Guarantors.................................................................86
2 Form of Drawdown Notice......................................................................87
3 Part A - Documents and evidence required as conditions precedent to first Advance............88
Part B - Documents and evidence required as conditions precedent to Advance in respect
of Reunion Equipment.........................................................................90
4 Calculation of UK Additional Cost............................................................91
5 Form of Transfer Certificate.................................................................93
6 Compliance Certificate to be delivered by an Authorised Officer of the Borrower..............97
7 Project Agreements...........................................................................99
8 Licences....................................................................................100
9 Part A - Deed of Guarantor Accession........................................................101
Part B - Documents and Evidence to be delivered by an Acceding Guarantor....................103
</TABLE>
<PAGE> 8
THIS AGREEMENT is dated May 26, 1999 and made BETWEEN:
(1) VERSATEL TELECOM EUROPE B.V. as the Borrower;
(2) VERSATEL TELECOM INTERNATIONAL N.V. and others as Original Guarantors as set
out in part B of schedule 1;
(3) THE LENDERS whose names and addresses are set out in part A of schedule 1;
(4) NORTEL NETWORKS INTERNATIONAL FINANCE & HOLDING B.V. as Agent; and
(5) NORTEL NETWORKS INTERNATIONAL FINANCE & HOLDING B.V. as Security Agent.
IT IS AGREED as follows:
1 INTERPRETATION
1.1 DEFINITIONS
In this Agreement, the following expressions have the meanings set
opposite them:
<TABLE>
<CAPTION>
<S> <C> <C>
ACCEDING GUARANTORS those entities which have become
party to this Agreement as
Guarantors pursuant to clause 10.17
ACCOUNTS the audited consolidated annual
accounts of the Group
ADDITIONAL COST in respect of all Lenders, in
relation to any period a percentage
calculated for such period at an
annual rate determined in accordance
with schedule 4
ADVANCE each borrowing under the Facility or
(as the context requires) the
principal amount of that borrowing
outstanding at any relevant time
AGENT NNIF or such other person as may be
appointed agent for the Lenders
pursuant to clause 25.13 and, in
each case, its successors in title
ANNUAL BUDGET the budget in respect of the Group
for each financial year in the
agreed form
</TABLE>
1
<PAGE> 9
<TABLE>
<CAPTION>
<S> <C> <C>
ANNUALISED CONSOLIDATED EBITDA two times the aggregate Consolidated
EBITDA of the Group for the two most
recent Quarterly Periods in respect
of which Quarterly Management
Accounts have been delivered to the
Agent under this Agreement
ASSET CHARGES the pledges/charges in the agreed
form entered or to be entered into
by the Borrower and certain of its
Subsidiaries over the Equipment in
favour of the Security Agent
ASSOCIATED COMPANY of a person means (i) any other
person which is directly or
indirectly controlled by, under
common control with or controlling
such person or (ii) any other person
owning beneficially and/or legally
directly or indirectly 10 per cent.
or more of the equity interest in
such person or 10 per cent. of whose
equity interest is owned
beneficially and/or legally directly
or indirectly by such person. For
the purposes of this definition the
term "control" means possession,
directly or indirectly, of the power
to direct or cause the direction of
the management and policies of a
person whether through the ownership
of interests or voting securities,
by contract or otherwise
AUTHORISED OFFICER in relation to an Obligor, that
officer or officers of the Obligor
authorised to sign Compliance
Certificates, Drawdown Notices and
other notices, requests, or
confirmations referred to in this
Agreement or relating to the
Facility
AVAILABLE COMMITMENT in relation to a Lender at any time,
its Commitment less its Contribution
at that time
AVAILABILITY PERIOD the period from the date of this
Agreement until 31 December 2000
BANKING DAY (a) a day (other than a
Saturday or a Sunday) on
which banks are open for
business in London and
Amsterdam; or
(b) in relation to rate fixing
a day on which
Trans-European Automated
Real-time Gross Settlement
Express Transfer system
(TARGET) is operating
BORROWED MONEY any transaction having the economic
effect of a borrowing or raising of
money
</TABLE>
2
<PAGE> 10
<TABLE>
<CAPTION>
<S> <C> <C>
BORROWER VersaTel Telecom Europe B.V.
(incorporated in The Netherlands
with number 33303418) and having its
statutory seat (statutaire zetel) at
Amsterdam, The Netherlands, and its
registered office at Paalbergweg 36,
1105 BV Amsterdam-Zuidoost, The
Netherlands
BORROWER GROUP the Borrower and its Subsidiaries
BUSINESS PLAN the year by year financial
projections of the Borrower and its
Subsidiaries for the period through
to 31 December 2005 in the agreed
form, as approved by the supervisory
board of the Borrower and (without
prejudice to clause 13.23) as
amended with the approval of the
supervisory board of the Borrower
from time to time, with the consent
of the Majority Lenders such consent
not to be unreasonably withheld,
provided that the Borrower shall
have reviewed with the Lenders the
revised material assumptions made in
providing such amendments and the
Majority Lenders shall not have
demonstrated that such assumptions
are unreasonable
BUSINESS SUBSCRIBER a Subscriber who subscribes for
services at a business tariff or
wholesale tariff with the relevant
Group Member or subscribes to an
entity acquired pursuant to clause
13.23 which would be categorised as
subscribing for services at a
business tariff or wholesale tariff
if it was a Subscriber of the
Borrower
CHANGE OF CONTROL has the meaning given to it in
Section 1.1 of the indenture dated 3
December, 1998 in respect of the
November Notes (in their original
form)
COLLATERAL INSTRUMENTS notes, bills of exchange,
certificates of deposit and other
negotiable and non-negotiable
instruments, guarantees and any
other documents or instruments which
contain or evidence an obligation
(with or without security) to pay,
discharge or be responsible directly
or indirectly for, any Indebtedness
or liabilities under this Agreement
and includes Encumbrances
COMMITMENT in relation to a Lender at any
relevant time, the amount set
opposite its name in schedule 1
and/or, in the case of a Transferee,
the amount transferred as specified
in the relevant Transfer Certificate
as
</TABLE>
3
<PAGE> 11
<TABLE>
<CAPTION>
<S> <C> <C>
reduced, in each case, by any
relevant term of this Agreement
COMPLIANCE CERTIFICATE a certificate substantially in the
form set out in schedule 6 in
relation to the compliance (or
otherwise) with the undertakings in
clause 15 issued by an Authorised
Officer of the Borrower in relation
to Quarterly Management Accounts
CONSOLIDATED EBITDA means, in respect of any period, the
consolidated profit (i) on ordinary
activities of the Group or (ii)
attributable to an acquisition or
investment referred to in clause
13.23 before Taxation and after
operating expenses adjusted as
follows:
(a) before interest received or
receivable but excluding
interest paid or payable
and other similar income or
costs to the extent not
already excluded;
(b) before any charge for the
amortisation of goodwill or any
other intangible asset;
(c) before deducting any
exceptional or extraordinary
costs and before including
exceptional or extraordinary
income;
(d) before the depreciation of
fixed assets; and
(e) before any foreign exchange
losses or gains
CONTRIBUTION in relation to a Lender, the
principal amount of the Loan owing
to such Lender at any relevant time
CURRENT ASSETS at any relevant time, the aggregate
of the current assets of the Group
at such time which would fall to be
included as current assets in a
consolidated balance sheet of the
Group drawn up at such time in
accordance with GAAP
CURRENT LIABILITIES at any relevant time, the aggregate
of the current liabilities
(excluding short term debt (which
shall include, for the avoidance of
doubt, any long term debt repayable
within 12 months) and overdrafts) of
the Group at such time which would
fall to be included as current
liabilities in a consolidated
balance sheet of the Group drawn up
at such time in accordance with GAAP
</TABLE>
4
<PAGE> 12
<TABLE>
<CAPTION>
<S> <C> <C>
DEED OF GUARANTOR a deed to be executed and delivered
ACCESSION by any Acceding Guarantor pursuant
to clause 10.17 substantially in the
form of schedule 9 part A
DEFAULT any Event of Default or any event or
circumstance which would, upon the
giving of a notice by the Lender,
the expiry of a period or the
fulfilment of any other condition
(in each case as specified by
reference in clause 16), constitute
an Event of Default
DERIVATIVES CONTRACT a contract, agreement or transaction
which is:
(a) a rate swap, basis swap,
commodity swap, forward
rate transaction, commodity
option, equity (or equity
or other index) swap or
option, bond option,
interest rate option,
foreign exchange
transaction, collar or
floor, currency swap,
currency option or any
other similar transaction;
and/or
(b) any combination of such
transactions,
in each case, whether on-exchange
or otherwise
DOLLARS AND $ the lawful currency for the time
being of the United States of
America
DRAWING each drawing by way of an Advance
DRAWDOWN DATE the date on which a Drawing takes
place
DRAWDOWN NOTICE a notice substantially in the form
of schedule 2, duly completed by the
Borrower
DUTY any duty, obligation or liability of
any kind
ELIGIBLE ACCOUNTS has the meaning given to it in
RECEIVABLE Section 1.1. of the indenture dated
3 December, 1998 in respect of the
November Notes
EMU Economic and Monetary Union as
contemplated in the Treaty
EMU LEGISLATION means legislative measures of the
European Council for the
introduction of, changeover to, or
operation of, a single or unified
European currency
ENCUMBRANCE any mortgage, charge (whether fixed
or floating), pledge, lien,
hypothecation, assignment by way of
security, trust arrangement for the
purpose of
</TABLE>
5
<PAGE> 13
<TABLE>
<CAPTION>
<S> <C> <C>
providing security or other security
interest of any kind securing any
obligation of any person or any
other arrangement having the effect
of conferring rights of retention or
set-off or other disposal rights
over an asset (including without
limitation title transfer and/or
retention arrangements having a
similar effect but excluding
arrangements conferring rights of
retention or set-off in the ordinary
course of business) and includes any
agreement to create any of the
foregoing
ENVIRONMENTAL CLAIM any claim, notice prosecution,
demand, action, official warning,
abatement or other order
(conditional or otherwise) relating
to Environmental Matters or any
notification or order requiring
compliance with the terms of any
Environmental Licence or
Environmental Law
ENVIRONMENTAL LAW all or any law, statute, rule,
regulation, treaty, by-law, code of
practice, order, notice, demand,
decision of the courts or of any
governmental authority or agency or
any other regulatory or other body
in any jurisdiction relating to
Environmental Matters
ENVIRONMENTAL LICENCE any permit, licence, authorisation,
consent or other approval required
at any time by any Environmental Law
ENVIRONMENTAL MATTERS (a) the generation, deposit,
disposal, keeping, treatment,
transportation, transmission,
handling, importation, exportation,
processing, collection, sorting,
presence or manufacture of any waste
or any Relevant Substance; (b)
nuisance, noise, defective premises,
health and safety at work or
elsewhere; and (c) the pollution,
conservation or protection of the
environment (both natural and built)
or of man or any living organisms
supported by the environment or any
other matter whatsoever affecting
the environment or any part of it
EQUIPMENT the goods and services (including
the Reunion Equipment) provided or
to be provided by Nortel Networks to
the Borrower or any other Obligor
pursuant to the Supply Agreement, as
further set out in schedule 2 to the
Supply Agreement
EURIBOR in relation to a particular period:
</TABLE>
6
<PAGE> 14
<TABLE>
<CAPTION>
<S> <C> <C>
(a) the percentage rate per annum
which is sponsored by the
European Banking Federation and
which appears on Telerate page
248 or such other page as may
replace such page 248 on such
system or on any other system
of the information vendor for
the time being designated by
the Federation Bancaire de
l'Union Europeene to be the
official collector, calculator
and distributor of the Euro
Interbank Offered Rate; or
(b) if no such rate is to appear on
the Telerate Screen, the
arithmetic mean (rounded
upward, if necessary, to the
nearest five decimal places) of
the annual rates, as supplied
to the Agent at its request,
quoted by the Reference Banks
to leading banks in the
Interbank Market of any
Participating Member State(s),
at or about 11.00 a.m. Central
European Time on the second Banking
Day before the first day of such
period for the offering of deposits
in euros in an amount approximately
equal to the amount in relation to
which EURIBOR is to be determined
for a period equivalent to such
period
EURO AND EUROS AND / / the single currency of Participating
Member States introduced in
accordance with the provisions of
Article 109(l)4 of the Treaty and in
respect of all payments to be made
under this Agreement in euros means
immediately available, freely
transferable funds
EURO UNIT a currency unit of the euro as
defined in EMU Legislation
EURO ZONE together, the Participating Member
States
EURO ZONE ADDITIONAL COST in respect of the Lenders whose
lending offices are in the Euro
Zone, any cost or loss suffered by
it as a result of complying with the
reserve requirements of the European
Central Bank to the extent such
requirements relate to its
participation in the Facility and
are not recoverable by the Lender
under clause 23
EVENT OF DEFAULT defined (by reference) in clause
16.1
FACILITY the loan facility provided under
this Agreement
</TABLE>
7
<PAGE> 15
<TABLE>
<CAPTION>
<S> <C> <C>
FACILITY PERIOD the period from the date of this
Agreement until the Loan has been
repaid in full together with all
amounts outstanding under this
Agreement and no Finance Party is
under any obligation to make any
other amount available under the
Facility
FINANCE DOCUMENTS this Agreement and the Security
Documents
FINANCE PARTIES the Agent, the Security Agent and
the Lenders and (as the context
requires) FINANCE PARTY means any
one of them
FREE CASH FLOW the aggregate Consolidated EBITDA
for the relevant financial year,
less (i) any interest and other
charges in respect of any Borrowed
Money of the Group, (ii) repayments
and/or prepayments of any Borrowed
Money of the Group other than
pursuant to clauses 6.3(c) and (d),
(iii) capital expenditure of the
Group and (iv) the amount of Taxes
payable by the Group (in each case
as were accrued (for the avoidance
of doubt, excluding deferred taxes)
during such financial year) but
after either (i) adding any amount
by which Net Working Capital at the
commencement of such financial year
exceeds Net Working Capital at the
close of such financial year or, as
appropriate, (ii) deducting any
amount by which Net Working Capital
at the end of such financial year
exceeds Net Working Capital at the
beginning of such financial year
GAAP generally accepted accounting
principles and practices in the
United States of America
GOVERNMENT ENTITY any government or public body,
authority or court
GROUP the Parent, the Borrower and their
respective Subsidiaries
GROUP MEMBER any of the Parent, the Borrower and
their respective Subsidiaries
GUARANTEE the covenants of the Guarantors
contained in clause 10
GUARANTORS the Original Guarantors and the
Acceding Guarantors
GUARANTEED LIABILITIES all moneys, obligations and
liabilities expressed to be
guaranteed by the Guarantors in
clause 10.1
</TABLE>
8
<PAGE> 16
<TABLE>
<CAPTION>
<S> <C> <C>
HOLDING COMPANY in relation to a Lender, the company
or entity within whose consolidated
supervision that Lender is included
or in relation to any other person,
an entity of which that person is a
Subsidiary
INDEBTEDNESS any obligation for the payment or
repayment of money, whether as
principal or as surety and whether
present or future, actual or
contingent
INTELLECTUAL PROPERTY
RIGHTS any patent, trademark, software
licence, service mark, registered
design, trade name or copyright
required to carry on the business of
any member of the Group
INTEREST PAYMENT DATE the last day of an Interest Period
INTEREST PERIOD each period for the calculation of
interest in respect of each Advance
ascertained in accordance with
clauses 7.4 and 16.16
INCAPACITY in relation to a person, the
insolvency, liquidation dissolution,
winding-up, administration,
receivership or other incapacity of
that person whatsoever (and in the
case of a partnership, includes the
termination or change of composition
of the partnership)
LENDERS the banks and financial institutions
listed in part A of schedule 1 and
includes their successors in title
and Transferees
LICENCES those licences set out in schedule 8
and, if applicable, any other
licences, franchises and permits
issued to any Obligor under or
registrations by any Obligor
required under, any
Telecommunications Laws
LOAN the principal amount advanced to the
Borrower under this Agreement or, as
the context requires, the aggregate
principal amount outstanding under
this Agreement at any time
MAJOR PERMITTED ACQUISITION a Permitted Acquisition (y) where
the aggregate amount of all such
acquisitions and investments in any
financial year is more than or equal
to, or (z) after the additional
amount of $100,000,000 has been
subscribed for in cash for equity
share capital in the Borrower by the
Parent (for the avoidance of doubt,
which amount shall be in addition to
the
</TABLE>
9
<PAGE> 17
<TABLE>
<CAPTION>
<S> <C> <C>
amounts as set out in paragraph (j)
of schedule 3, part A) the value of
any single acquisition or investment
is more than or equal to (i) 10 per
cent. of the Total Relevant Assets
of the Group as a whole as at the
date of the most recent Quarterly
Management Accounts as delivered to
the Agent under this Agreement or
(ii) if at such time Annualised
Consolidated EBITDA (prior to the
proposed acquisition or investment)
(calculated by reference to the
Quarterly Period ending on such
Quarter Days) was not less than zero
on the two most recent previous
consecutive Quarter Days in relation
to which Quarterly Management
Accounts have been delivered to the
Agent under this Agreement, 20 per
cent. of the Total Relevant Assets
of the Group as a whole as at the
date of the most recent Quarterly
Management Accounts as delivered to
the Agent under this Agreement
MAJORITY LENDERS at any relevant time Lenders (a) the
aggregate of whose Contributions
exceed two thirds of the Loan or (b)
(if no principal amounts are
outstanding under this Agreement)
the aggregate of whose Commitments
exceed two thirds of the Total
Commitments but so that if at such
time the Total Commitments have been
reduced to zero references to a
Lender's Commitment shall be
construed (as amongst the Finance
Parties and not so as to give any
rights to any other person) as a
reference to that Lender's
Commitment immediately prior to such
reduction to zero
MANDATORY PREPAYMENT has the meaning given to it in
clause 6.3
MARGIN the rate per annum calculated in
accordance with clause 7.3
MATERIAL ADVERSE EFFECT in the reasonable opinion of the
Agent (acting on the instructions of
the Lenders) a material adverse
effect on
(i) the ability of the Borrower,
the Parent or the Group as a
whole to make payments when due
in respect of any Borrowed
Money; or
(ii) the legal, technical or
financial viability of the
Borrower, the Parent or the
Group as a whole, or the
Project; or
</TABLE>
10
<PAGE> 18
<TABLE>
<CAPTION>
<S> <C> <C>
(iii) the ability of any Finance
Party to exercise any of its
respective rights under this
Agreement
MAY NOTES the $225,000,000 13.25 per cent.
Senior Notes due 2008 (and
associated warrants) issued by the
Parent under an indenture between
the Parent as issuer and United
States Trust Company of New York as
trustee, registrar and paying agent,
dated 27 May 1998
NECESSARY AUTHORISATIONS all material approvals,
authorisations and licences (other
than the Licences) from, all rights
granted by and all filings,
registrations and agreements with
any person including, without
limitation, any government or other
regulatory authority necessary in
order to enable each Group Member to
carry on such business as may be
permitted by the terms of this
Agreement and which is carried on at
the relevant time
NET DERIVATIVES LIABILITY in relation to any person, at any
time, the net liability (if any) at
such time of such person in respect
of Derivatives Contracts determined
by reference to the amounts (as
determined by the Agent), which
would be payable or receivable by
such person if all Derivatives
Contracts to which such person was a
party at such time were terminated
at such time and replaced by the
obligation to make a payment
reflecting the economic burden or
value to such person of the payment
flows under those Derivatives
Contracts remaining at the time of
termination
NET WORKING CAPITAL at any time, the aggregate of the
Current Assets of the Group at such
time less the aggregate of the
Current Liabilities of the Group at
such time
NET WORTH the aggregate of:
(a) the amount from time to time
paid up on issued share capital
of the Parent (or, where the
context requires, any person);
(b) the amount from time to time
credited to the Parent (or,
where the context requires, any
person's) share premium
account;
(c) the amount standing to the
credit (or less the amount
standing to the debit) on the
</TABLE>
11
<PAGE> 19
<TABLE>
<CAPTION>
<S> <C> <C>
consolidated revenue reserves
of the Group (or where the
context requires, any person)
but excluding (for the
avoidance of doubt) any capital
reserves arising from the
creation of goodwill or the
writing-up of the book value of
assets (other than the writing
up by no more than 25 per cent.
of the historical cost of
assets, provided that such
writing-up is supported by a
certificate from the Group's
Auditors to the effect that
such writing up is justified
and is in accordance with
GAAP); and
(d) the increased amount of
depreciation where additional
depreciation is charged to a
revenue reserve due to the
write up of the value of assets
as contemplated in (c) above,
on a consolidated basis all as shown
in the Quarterly Management Accounts
for each Quarterly Period prepared
in accordance with clause 12.1 or
shown in the Accounts at the end of
any relevant financial year prepared
in accordance with clause 12.1 (as
applicable)
NLG OR GUILDERS the lawful currency for the time
being of The Netherlands
NNIF Nortel Networks International
Finance & Holding B.V. (incorporated
in The Netherlands with number
34054810) and having its registered
office at Siriusdreef 17-27, 2132 WT
Hoofddorp, The Netherlands
NORTEL NETWORKS Nortel Networks B.V. (incorporated
in The Netherlands with number
34054624) and having its registered
office at Siriusdreef 17-27-2132 WT
Hoofddorp The Netherlands or, as the
case may be, Nortel Networks N.V.
(incorporated in Belgium with number
378.358) and having its registered
office at Belgicastraat 4, Zaventem,
Belgium 1930
NOTES either or both (as the context
requires) of the May Notes and the
November Notes
NOVEMBER NOTES the $150,000,000 13.25 per cent.
Senior Notes due 2008 (and
associated warrants) issued by the
Parent under an indenture between
the Parent as
</TABLE>
12
<PAGE> 20
<TABLE>
<CAPTION>
<S> <C> <C>
issuer and United States Trust
Company of New York as trustee,
registrar and paying agent, dated 3
December 1998
OBLIGORS the Borrower and the Guarantors
ORIGINAL GUARANTORS the Parent and those
Subsidiaries of the Borrower whose
names, country of incorporation and
principal place of business are set
out in part B of schedule 1
PARENT VersaTel Telecom International N.V.
(incorporated in The Netherlands
with number 33272606) and having its
statutory seat (statutaire zetel) at
Amsterdam, The Netherlands, and its
registered office at Paalbergweg 36,
1105 BV Amsterdam Zuidoost, The
Netherlands
PARENT SUBORDINATED LOAN an agreement evidencing any Borrowed
AGREEMENT Money of the Borrower Group made
available by the Parent which is
subordinated to the rights of the
Finance Parties on terms and
conditions reasonably acceptable to
the Agent and in accordance with the
terms of the Notes
PARTICIPATING MEMBER STATE a member state of the European Union
that adopted a single currency in
accordance with the Treaty
PERMITTED ACQUISITION the acquisition of or investment in
any company, joint venture or
partnership or the acquisition of
any business, in The Netherlands,
Belgium, the United States of
America, the United Kingdom, France
or Germany, where:
(a) such acquisition or investment
is of or in a company, joint
venture, partnership or
business which is involved in a
Permitted Business; and
(b) as a result of such acquisition
or investment the Group does
not have any capital
commitments that are not fully
funded as evidenced by the
Business Plan and the Borrower
will at all times thereafter be
in compliance with the
financial covenants set out in
clause 15,
and the supervisory board or, as the
case may be, board of directors of
the relevant Group
</TABLE>
13
<PAGE> 21
<TABLE>
<CAPTION>
<S> <C> <C>
Member making the acquisition or
investment has approved such
acquisition or investment
PERMITTED BUSINESS the business of (i) transmitting, or
providing services relating to the
transmission of, voice, video or
data through owned or leased
transmission facilities, (ii)
constructing, creating, developing
or marketing communications related
network equipment, software and
other devices for use in a
telecommunications business or (iii)
evaluating, participating in or
pursuing any other activity or
opportunity that is primarily
related to those identified in
clause (i) or (ii) above
PERMITTED DISPOSAL (a) transfers, sales or disposals
on bona fide arms' length
commercial terms in the
ordinary course of trade; or
(b) transfers, sales or disposals
of equipment which are either
obsolete or no longer required
in order to enable the Group to
undertake the Permitted
Business
PERMITTED ENCUMBRANCES (a) any Encumbrance arising by
operation of law (not by
contract or otherwise)
including, without limitation,
banker's liens or rights of
set-off and liens arising in
the ordinary course of trading
by operation of law and not by
way of contract so long as any
amounts in respect of which
such liens or rights of set-off
arise are not more than 30 days
overdue for payment;
(b) any Encumbrance arising
hereunder or under any Security
Document;
(c) any liens on any assets of any
member of the Group which
secure Borrowed Money falling
within paragraphs (a), (b), (c)
or (d) of the definition of
"Permitted Senior Debt", but in
each case such Encumbrance must
only be over the equipment
purchased pursuant to such
vendor financing, the property
purchased with such additional
finance, or the eligible
receivables charged in respect
of such Indebtedness, as
referred to in the relevant
paragraph of such definition;
(d) any Encumbrance approved in
writing by the Agent (acting on
the instructions of the
</TABLE>
14
<PAGE> 22
<TABLE>
<CAPTION>
<S> <C> <C>
Majority Lenders); or
(e) any Encumbrance arising out of
title retention provisions in a
supplier's standard conditions
of supply of goods or services
acquired in the ordinary course
of the Permitted Business
PERMITTED INDEBTEDNESS (a) Indebtedness permitted under
Section 4.4(b)(xii) of the
indenture in respect of the May
Notes (in their original form);
and/or
(b) acquired Indebtedness permitted
under Section 4.4(b)(ix) of the
indenture in respect of the May
Notes (in their original form)
PERMITTED SENIOR DEBT (a) Indebtedness unsecured or, if
secured, secured solely over
assets purchased with such
finance, as permitted under
Section 4.4(b)(i) of the
indenture in respect of the
November Notes (in their
original form);
(b) any refinancing of any Senior
Debt incurred under paragraph
(a) of this definition,
provided that such refinancing
is on similar terms and
security (if any) given in
respect of such refinancing is
limited as provided in
paragraph (a) above;
(c) Indebtedness under one or more
credit facilities unsecured or,
if secured, secured by a charge
over Eligible Accounts
Receivables subject to an
overall limit not to exceed the
greater of NLG70,000,000 and 80
per cent. of the value of
Eligible Accounts Receivables
outstanding from time to time
or as otherwise agreed with the
Agent acting on the
instructions of the Majority
Lenders;
(d) Indebtedness permitted under
Section 4.4(b)(iv) of the
indenture in respect of the
November Notes (in their
original form);
(e) debt incurred under the Notes
(in their original form) or any
refinancing thereof by the
Parent;
(f) any other Senior Debt incurred
or to be incurred which is
unsecured, contains no right to
call an event of default
without the consent of the
Agent (acting on the
instructions of all the
Lenders) and is fully
subordinated to the
</TABLE>
15
<PAGE> 23
<TABLE>
<CAPTION>
<S> <C> <C>
Loan on terms satisfactory to
the Agent; and
(g) any other Indebtedness incurred
or to be incurred by the Parent
which is permitted by the Notes
(in their original form)
PROJECT the construction of the Borrower's
and its Subsidiaries'
telecommunications networks in The
Netherlands and Belgium, or the
United States of America, the United
Kingdom, France and Germany further
to the use of certain international
links into those countries
PROJECT AGREEMENTS the documents and agreements listed
in schedule 7
QUALIFYING PERSON (a) a person, being a bank or
financial institution (whether
incorporated in the United Kingdom
or elsewhere), which is eligible to
have payments made to it by the
Borrower under this Agreement
without any deduction or withholding
in respect of Taxes either (i) by
virtue of a double taxation treaty
or (ii) by virtue of the fact that
no such deduction or withholding is
imposed in the jurisdiction to which
the Borrower is subject, or (b) NNIF
QUARTER DAY 31 March, 30 June, 30 September and
31 December in any year
QUARTERLY MANAGEMENT the quarterly management accounts of
ACCOUNTS the Group to be delivered (or which
may be delivered) to the Agent
pursuant to clause 12.1 in the
agreed form
QUARTERLY PERIOD each period of approximately three
months commencing on the day after a
Quarter Day and ending on the next
following Quarter Day
QUOTATION DATE in relation to any period for which
EURIBOR is to be determined, the
date on which quotations are
customarily provided by leading
banks in the interbank market of any
Participating Member State(s) for
deposits in euro for delivery on the
first day of that period
REFERENCE BANKS the principal London offices of
Paribas, Midland Bank plc and/or any
Lender appointed as such pursuant to
clause 25.14
</TABLE>
16
<PAGE> 24
<TABLE>
<CAPTION>
<S> <C> <C>
REGULATION any present or future law,
regulation, request, requirement or
guideline of any authority, whether
or not it has the force of law (but,
if it does not, with which the
person concerned habitually
complies)
RELEVANT JURISDICTION each jurisdiction in which a member
of the Group is incorporated or
formed or in which such member of
the Group has its principal place of
business or owns any material assets
RELEVANT SUBSTANCE any substance whatsoever (whether in
a solid or liquid form or in the
form of a gas or vapour and whether
alone or in combination with any
other substance) or waste which is
capable of causing harm to man or
any other living organism supported
by the environment, or damaging the
environment or public health or
welfare
REPAYMENT DATES each Quarter Day in each year
commencing 30 June 2001
RESERVATIONS (a) the principle that equitable
remedies (and similar remedies
under the laws of the Relevant
Jurisdictions) are remedies
which may be granted or refused
at the discretion of the court
and damages may be regarded as
an adequate remedy;
the limitation of enforcement
by laws relating to bankruptcy,
insolvency, liquidation,
reorganisation, court schemes,
moratoria, administration and
other laws generally affecting
the rights of creditors;
the time-barring of claims
under any statute of limitation
(and similar legislation);
the possibility that an
undertaking to assume liability
for or to indemnify a person
against non-payment of stamp
duty may be void;
the fact that a court may:
refuse to give effect to a
purported contractual
obligation to pay costs imposed
upon another party in respect
of the costs of any
unsuccessful litigation brought
</TABLE>
17
<PAGE> 25
<TABLE>
<CAPTION>
<S> <C> <C>
against that party or may not
award by way of costs all of
the expenditure incurred by a
successful litigant in
proceedings brought before that
court;
stay proceedings if concurrent
proceedings based on the same
grounds and between the same
parties have previously been
brought before another court;
and
require documents lodged in
proceedings to be translated
into the language of the
jurisdiction of that court;
a judgment in a currency other than
the lawful currency of the
jurisdiction where judgment is
obtained may be converted into the
currency of that jurisdiction for
the purposes of enforcement;
currency indemnity clauses may not
be enforceable; and
defences of set-off and counterclaim
and other similar principles
RESTRICTED PAYMENT in relation to a member of the
Borrower Group
(a) in each case whether by way of
set-off, combination of
accounts or otherwise, (i) any
direct or indirect
distribution, dividend or other
payment (whether in cash or in
specie), including any interest
and/or unpaid dividends, in
respect of its equity or other
share capital for the time
being in issue or (ii) any
payment (whether in cash,
securities, property or
otherwise) of principal of, or
interest on, any Subordinated
Debt, any loan stock or similar
instrument; or
(b) any redemption, reduction or
purchase or otherwise of (i)
its equity or other share
capital or any uncalled or
unpaid liability in respect
thereof, (ii) the amount (if
any) for the time being
standing to the credit of its
share premium account (iii) any
</TABLE>
18
<PAGE> 26
<TABLE>
<CAPTION>
<S> <C> <C>
Subordinated Debt, any loan
stock or similar instrument in
whole or in part in any
circumstances or (iv) any other
undistributable reserve in any
manner
in each case to the Parent or a
Restricted Person
RESTRICTED PERSON any shareholder of the Parent, any
Associated Company of such
shareholder or any Holding Company
of such shareholder and any
Subsidiary or Associated Company of
any such Holding Company but shall
not include any Obligor
REUNION EQUIPMENT has the meaning given to it in the
Supply Agreement
RIGHT any right, privilege, power,
immunity or other interest or remedy
of any kind
SECURITY AGENT the Agent in its capacity as
Security Agent for the purposes of
the Security Documents
SECURITY DEED the Security Deed entered into or to
be entered into between the Finance
Parties and the Obligors, and any
party to any Subordinated Loan
Agreement
SENIOR DEBT the principal amount outstanding of
all Borrowed Money incurred by any
member of the Group, excluding any
Indebtedness outstanding in respect
of the Notes or any Subordinated
Debt
SECURITY DOCUMENTS the Asset Charges, the Subordinated
Loan Agreements, the Security Deed
and all Encumbrances, guarantees and
other instruments from time to time
entered into by any person by way of
security or guarantee in respect of
amounts owed to the Finance Parties
under this Agreement (whether or not
also in respect of any other
Indebtedness)
SIX MONTH PERIOD each period of six months ending on
the last day of a calendar month
SUBORDINATED DEBT at any relevant time, the aggregate
of all Borrowed Money lent to the
Borrower Group by the Parent or a
Restricted Person pursuant to a
Subordinated Loan Agreement or a
Parent Subordinated Loan Agreement
</TABLE>
19
<PAGE> 27
<TABLE>
<CAPTION>
<S> <C> <C>
SUBORDINATED LOAN an agreement evidencing any Borrowed
AGREEMENT Money of the Group which is
subordinated to the rights of the
Finance Parties on terms and
conditions reasonably acceptable to
the Agent
SUBSCRIBER a person who has entered into an
agreement with a Group Member to be
provided with services by a Group
Member through the operation of the
Group's telecommunication network
SUBSIDIARY of a person means any company or
entity directly or indirectly
controlled by such person, for which
purpose "CONTROL" means either
ownership of more than 50 per cent
of the voting share capital (or
equivalent right of ownership) of
such company or entity or power to
direct its policies and management
whether by contract or otherwise
SUPPLY AGREEMENT the supply contract dated 8 June
1998 and between Nortel Networks and
the Borrower as amended on 28
September 1998 and on 26 April 1999
and as subsequently amended with the
written consent of the Agent (acting
on the instructions of the Majority
Lenders acting reasonably)
SYSTEM in relation to a Group Member, the
telecommunications systems
constructed or to be constructed by
such Group Member pursuant to the
Licences issued to such Group Member
and includes any part of such system
and all modifications,
substitutions, replacements,
renewals and extensions made to such
system
TAXES all present and future taxes,
levies, imposts, duties, fees or
charges of whatever nature together
with any related interest and
penalties (and "TAXATION" is
construed accordingly)
TELECOMMUNICATIONS LAWS all laws, statutes, regulations and
judgments relating to
telecommunications and/or data
services applicable to any Group
Member and/or the business carried
on by any Group Member in any
Relevant Jurisdiction
TOTAL COMMITMENTS at any relevant time, the total of
the Commitments of all the Lenders
at such time
TOTAL DEBT the principal amount of all Borrowed
Money incurred by the Borrower Group
and the Parent
</TABLE>
20
<PAGE> 28
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL DEBT INTEREST CHARGES in relation to any period, the total
amount of all interest, fees
(excluding front-end fees) and
commissions accruing in respect of
Total Debt during such period
TOTAL RELEVANT ASSETS in relation to any period, the
aggregate of the fixed assets
(determined in accordance with GAAP
but for the avoidance of doubt
excluding goodwill) and Current
Assets excluding the writing-up of
the book value of assets (other than
the writing up by no more than 25
per cent. of the historical cost of
assets, provided that any such
writing-up is supported by a
certificate from the Group's
Auditors to the effect that such
writing up is justified and is in
accordance with GAAP) deducting
Current Liabilities, of the Borrower
Group, as at the date of the most
recent Quarterly Management Accounts
delivered to the Agent under this
Agreement
TRANSFEREE has the meaning given to that term
in clause 24.2
TRANSFER CERTIFICATE a certificate substantially in the
terms of schedule 5
TREATY the Treaty establishing the European
Economic Community, being the Treaty
of Rome of 25 March 1957 as amended
by the Single European Act 1986 and
the Maastricht Treaty (which was
signed on 7 February 1992 and came
into force on 1 November 1993) as
amended, varied or supplemented from
time to time
TWELVE MONTH PERIOD each period of twelve months ending
on the last day of a calendar month
VERSATEL BELGIUM VersaTel Telecom Belgium N.V.
(incorporated in Belgium with number
Antwerp 328.909) and having its
registered office at Noorderlaan
133, North Trade Center, 2030
Antwerp, Belgium
YEAR 2000 ISSUE in relation to each Group Member,
the failure of its computer
software, hardware and firmware
systems and equipment containing
embedded computer chips to:
(a) correctly handle date
information before, during and
after 1st January 2000
including, but not limited to,
accepting data input, providing
data output and
</TABLE>
21
<PAGE> 29
<TABLE>
<CAPTION>
<S> <C> <C>
performing calculations on
dates or portions of dates;
(b) function accurately and without
interruption before, during and
after 1st January 2000, without
any change in operations
occasioned by the advent of the
year 2000 and the new century;
(c) respond to two digit year input
and process two digit year date
information, including single
and multi-century formulae and
leap years, in ways that
resolve any ambiguity as to
century in a disclosed, defined
and predetermined manner; and
(d) store and provide out put of
date information, including
single and multi-century
formulae and leap years, in
ways that are similarly
unambiguous as to century.
</TABLE>
1.1 INTERPRETATION
In this Agreement:
(a) the table of contents and the headings are inserted for
convenience only and do not affect the interpretation of this
Agreement;
(b) references to clauses and schedules are to clauses of, and
schedules to, this Agreement;
(c) references to this Agreement or any other document are to this
Agreement or that document as from time to time amended,
varied, restated or replaced in accordance with the terms
thereof, or, as the case may be, with the agreement of the
relevant parties and (where in such case the prior consent of
the Agent, the Majority Lenders or the Lenders (as the case
may be) is by the terms of any Finance Document required to be
obtained or the relevant amendment, variation, restatement or
replacement would otherwise result in an Event of Default) the
prior consent of the Agent, the Majority Lenders or the
Lenders (as the case may be);
(d) references to a person includes its successors in title
(unless otherwise stated);
(e) words importing the plural include the singular and vice
versa;
(f) references to a time of day are to London time;
22
<PAGE> 30
(g) references to the "agreed form" means, in relation to any
document, the form of such document as shall have been agreed
between the Borrower and the Agent (acting for and on behalf
of all of the Lenders) unless otherwise provided herein; and
(h) references to any enactment include that enactment as
re-enacted; and, if an enactment is amended, any provision of
this Agreement which refers to that enactment will be amended
in such manner as the Agent, after consultation with the
Borrower, shall determine to be reasonably necessary in order
to preserve the intended effect of this Agreement.
1.2 MAJORITY LENDERS
Where this Agreement provides for any matter to be determined by
reference to the opinion of the Majority Lenders or to be subject to
the consent or request of the Majority Lenders or for any action to be
taken on the instructions of the Majority Lenders, once informed by the
Agent that such opinion, consent, request or instructions have been
given, the Borrower shall be entitled (and bound) to assume that such
notice shall have been duly received by each Lender and that the
relevant majority shall have been obtained to constitute Majority
Lenders whether or not this is in fact the case. As between the Lenders
such opinion, consent, request or instructions shall only be regarded
as having been validly given or issued by the Majority Lenders if all
the Lenders shall have received prior notice of the matter on which
such opinion, consent, request or instructions are required to be
obtained and the relevant majority of Lenders shall have given or
issued such opinion, consent, request or instructions.
1.3 AGENT'S OPINION
Where this Agreement provides for the Agent's opinion to determine
whether any matter would or is reasonably likely to have a Material
Adverse Effect and/or a material adverse effect, as the case may be,
the Agent shall act in accordance with the instructions of the Majority
Lenders in making such determination.
2 THE FACILITY
2.1 THE FACILITY
The Lenders will (subject to clause 3) lend up to euro 45,378,022 to
the Borrower. The obligation of each Lender under this Agreement shall
be to contribute that proportion of each Advance which, as at the
Drawdown Date of and Advance, its Commitment bears to the Total
Commitments.
23
<PAGE> 31
2.2 PURPOSE
The Facility is to be used to finance the purchase of the Equipment in
relation to the Project (excluding any VAT payable by the Borrower in
respect of such purchase).
3 CONDITIONS
3.1 DOCUMENTARY CONDITIONS PRECEDENT
(a) Subject to (b) below, the obligation of each Lender to make
its Commitment available is conditional on prior receipt by
the Agent of, not later than five Banking Days before the day
on which the first Advance is to be made, the documents and
evidence specified in schedule 3 part A in form and substance
reasonably satisfactory to the Agent.
(b) The obligation of each Lender to contribute to an Advance,
which Advance is the first Advance to be used for the purpose
of purchasing the Reunion Equipment, is conditional on prior
receipt by the Agent of, not later than five Banking Days
before the day on which such first Advance is to be made, the
documents and evidence specified in schedule 3, parts A and B
in form and substance reasonably satisfactory to the Agent.
3.2 FURTHER CONDITIONS
The obligation of each Lender to contribute to any Advance is subject
to the further conditions that at the date of each Drawdown Notice and
on each Drawdown Date:
(a) the representations and warranties set out in clause 11
(adjusted in accordance with clause 11.21) are true and
correct on and as of each such date as if each were made with
respect to the facts and circumstances existing at such date;
(b) no Default has occurred and is continuing and no Default will
result from the making of such Advance.
3.3 WAIVER OF CONDITIONS PRECEDENT
The conditions specified in this clause 3 are inserted solely for the
benefit of the Lenders and may be waived on their behalf in whole or in
part and with or without conditions by the Agent acting on the
instructions of all of the Lenders in respect of the first Advance to
the Borrower and on the instructions of the Majority Lenders with
respect to any other Advances without prejudicing the right of the
Agent acting on such instructions to require fulfilment of such
conditions in whole or in part in respect of any other Advance.
24
<PAGE> 32
3.4 NOTIFICATION
The Agent shall notify the Lenders and the Borrower promptly after
receipt by it of the documents and evidence referred to in clause 3.1
in form and substance reasonably satisfactory to the Agent.
4 THE LOAN
4.1 DRAWDOWN
(a) The Borrower can only draw down the Loan for the purpose set
out in clause 2.2.
(b) If the Borrower wants to draw an Advance, it must deliver a
Drawdown Notice to the Agent by 10:00 a.m. on the third
Banking Day before the intended Drawdown Date. Once given, the
Borrower cannot revoke a Drawdown Notice.
(c) Each Drawdown Notice in respect of an Advance to be drawn down
shall be accompanied by:
(i) a purchase order in respect of the relevant Equipment
to which such Advance relates together with an
invoice from Nortel Networks B.V. in respect of such
Equipment unconditionally evidencing that the amount
to be drawn down is due and payable by the Borrower
to Nortel Networks B.V. pursuant to the Supply
Agreement;
(ii) a supplemental agreement to the relevant Asset Charge
or supplemental list to be attached thereto in form
reasonably satisfactory to the Agent duly executed
and delivered by the Borrower relating, inter alia,
to the relevant Equipment together with a definitive
list of the Equipment to be secured thereto; and
(iii) an acceptance certificate certifying that the
relevant Equipment to which such Advance relates
meets the agreed operational standards.
(d) The Borrower irrevocably authorises the Agent to remit the
proceeds of any Advance requested under this clause 4.1(d) to
Nortel Networks at such bank (whose receipt shall be a good
discharge to the Agent) and such bank account as shall be
notified by Nortel Networks to the Agent. The Borrower
acknowledges that such payment by the Agent shall constitute
the making of such Advance to the Borrower by the Lenders.
4.2 AMOUNT OF ADVANCES
Each Advance will be in euros. After NNIF has transferred all or part
of its Rights and Duties in accordance with clause 24, the principal
amount specified in each Drawdown Notice shall be no less than euro
250,000 or the balance of the
25
<PAGE> 33
Commitments. Subject to the terms of this Agreement the Agent will
advance the amount requested in the Drawdown Notice to the Borrower on
the Drawdown Date. The Borrower acknowledges that each such payment by
the Agent shall constitute the making of an Advance to the Borrower by
the Lenders.
4.3 TERMINATION OF COMMITMENTS
Any part of the Commitments of the Lenders undrawn on the last day of
the Availability Period shall be automatically reduced to zero and
cancelled.
4.4 NOTIFICATION TO LENDERS
As soon as practicable after receipt of a Drawdown Notice complying
with the terms of this Agreement the Agent shall notify each Lender
and, subject to clause 3, each of the Lenders shall on the Drawdown
Date make available to the Agent its portion of the relevant Advance in
accordance with clause 2.1 . The amount to be advanced to the Borrower
under this clause 4.4 shall be the amount specified in the relevant
Drawdown Notice.
4.5 APPLICATION OF PROCEEDS
Without prejudice to the Borrower's obligations under clause 13.2, none
of the Finance Parties shall have the responsibility for the
application of the proceeds of any Advance by any Borrower.
5 REPAYMENT
The Borrower will repay the Loan in sixteen equal instalments on
consecutive Quarter Days with the first instalment being due on 30 June
2001 and the last being due on 31 March 2005. The amount of each such
instalment shall be one sixteenth of the Loan as at 30 June 2000. If
any Quarter Day is not a Banking Day the relevant Repayment Date will
be the next Banking Day.
6 PREPAYMENT
6.1 VOLUNTARY PREPAYMENTS
The Borrower may prepay all or part of the Loan in each case on the
following terms:
(a) The amount prepaid must be either the entire Loan or an amount
of at least euro 250,000 and an integral multiple of euro
250,000.
(b) The Borrower must give the Agent at least 30 days' notice of
its intention to prepay. The Borrower cannot revoke such a
notice.
(c) Once the Borrower has given such a notice, the Commitments
will automatically be reduced by the amount of the intended
prepayment.
6.2 ADDITIONAL VOLUNTARY PREPAYMENT
26
<PAGE> 34
The Borrower may also prepay (in whole but not in part only), without
premium or penalty, but without prejudice to its obligations under
clauses 22, 18.1 and 23.1, (a) the Contribution of any Lender to which
such Borrower shall have become obliged to pay additional amounts under
clause 18.1 or 23.1 or (b) any Lender's Contribution to which a
Substitute Basis applies by virtue of clause 22. Upon any notice of
such prepayment being given, the Commitment of the relevant Lender
shall be reduced to zero and the amount of the Total Commitments shall
be reduced accordingly.
6.3 MANDATORY PREPAYMENT
(a) The Borrower undertakes to prepay the Loan in full upon either
the occurrence of a Change of Control or the listing of the
Borrower on any recognised stock exchange being suspended for
a continuous period of 14 days or withdrawn.
(b) The Borrower undertakes to apply or procure the application of
the proceeds of:
(i) amounts recovered under any insurance policy in
respect of the Equipment to the extent that (y) the
aggregate of the amounts so recovered exceeds
$250,000, and (z) the proceeds are not used to
purchase further Equipment pursuant to the Supply
Agreement within 60 days of the relevant disposal;
and/or
(ii) all disposals of Equipment supplied pursuant to the
Supply Agreement to the extent that (y) the aggregate
of the purchase price of the Equipment disposed of
exceeds $250,000, and (z) the proceeds are not used
to purchase further Equipment pursuant to the Supply
Agreement within 60 days of the relevant disposal,
in prepayment of the Loan.
(c) To the extent that Free Cash Flow in respect of each financial
year of the Group is in excess of 140 per cent. of the
projected Free Cash Flow for such financial year as set out in
the Business Plan, the Borrower shall apply 50 per cent. of
such excess in prepayment of the Loan.
(d) The Borrower shall procure that 50 per cent. of any Senior
Debt raised by the Borrower Group after the date of this
Agreement (other than Permitted Senior Debt or Permitted
Indebtedness) is applied in prepayment of the Loan.
(e) The Borrower shall prepay the Loan in full upon the early
redemption of the Notes (other than in the circumstances
referred to in clause 6.3(f)).
(f) In the event that the Parent voluntarily redeems up to 35 per
cent. of the November Notes on or before 15 November 2001 as
permitted pursuant to the terms of the November Notes, the
Borrower will repay the same percentage of the Loan
contemporaneously with such redemption,
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provided that if additional equity share capital of more than
$100,000,000 has been subscribed for in cash pursuant to an
initial public offering, no prepayment of the Loan shall be
required,
(g) If, following the drawdown of an Advance in respect of any
amount payable under the Supply Agreement in respect of the
purchase of Equipment following the delivery of the
certificate referred to in clause 4.1(c) signed by a Borrower,
the Borrower rejects and returns such Equipment as a result of
the failure of Nortel Networks to comply with the terms of the
Supply Agreement all or the relevant part of such Advance
shall be repayable on demand. The Borrower irrevocably and
unconditionally instructs Nortel Networks to make payment of
any sum due to it as a result of such failure to the Agent in
or towards satisfaction of the Borrower's obligations under
this clause 6.3 and (subject to receipt of such sum from
Nortel Networks) the Agent agrees to release the Borrower of
its obligation to prepay such sum.
The prepayments set out in this clause 6.3 shall each be referred to as
a "MANDATORY PREPAYMENT".
6.4 APPLICATION OF PREPAYMENTS TO REPAYMENT INSTALMENTS
Any amounts prepaid after 30 June 2000 pursuant to clause 6.2 shall be
applied in reducing the repayment instalments referred to in clause 5
rateably. Any other amounts prepaid after 30 June 2000, shall be
applied against the repayment instalments referred to in clause 5 in
inverse order.
6.5 AMOUNTS PAYABLE ON PREPAYMENT
Any prepayment under this Agreement shall be made together with: (a)
accrued interest to the date of prepayment; (b) any additional amount
payable under clause 18.1, 19.1 or 23.1; and (c) all other sums payable
by the Borrower to the Lenders under this Agreement including, without
limitation, any accrued commitment commission payable under clause 9.2
and any amounts payable under clause 17.
6.6 CANCELLATION
(a) (Other than a payment made pursuant to clause 6.3(g)) on the
date upon which any Mandatory Prepayment is to be applied in
prepayment of the Loan the Total Commitments shall be
automatically reduced by an amount equal to the amount of the
Mandatory Prepayment.
(b) The Borrower may at any time during the Availability Period by
notice to the Agent (effective only on actual receipt) cancel
with effect from a date not less than 7 Banking Days after the
receipt by the Agent of such notice any part (being euro
250,000 or any larger sum which is an integral multiple
thereof) of the undrawn Commitments provided that the Agent
(acting on the instructions of the Majority Lenders) is
reasonably satisfied with the ability of the Borrower to
comply with the Business Plan on an
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<PAGE> 36
ongoing basis and to meet its payment obligations in respect
of its Borrowed Money as they fall due. Any such notice of
cancellation, once given, shall be irrevocable and upon such
cancellation taking effect the Commitment of each Lender shall
be reduced proportionately. No amount cancelled may be
reinstated.
6.7 APPLICATION OF MANDATORY PREPAYMENTS
Each Mandatory Prepayment to be made under clause 6.3 (a), (d), (e) or
(f) shall be made promptly upon the occurrence of the relevant event or
receipt of the relevant amount. Any other Mandatory Prepayment shall be
effected on the Interest Payment Date falling after the date of receipt
of the relevant amount and the Borrower shall deposit the amount of
such Mandatory Prepayment (or if less the amount of the Loan) with the
Agent or as the Agent may reasonably direct in an account (or accounts)
bearing interest at market rates on terms that the principal amount so
deposited may only be released to the Borrower by making the relevant
prepayment, but that any interest on such principal amount is to be
released to the Borrower following such prepayments.
6.8 PREPAYMENTS GENERALLY
The Borrower may not prepay all or any part of the Loan other than as
specified in this clause 6.
7 INTEREST
7.1 DATES OF PAYMENT
The Borrower will pay interest on the Loan in respect of each Interest
Period on its Interest Payment Date.
7.2 RATES OF INTEREST
The rate of interest applicable to an Advance is the aggregate of (a)
the applicable Margin, (b) the Additional Cost and (c) EURIBOR.
7.3 APPLICABLE MARGIN
(a) In respect of each Interest Period or period determined by the
Agent pursuant to clause 8.2, the Margin in relation to the
relevant Advance or unpaid sum under this Agreement under
clause 8 shall be 3.75 per cent. per annum unless at such time
Annualised Consolidated EBITDA (calculated by reference to the
Quarterly Period ending on such Quarter Days) was not less
than zero on the two most recent previous consecutive Quarter
Days in relation to which Quarterly Management Accounts have
been delivered to the Agent under this Agreement, in which
case (b) below will apply.
(b) In respect of each Interest Period or period determined by the
Agent pursuant to clause 8.2 in respect of which (a) above
does not apply, the
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<PAGE> 37
Margin in relation to the relevant Advance or unpaid sum under
this Agreement under clause 8 shall be the rate set out in
column (1) below, which is set out opposite the applicable
ratio of Senior Debt as at the first day of the relevant
Interest Period or period to Annualised Consolidated EBITDA
(calculated by reference to the then most recently ended
Quarterly Period in respect of which Quarterly Management
Accounts have been delivered to the Agent under this
Agreement) set out in column (2) below:
<TABLE>
<CAPTION>
(1) (2)
Rate (per cent. per annum) Ratio of Senior Debt to Annualised
Consolidated EBITDA
<S> <C> <C>
3.00 >7.0
2.50 >5.5
2.00 >4.0
1.75 less than or equal to 4.0
</TABLE>
(c) If, at the time of determination of the Margin,:
(i) (b) above is applicable; and
(ii) the ratio of Total Debt to Net Worth was greater than
zero and less than 3:1 on the two previous
consecutive Quarter Days calculated by reference to
the Quarterly Period ending on such Quarter Days) as
evidenced by the most recent Quarterly Management
Accounts delivered to the Agent under this Agreement,
the rate set out in column (1) of (b) above shall be reduced
by 0.50 per cent. subject to a minimum of 1.50 per cent. per
annum.
7.4 DETERMINATION OF INTEREST PERIODS
(a) The first Interest Period in respect of each Advance will
start on the relevant Drawdown Date and end on the next
Quarter Day. Each subsequent Interest Period in respect of
each such Advance will start on the day after the last day of
the previous relevant Interest Period and end on the next
Quarter Day. If any Quarter Day is not a Banking Day the
relevant Interest Period will end on the next Banking Day.
(b) If the Borrower has made more than one Drawing under the
Facility then on the last day of the then current Interest
Period for the first Advance, such further Advances shall be
consolidated into a single Advance.
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7.5 NOTIFICATION BY THE AGENT
The Agent will promptly notify each Lender of the duration of each
Interest Period in respect of each Advance and of the rate of interest
applicable to that Interest Period.
8 INTEREST FOR LATE PAYMENT
8.1 THE BORROWER'S OBLIGATION TO PAY
If the Borrower fails to pay an amount payable in connection with the
Finance Documents (including an amount payable under this clause 8) on
the due date for payment, it will pay interest on that amount from the
due date until the date of payment (whether before or after judgment)
in accordance with this clause 8.
8.2 NORMAL RATE
The Agent will divide the period beginning on the due date and ending
on the date of payment into successive periods of such length as it
shall decide in its discretion. The rate of interest applicable to each
such period will be the aggregate of (a) two per cent. per annum, (b)
the applicable Margin, (c) the Additional Cost and (d) EURIBOR.
8.3 INITIAL RATE ON ACCELERATION OF THE LOAN
If, however, the unpaid amount is an amount of principal which is
repayable before its next Interest Payment Date, the first period
selected by the Agent will end on that Interest Payment Date and the
rate of interest applicable to that period will be two per cent. per
annum above the rate previously applicable to that amount.
8.4 DATE OF PAYMENT
Interest is payable under this clause 8 on the last day of each such
period selected by the Agent or, if earlier, the date on which the
Borrower pays an amount in respect of which the interest is accruing.
8.5 NOTIFICATION BY THE AGENT
The Agent will notify the Borrower and the Lenders of the duration of
each such period and of the rate of interest applicable to that period.
9 FEES AND EXPENSES
9.1 FACILITY FEE
The Borrower shall pay the Agent, for the account of the Lenders, a
facility fee of 1.50 per cent. of the Total Commitments. The facility
fee will be payable in two equal instalments, on the date of this
Agreement and 30th June 1999.
9.2 COMMITMENT COMMISSION
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The Borrower shall pay in arrears on each Quarter Date after the date
of this Agreement and on the last day of the Availability Period
(unless the undrawn Commitments have been cancelled in full pursuant to
clause 6.6(b)), for the account of each relevant Lender, commitment
commission computed (i) from the date of this Agreement to (and
including) 30 June 1999 at the rate of 0.50 per cent. per annum, (ii)
from (and including) 1 July 1999 until (and including) 30 September
1999 at the rate of 0.75 per cent. per annum and (iii) from (and
including) 1 October 1999 until the last day of the Availability Period
at the rate of 1.00 per cent. per annum, on the daily undrawn and
uncancelled amount of such relevant Lender's Commitment.
9.3 EXPENSES
The Borrower shall pay, or procure the payment, to the Agent on demand:
(a) all reasonable expenses (including legal, printing and
out-of-pocket expenses) properly incurred by the Agent and the
Security Agent in connection with the negotiation, preparation
and execution of this Agreement and the Security Documents (up
to an amount of $100,000) and of any amendment or extension
of, or the granting of any waiver or consent under, this
Agreement or the Security Documents; and
(b) all expenses (including legal and out-of-pocket expenses)
properly incurred by any Finance Party in contemplation of, or
otherwise in connection with, the enforcement or attempted
enforcement of, or preservation or attempted preservation of
any rights under, this Agreement and/or the Security
Documents, including, without limitation, after the occurrence
of a Default or if otherwise agreed with the Borrower, the
fees and expenses of accountants or other experts incurred in
relation to any investigation into the affairs of any Obligor,
or otherwise in respect of the moneys owing under this
Agreement and/or the Security Documents.
9.4 STAMP AND OTHER DUTIES
The Borrower will promptly pay all stamp duties or similar Taxes and
all filing, registration or notarisation fees payable in connection
with the Facility or the Finance Documents, including those payable by
any of the Finance Parties.
9.5 VAT
All amounts payable under this clause 9 are exclusive of VAT. The
Borrower will, in addition to paying such amounts, pay all applicable
VAT on those amounts.
10 GUARANTEE
10.1 COVENANT TO PAY
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<PAGE> 40
In consideration of the Lenders making or continuing to make Advances
to the Borrower pursuant to this Agreement the Guarantors hereby
irrevocably and unconditionally:
(a) jointly and severally guarantee to each Finance Party, the due
performance by the Borrower of all of its respective
obligations under or pursuant to this Agreement; and
(b) jointly and severally guarantee to each Finance Party the
payment of all moneys now or hereafter due, owing or incurred
by the Borrower under or pursuant to this Agreement when the
same become due whether by acceleration or otherwise.
10.2 GUARANTORS AS PRINCIPAL DEBTORS; INDEMNITY
As a separate and independent stipulation, but subject always to the
provisions of clause 10.1, the Guarantors jointly and severally agree
that if any purported obligation or liability of the Borrower which
would have been the subject of this Guarantee had it been valid and
enforceable is not or ceases to be valid or enforceable against the
Borrower on any ground whatsoever whether or not known to the Finance
Parties or any of them, including, without limitation, any irregular
exercise or absence of any corporate power or lack of authority of, or
breach of duty by, any person purporting to act on behalf of the
Borrower or any legal or other limitation, or any disability or
Incapacity or any change in the constitution of the Borrower) the
Guarantors shall nevertheless be jointly and severally liable in
respect of that purported obligation or liability as if the same were
fully valid and enforceable and such Guarantor was the principal debtor
in respect thereof. The Guarantors hereby irrevocably and
unconditionally jointly and severally agree to indemnify and keep
indemnified the Finance Parties against any loss or liability arising
from any failure of the Borrower to perform or discharge any such
purported obligation or liability or from any invalidity or
unenforceability of any of the same against the Borrower.
10.3 LIMITATION
Notwithstanding the other provisions of this clause 10, the liability
of the Guarantors under this Guarantee is limited as follows:
(a) with respect to a Guarantor incorporated in Belgium, for a
maximum period of 6 years and to a maximum amount of euro
45,378,022;
(b) with respect to a Guarantor incorporated in The Netherlands
(other than the Parent), to the distributable reserves of such
Guarantor at each date on which demand is made under this
Guarantee, for which purpose "DISTRIBUTABLE RESERVES" means
the shareholders' equity of the relevant Guarantor as far as
it exceeds the sum of the amount of the paid and called up
part of the share capital and the reserves of such Guarantor
which must be maintained under the laws of The Netherlands or
the articles of incorporation of such Guarantor.
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<PAGE> 41
10.4 NO SECURITY TAKEN BY GUARANTORS
The Guarantors hereby jointly and severally warrant that they have not
taken or received, and undertake that until all the Guaranteed
Liabilities have been paid or discharged in full, they will not take or
receive, the benefit of any security from the Borrower or any other
person in respect of their obligations under this Guarantee save as may
be agreed by the Majority Lenders.
10.5 INTEREST
Each Guarantor agrees to pay interest on each amount demanded of it
under this Guarantee from the date of such demand until payment (as
well after as before judgment) at the rate specified in clause 8. Such
interest shall be compounded at the end of each period determined for
this purpose by the Agent in the event of it not being paid when
demanded but without prejudice to the Agent and each Lender's right to
require payment of such interest.
10.6 CONTINUING SECURITY AND OTHER MATTERS
This Guarantee shall:
(a) extend to the ultimate balance from time to time owing to the
Finance Parties by the Borrower and shall be a continuing
guarantee, notwithstanding any settlement of account or other
matter whatsoever;
(b) be in addition to any present or future Collateral Instrument,
right or remedy held by or available to the Finance Parties or
any of them; and
(c) not be in any way prejudiced or affected by the existence of
any such Collateral Instrument, rights or remedies or by the
same becoming wholly or in part void, voidable or
unenforceable on any ground whatsoever or by the Finance
Parties or any of them dealing with, exchanging, varying or
failing to perfect or enforce any of the same or giving time
for payment or indulgence or compounding with any other person
liable.
10.7 NEW ACCOUNTS
If this Guarantee ceases to be continuing for any reason whatsoever
each Lender may nevertheless continue any account of the Borrower or
open one or more new accounts and the liability of each Guarantor under
this Guarantee shall not in any manner be reduced or affected by any
subsequent transactions or receipts or payments into or out of any such
account.
10.8 LIABILITY UNCONDITIONAL
The liability of each Guarantor shall not be affected nor shall this
Guarantee be discharged or reduced by reason of:
(a) the Incapacity or any change in the name, style or
constitution of any other Obligor or any other person liable;
or
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<PAGE> 42
(b) any of the Finance Parties granting any time, indulgence or
concession to, or compounding with, discharging, releasing or
varying the liability of any other Obligor or any other person
liable or renewing, determining, varying or increasing any
accommodation, Facilities or transaction or otherwise dealing
with the same in any manner whatsoever or concurring in,
accepting or varying any compromise, arrangement or settlement
or omitting to claim or enforce payment from any other Obligor
or any other person liable; or
(c) any act or omission which would not have discharged or
affected the liability of such Guarantor had it been a
principal debtor instead of a guarantor or by anything done or
omitted which but for this provision might operate to
exonerate such Guarantor.
10.9 COLLATERAL INSTRUMENTS
None of the Finance Parties shall be obliged to make any claim or
demand on the Borrower or to resort to any Collateral Instrument or
other means of payment now or hereafter held by or available to them or
it before enforcing this Guarantee and no action taken or omitted by
any of the Finance Parties in connection with any such Collateral
Instrument or other means of payment shall discharge, reduce, prejudice
or affect the liability of any Guarantor under this Guarantee nor shall
any of the Finance Parties be obliged to apply any money or other
property received or recovered in consequence of any enforcement or
realisation of any such Collateral Instrument or other means of payment
in reduction of the Guaranteed Liabilities.
10.10 WAIVER OF GUARANTORS' RIGHTS
Until all the Guaranteed Liabilities have been paid, discharged or
satisfied in full (and notwithstanding payment of a dividend in any
liquidation or under any compromise or arrangement) each Guarantor
agrees that, without the prior written consent of the Agent, it will
not:
(a) exercise its rights of subrogation, reimbursement and
indemnity against any other Obligor or any other person
liable; or
(b) demand or accept any security to be executed in respect of any
of its obligations under this Guarantee or any other
Indebtedness now or hereafter due to such Guarantor from any
other member of the Group or from any other person liable; or
(c) take any step or enforce any right against any other Obligor
or any other person liable in respect of any Guaranteed
Liabilities; or
(d) exercise any right of set-off or counterclaim against any
other Obligor or any other person liable or claim or prove or
vote as a creditor in competition with any of the Finance
Parties in the liquidation, administration or other insolvency
proceeding of any other Obligor or any other person liable or
have the benefit of, or share in, any payment from
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<PAGE> 43
or composition with, any other Obligor or any other person
liable or any other Collateral Instrument now or hereafter
held by any of the Finance Parties for any Guaranteed
Liabilities or for the obligations or liabilities of any other
person liable but so that, if so directed by the Agent, it
will prove for the whole or any part of its claim in the
liquidation of any other Obligor on terms that the benefit of
such proof and of all money received by it in respect thereof
shall be held on trust for the Finance Parties and applied in
or towards discharge of the Guaranteed Liabilities in such
manner as the Agent shall deem appropriate.
10.11 SUSPENSE ACCOUNTS
Any money received in connection with this Guarantee (whether before or
after any Incapacity of any Obligor) may be placed to the credit of a
suspense account (bearing interest at a commercial rate) with a view to
preserving the rights of the Finance Parties to prove for the whole of
their respective claims against any Obligor or any other person liable
or may be applied in or towards satisfaction of the Guaranteed
Liabilities as the Agent may from time to time conclusively determine
in its absolute discretion.
10.12 SETTLEMENTS CONDITIONAL
Any release, discharge or settlement between any Guarantor and any of
the Finance Parties shall be conditional upon no security, disposition
or payment to any of the Finance Parties by any Obligor or any other
person liable being void, set aside or ordered to be refunded pursuant
to any enactment or law relating to bankruptcy, liquidation,
administration or insolvency or for any other reason whatsoever and if
such condition shall not be fulfilled the Finance Parties shall be
entitled to enforce this Guarantee subsequently as if such release,
discharge or settlement had not occurred and any such payment had not
been made.
10.13 GUARANTORS TO DELIVER UP CERTAIN PROPERTY
If, contrary to clauses 10.4 or 10.10, any Guarantor takes or receives
the benefit of any security or receives or recovers any money or other
property, such security, money or other property shall be held on trust
for the Finance Parties and shall be delivered to the Agent, on demand.
10.14 RETENTION OF THIS GUARANTEE
The Finance Parties shall be entitled to retain this Guarantee after as
well as before the payment or discharge of all the Guaranteed
Liabilities for such period as the Agent may reasonably determine but
for no longer than one year after the payment or discharge of all the
Guaranteed Liabilities.
10.15 CHANGES IN CONSTITUTION OR REORGANISATIONS OF LENDERS
For the avoidance of doubt and without prejudice to the provisions of
clause 25, this Guarantee shall remain binding on each Guarantor
notwithstanding any change in the constitution of the Finance Parties
or any of them or their or its
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absorption in, or amalgamation with, or the acquisition of all or part
of their or its undertaking or assets by, any other person, or any
reconstruction or reorganisation of any kind, to the intent that this
Guarantee shall remain valid and effective in all respects in favour of
any successor in title of the Finance Parties, any Transferee and any
successor Agent appointed pursuant to clause 25.13 or any successor
Security Agent appointed pursuant to the Security Deed in the same
manner as if such successor in title, Transferee or successor Agent or
successor Security Agent had been named in this guarantee as a party
instead of, or in addition to, the relevant Lender, the Agent or the
Security Agent.
10.16 OTHER GUARANTORS
Each Guarantor agrees to be bound by this Guarantee notwithstanding
that any other person intended to execute or to be bound by any other
guarantee or assurance under or pursuant to this Agreement may not do
so or may not be effectually bound and notwithstanding that such other
guarantee or assurance may be determined or be or become invalid or
unenforceable against any other person, whether or not the deficiency
is known to the Lenders or any of them or the Agent, the Security Agent
or the Arrangers or any of them.
10.17 ACCEDING GUARANTORS
(a) To the extent legally possible, the Borrower shall procure
that as soon as reasonably practicable all entities which
become Subsidiaries (other than those which are dormant and do
not hold any licences or other material assets) become
Acceding Guarantors by delivering to the Agent (as soon as is
reasonably practicable following receipt by the Borrower of a
written notice from the Agent requiring such action) Deeds of
Guarantor Accession duly executed by such Subsidiaries and the
Borrower.
(b) To the extent legally possible the Borrower shall procure
that, at the same time as a Deed of Guarantee Accession is
delivered to the Agent, there is delivered to the Agent all
the documents and evidence listed in schedule 9, part B in
respect of the relevant Subsidiary in each case in form and
substance satisfactory to the Agent acting reasonably.
(c) Delivery of a Deed of Guarantor Accession duly executed by an
Acceding Guarantor and the Borrower constitutes confirmation
by the relevant Acceding Guarantor that the representations
and warranties set out in clause 11 to be made by it on the
date of the Deed of Guarantor Accession in accordance with
clause 11.21 are correct as if made by it with reference to
the facts and circumstances then existing.
(d) To the extent legally possible in any Relevant Jurisdiction,
each Acceding Guarantor, before entering into such a Deed of
Guarantor Accession, shall comply with all the relevant
legislation in its country of incorporation to the reasonable
satisfaction of the Agent, to ensure that the proposed
guarantee to be given is in compliance with any relevant
provisions of such legislation and to ensure that the proposed
guarantee
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<PAGE> 45
to be given is, subject to the Reservations, to be legal valid
and binding on the proposed Acceding Guarantor.
(e) Each Finance Party irrevocably authorises the Agent to
countersign each Deed of Guarantor Accession on its behalf
without any further consent of, or consultation with any of
the Finance Parties
(f) Each of the other Obligors irrevocably authorises the Borrower
to countersign each Deed of Guarantor Accession on its behalf
without any further consent of, or consultation with, any of
the other Obligors
11 REPRESENTATIONS
11.1 REPRESENTATIONS
The Parent, in respect of itself and each other Group Member, and each
Obligor in respect of itself only, represents and warrants to each of
the Finance Parties that all the matters described in clauses 11.2 to
11.20 are true and accurate on the date of this Agreement.
11.2 DUE INCORPORATION
It is duly incorporated and validly existing under the laws of its
country of incorporation and has the power, and has obtained all
necessary authorisations, to own its assets and carry on its business
in all relevant jurisdictions.
11.3 THE DOCUMENTS
(a) It has power to execute the Finance Documents to which it is a
party and to exercise its Rights and perform its Duties under
them; and it has obtained all necessary authorisations to do
so.
(b) This Agreement constitutes its legally binding and enforceable
obligations. Each other Finance Document that it is a party
to, when executed, will, subject to the Reservations,
constitute its legally binding and enforceable obligations.
(c) The execution of the Finance Documents and the exercise of its
Rights and the performance of its Duties under them will not
result in it being in breach of any Duty or required to create
any Encumbrance or perform any other action as a result of any
Duty.
(d) The Finance Documents to which it is a party are effective and
admissible in evidence without the need for any filing,
registration, notarisation or other action.
(e) No stamp duty or other Tax is payable in respect of the
Finance Documents to which it is a party.
11.4 LITIGATION
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No litigation, arbitration or administrative proceeding is taking place
or to the best of its knowledge pending against it which, if adversely
determined, would or is reasonably likely to have a Material Adverse
Effect. It is not aware that any such proceeding is threatened.
11.5 THE ACCOUNTS
(a) The Accounts in respect of the financial year ended 31
December 1998 have been prepared in accordance with GAAP which
have been consistently applied. The Accounts provide a true
and fair view of the consolidated financial position of the
Group as at 31 December 1998 and of the consolidated
operations of the Group for the financial period ended on that
date.
(b) There has been no material adverse change in the consolidated
financial position of the Borrower or the Group from that set
out in the Accounts.
11.6 WORKS COUNCILS
If it is incorporated in The Netherlands, it has not instituted a works
council or, if any such works council has been instituted, all action
has been taken by or in relation to such works council necessary to
authorise the performance by it of its respective obligations under the
Finance Documents.
11.7 CHOICE OF LAW
The choice by it of English law to govern this Agreement and the
Security Deed and the submission by it to the non-exclusive
jurisdiction of the High Court of Justice in England are, subject to
the Reservations, valid and binding.
11.8 TITLE TO ASSETS
(With the exception of VersaTel Belgium), it is the legal and
beneficial owner of and has good and marketable title to the Equipment
supplied to it free and clear of any Encumbrance other than Permitted
Encumbrances.
11.9 INTELLECTUAL PROPERTY RIGHTS
(a) The Intellectual Property Rights owned by or licensed to it
are free from any Encumbrance (save for those created or to be
created by or pursuant to the Security Documents and Permitted
Encumbrances) and any other rights or interests in favour of
third parties.
(b) The Intellectual Property Rights owned by or licensed to it
are all the Intellectual Property Rights required by it in
order to carry on, maintain and operate in all material
respects its respective businesses, properties and assets. In
carrying on its business it does not infringe any Intellectual
Property Rights of any third party where any action taken by
such third party in respect of any such infringement would or
is reasonably likely to have a Material Adverse Effect.
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(c) No Intellectual Property Rights owned by it are being
infringed, nor is there, to the best of its knowledge, any
threatened infringement of any such Intellectual Property
Rights which, in either case would or is reasonably likely to
have a Material Adverse Effect.
11.10 PROJECT AGREEMENTS
(a) The Project Agreements which have been entered into on or
prior to the date of this Agreement and to which it is a party
are in full force and effect and, subject to the Reservations,
constitute its legally binding and enforceable obligations.
(b) To the best of its knowledge and belief after due enquiry, (1)
it is not in breach of any material term of any Project
Agreement to which it is a party, (2) there is no material
dispute subsisting between the parties thereto (3) no
termination event (howsoever described) is subsisting
thereunder and (4) no material amendments have been made
thereto.
11.11 LICENCES AND NECESSARY AUTHORISATIONS
The Licences are in full force and effect and it is in compliance in
all material respects with all material provisions thereof that are
applicable to it. It has secured all the Necessary Authorisations, all
such Necessary Authorisations are in full force and effect and it is in
compliance in all material respects with all material provisions
thereof that are applicable to it. To the best of its knowledge and
belief after due enquiry, neither the Licences nor any of the Necessary
Authorisations are the subject of any pending or threatened attack or
revocation.
11.12 NO WITHHOLDING TAXES
No Taxes are imposed by withholding or otherwise on any payment to be
made by it under any Finance Document to any Qualifying Person or are
imposed on or by virtue of the execution or delivery by it of any
Finance Document to which it is a party or any document or instrument
to be executed or delivered under any such Finance Document.
11.13 TELECOMMUNICATIONS LAWS
It is in compliance in all material respects with all
Telecommunications Laws applicable to it.
11.14 ENVIRONMENTAL MATTERS
(a) It is in compliance in all material respects with all
requirements of Environmental Laws applicable to it.
(b) No Environmental Claim is, to its knowledge after due enquiry,
pending, threatened or existing against it.
11.15 INFORMATION
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<PAGE> 48
To the best of its knowledge and belief after due enquiry, as at the
date provided the factual information relating to the Group provided to
any of the Finance Parties was true and accurate in all material
respects and not misleading in any material respect and did not omit
any material facts; all reasonable enquiries have been made by the
Borrower to verify the facts and statements relating to the Group
contained therein.
11.16 NOTES
The execution, delivery and performance of the Finance Documents will
not breach the terms of the Notes and it is not is in breach of any
provision of the Notes.
11.17 YEAR 2000 ISSUE
It has reviewed the effect of the Year 2000 Issue on the computer
software, hardware and firmware systems and equipment containing
embedded microchips owned or operated by or for it or used or relied
upon in the conduct of its business (including systems and equipment
supplied by others or with which its computer systems interface). The
costs to the Group of any reprogramming required as a result of the
Year 2000 Issue to permit the proper functioning of such systems and
equipment and the proper processing of data, and the testing of such
reprogramming, and of the reasonably foreseeable consequences of the
Year 2000 Issue to the Group (including reprogramming errors and the
failure of systems or equipment supplied by others) are not expected to
result in an Event of Default or to have a Material Adverse Effect.
11.18 BOOKS AND RECORDS
All its documentation is maintained in accordance with all material
legal requirements and good business practices and is safely kept and
correct.
11.19 BUSINESS PLAN
All opinions, projections and forecasts contained in the Business Plan
and the assumptions on which such opinions, projections and forecasts
were based were arrived at after due and careful consideration and
enquiry and represent the views of the Borrower as at the date of the
Business Plan; to the best of its knowledge and belief there are no
material facts or circumstances the omission of which could make any of
the opinions, projections and forecasts contained in the Business Plan
(and the assumptions on which such opinions, projections and forecasts
were made) misleading in any respect.
11.20 DEFAULT
No Default has occurred and is continuing.
11.21 REPETITION
The representations and warranties in clauses 11.2 to 11.20 (excluding
clauses 11.3(d) and (e), 11.5(b), 11.12 and 11.15), (so that the
representations and
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<PAGE> 49
warranties in (i) clause 11.5, shall for this purpose refer to the then
and the latest audited consolidated financial statements of the Group
delivered to the Agent under clause 12.1 and (ii) clause 11.19, shall
refer to the then updated Business Plan delivered to the Agent under
clause 12.1) shall be deemed to be repeated by the Obligors on and as
of each Drawdown Date and each Interest Payment Date as if made with
reference to the facts and circumstances existing on each such day.
12 INFORMATION UNDERTAKINGS
12.1 GENERAL
The Borrower will, throughout the Facility Period, provide the Agent
with sufficient copies for all the Lenders of the documents and
information relating to the Group specified in column (1) at the time
specified in column (2):
<TABLE>
<CAPTION>
(1) INFORMATION (2) TIME
<S> <C>
The Accounts As soon as they are available, and no
later than 90 days after the end of
the period to which they relate
Quarterly Management Accounts and a As soon as they are available, and no later
Compliance Certificate from an than 45 days after the end of the period to
Authorised Officer which they relate
Quarterly operating and financial As soon as they are available, and no later
performance data on the Project in than 45 days after the end of the period to
the agreed form which they relate
Any document sent to the Parent's or When sent to that person
Borrower's shareholders or creditors
generally
Annual Budget Within 30 days upon it being approved by
the Borrower's supervisory board with such
approval not to be unreasonably withheld or
delayed
Updated Annual Budget or Business 30 days after each amendment or revision is
Plans approved by the supervisory board
of the Borrower
Details of terms of employment of key As soon as reasonably practicable following
members of the Group's management team any material charge
Such other information about the Group As soon as reasonably practicable following
as the Lenders may a request by the Agent
</TABLE>
42
<PAGE> 50
<TABLE>
<CAPTION>
(1) INFORMATION (2) TIME
<S> <C>
reasonably require
Certified English translations of any As soon as reasonably practicable following
Project Agreement a reasonable request by the Agent
Any notice of suspension of, default Within 3 days of receipt by the relevant
under, or amendment to, any Project Obligor
Agreement
</TABLE>
12.2 DEFAULTS
Each of the Obligors will procure that the Agent is promptly informed
of (i) any occurrence of which it becomes aware which would or is
reasonably likely to have a Material Adverse Effect and, (ii) any
Default and any potential breach of any of the undertakings set out in
clause 15 promptly upon becoming aware thereof and will from time to
time, if so requested by the Agent, confirm to the Agent in writing
that, save as otherwise stated in such confirmation, no Default has
occurred and is continuing.
13 UNDERTAKINGS
13.1 OBLIGORS' UNDERTAKINGS
Save where stated otherwise, the Parent, in respect of itself and each
other Group Member, and each Obligor in respect of itself only,
undertakes with each of the Finance Parties that it will procure that
the undertakings contained in clauses 13.2 to 13.22 are complied with
throughout the Facility Period.
13.2 PURPOSE
The Borrower will use the Loan for the purpose specified in clause 2.2.
13.3 CONSENTS
It will (and will procure the same in respect of all its Subsidiaries),
without prejudice to clauses 3 and 11, obtain or cause to be obtained,
maintain in full force and effect and comply in all material respects
with conditions and restrictions (if any) imposed in, or in connection
with, every consent, authorisation, licence or approval of any
Government Entity and do, or cause to be done, all other acts and
things, which may from time to time be necessary under applicable law
for the continued due performance of all its material obligations under
the Finance Documents.
13.4 COMPLIANCE WITH LICENCES ETC. RELATING TO THE BUSINESS OF THE GROUP
It will comply, and shall procure that all its Subsidiaries comply, in
all material respects with the terms and conditions of all laws
(including Telecommunications Laws, the Licences and the Necessary
Authorisations), regulations, agreements, licences and concessions
relevant to the carrying on of the business of any member of the Group.
43
<PAGE> 51
13.5 PARI PASSU
It will ensure that its obligations, under each of the Finance
Documents shall, without prejudice to the provisions of clause 15, at
all times be direct, general and unconditional obligations and rank at
least pari passu with all its other present and future unsecured and
unsubordinated Indebtedness, subject to the Reservations.
13.6 INSURANCE
It will, and, in the case of the Parent, will procure that each other
Group Member will, (i) insure and keep insured all of the Equipment
with underwriters or insurance companies of repute to such extent and
against such risks (including, without limitation, product liability
risks) as prudent companies engaged in businesses similar to those it
or, in the case of the Parent, the relevant Group Member normally
insures and as further required under the terms of the Security
Documents, (ii) produce (if available) to the Agent on request copies
of all insurance policies from time to time effected by it and, in the
case of the Parent, other Group Members, following their issue and
receipts for the premiums payable under such policies, (iii) procure
that the Security Agent is noted as loss payee on such insurance
policies and (iv) (to the extent permitted by the Notes) assign such
insurance policies to the Security Agent on terms reasonably acceptable
to all of the Lenders.
13.7 ENVIRONMENTAL LICENCES
It will, and will, in the case of the Parent, procure that each Group
Member will, obtain and maintain in full force and effect all
Environmental Licences to ensure that its business complies in all
material respects with all Environmental Laws.
13.8 ENVIRONMENTAL CLAIMS
It will, and will, in the case of the Parent, procure that each Group
Member will, promptly upon receipt of notice of the same inform the
Agent of any Environmental Claim which has been made or to the best of
its knowledge threatened against any Group Member or any of the
officers of any Group Member in their capacity as such which would or
be reasonably likely to have a Material Adverse Effect or any
requirement by any Environmental Licence or applicable Environmental
Laws to make any material investment or expenditure or take or desist
from taking any action.
13.9 RELEVANT SUBSTANCES
It will, and will, in the case of the Parent, procure that each Group
Member will, notify the Agent forthwith upon becoming aware of any
Relevant Substance at or brought on to any of the properties owned,
leased or otherwise occupied by any member of the Group in
circumstances which are outside the ordinary course of the business of
the relevant Group Member which might be reasonably expected to give
rise to any Environmental Claim, and in such cases take or procure the
taking of all necessary action to deal with, remedy or remove from such
property
44
<PAGE> 52
or prevent the incursion of (as the case may be) that Relevant
Substance in order to prevent such Environmental Claim and in a manner
that complies with all requirements of Environmental Law.
13.10 YEAR 2000
It will, and will, in the case of the Parent, procure that each Group
Member will, have completed by the commencement of the year 2000, any
reprogramming required to permit the proper functioning, in and
following the year 2000, of (i), in the case of the Parent, the
computer systems of each Group Member and (ii) its equipment containing
embedded microchips (including systems and equipment supplied by
others), in each case which systems or equipment are material to the
carrying on of the Group's business, and the testing of all such
systems and equipment as so reprogrammed.
13.11 INTELLECTUAL PROPERTY RIGHTS
It will, and will, in the case of the Parent, procure that each Group
Member will:
(a) take all action necessary to safeguard and maintain its
rights, present and future, in or relating to all Intellectual
Property Rights material to its business, and in the case of
the Parent, the business of the Group (taken as a whole)
including, without limitation, observing all covenants and
stipulations relating thereto and paying all applicable
renewal fees, licence fees and other outgoings;
(b) use all reasonable efforts to effect registration of
applications for registration of any registered design,
patent, trade mark and service mark material to its business,
and in the case of the Parent, the business of the Group
(taken as a whole) and keep the Agent informed of events
relevant to any such application and not without the prior
consent in writing of the Agent, acting on the instructions of
the Majority Lenders, permit any Intellectual Property Rights
material to its business, and in the case of the Parent, the
business of the Group (taken as a whole) to be abandoned or
cancelled, to lapse or to be liable to any claim of
abandonment for non-use or otherwise;
(c) promptly notify the Agent of any infringement or suspected
infringement or any challenge to the validity of any of its
present or future Intellectual Property Rights material to its
business, and in the case of the Parent, the business of the
Group (taken as a whole) which may come to its notice, supply
the Agent with all information in its possession relating
thereto and take all steps necessary to prevent or bring to an
end any such infringement and to defend any challenge to the
validity of any such rights; and
(d) not sell, transfer or otherwise dispose of any Intellectual
Property Rights material to its business, and in the case of
the Parent, the business of the Group (taken as a whole).
45
<PAGE> 53
13.12 CHANGE IN BASIS OF ACCOUNTS
The Borrower will ensure that all financial statements delivered under
clause 12.1 are prepared in accordance with GAAP and in accordance with
the accounting principles and practices used in the preparation of the
financial statements referred to in part A of schedule 3 (the "ORIGINAL
BASIS") consistently applied in respect of each financial year unless
to do so would be inconsistent with then current GAAP (the "NEW
BASIS"). If the preparation of financial statements on the Original
Basis is contrary to the New Basis then the Borrower shall promptly
notify the Agent in writing of the relevant change and at the option of
the Borrower) shall either (1) prepare and deliver to the Agent audited
financial statements on both the Original Basis and the New Basis or
shall prepare and deliver financial statements on the New Basis only
but shall also prepare and deliver an audited reconciliation statement
(a "RECONCILIATION STATEMENT") showing those adjustments necessary in
order to reconcile the financial statements produced on the New Basis
to the Original Basis) or (2) request the Agent to enter into good
faith negotiations for such amendments (if any) as are necessary to the
covenants contained in clause 15 and any other provisions of this
Agreement affected by such change, in which event the Agent will enter
into such negotiations for a period of not more than 28 days. If
agreement is reached between the Borrower and the Agent (acting on the
instructions of the Majority Lenders) within such period as to the
amendment of any such covenants or provisions, then the parties hereto
will enter into such documentation and take such other steps as are
required to put such amendments into effect following which the
Borrower shall then be obliged to produce financial statements on the
New Basis only. If no such agreement is reached then the Borrower shall
be obliged to prepare and deliver audited financial statements on the
New Basis accompanied by a Reconciliation Statement.
Where the Borrower is under an obligation to deliver financial
statements under clause 12.1 on the New Basis but accompanied by a
Reconciliation Statement, Quarterly Management Accounts shall also be
delivered on the New Basis but accompanied by a Reconciliation
Statement.
All financial statements, Quarterly Management Accounts and
Reconciliation Statements delivered pursuant to this clause 13.12 shall
be delivered within the relevant time period set out in clause 12.1.
The provisions of this clause 13.12 shall also apply, mutatis mutandis,
to the preparation and delivery of the Business Plan under clause 12.1.
13.13 FINANCIAL YEAR END
Unless the Agent is otherwise advised, it will and, in the case of the
Parent, will procure that each Group Member will maintain a financial
year end of 31 December, in the event that such a change is made the
covenants in clause 15 will be restated as at the new financial year
end.
46
<PAGE> 54
13.14 AUTHORISED OFFICERS
It will ensure that any new or replacement Authorised Officer has
provided the Agent with evidence reasonably satisfactory to it of such
new officer(s)' authority and a specimen of his or their signature(s)
prior to signing any Compliance Certificates, Drawdown Notices, or any
other notices, requests or confirmations referred to in this Agreement
or relating to the Facilities.
13.15 AUDITORS
The Parent will ensure that Arthur Andersen is appointed as auditor of
the Parent, the Borrower and each of its Subsidiaries and not change
such appointment without appointing a major accounting firm of
recognised international standing and repute.
13.16 INSPECTION
It will if required by the Agent (acting on the instructions of the
Majority Lenders), at any time whilst a Default is continuing, permit,
to the extent it is able to do so, representatives of the Agent or any
of the Lenders upon reasonable prior written notice to the Borrower or
its relevant Subsidiary, after having made arrangements with the
Borrower so to do and after entering into a confidentiality undertaking
if reasonably required by the Borrower (a) visit and inspect the
properties of any Group Member during normal business hours, (b)
inspect and make extracts from and copies of its books and records
other than records which the relevant Group Member is prohibited by law
or any confidentiality undertaking from disclosing to the Agent and/or
any relevant Lender and (c) discuss with its principal officers and
auditors its business, assets, liabilities, financial position, results
of operations and business prospects provided that any such discussion
with the auditors shall only be on the basis of the audited accounts of
the Group and Compliance Certificates issued by the auditors.
13.17 TAXES
It will and will procure that each Group Member will file or cause to
be filed all tax returns required to be filed in all jurisdictions in
which it is situated or carries on business or is otherwise subject to
Taxation and will pay all Taxes shown to be due and payable on such
returns or any assessments made against it within the period stipulated
for such payment (other than those being contested in good faith and
where such payment may be lawfully withheld).
13.18 SUBORDINATION OF LOANS FROM SUBORDINATED CREDITOR
The Parent will procure that any Subordinated Debt is made available on
terms and conditions reasonably acceptable to the Agent.
13.19 BUSINESS PLAN
The Parent will, and will procure that each Group Member will, perform
at all times in accordance with the Business Plan.
47
<PAGE> 55
13.20 WORKING CAPITAL
The Borrower will maintain adequate working capital to enable it to
comply with the Business Plan and ensure that the days of receivables
outstanding on a rolling average basis is less than 90 days.
13.21 BUSINESS
The Parent will engage solely in the business of acting as the Holding
Company of its Subsidiaries (which shall include the on-lending of
Borrowed Money to its Subsidiaries in accordance with the provisions of
this Agreement) and will not act as an operating company actually
engaged in any business.
13.22 MAINTENANCE OF SYSTEMS AND SOFTWARE
The Borrower will procure that the Systems are maintained in accordance
with industry standard practice and that the software used in
connection with the Equipment is maintained within two releases
generally available to users operating a similar business to the
Borrower.
13.23 PERMITTED ACQUISITIONS
(a) The Borrower shall, within 7 days of the completion of a
Permitted Acquisition or a Major Permitted Acquisition, give
notice thereof to the Agent, together with confirmation that
immediately after such completion no Default has occurred and
is continuing or, to the best of its knowledge, would result
therefrom.
(b) The Borrower shall, within 7 days of the approval by the
supervisory board or, as the case may be the board of
directors, of a Major Permitted Acquisition, give notice
thereof to the Agent, together with a certificate in the
agreed form signed by the chief financial officer of the
Borrower confirming his opinion that the Borrower will at all
times after the completion of such Major Permitted Acquisition
be in compliance with all the covenants set out in clause 15.
Thereafter the Borrower shall provide the Agent with such
information as it may reasonably request about the strategic
rationale and economics of such acquisition.
(c) (i) In respect of a Permitted Acquisition which is not a Major
Permitted Acquisition, the Borrower shall provide the Agent
with a revised Business Plan within 60 days of the date of
such Permitted Acquisition. There shall be no requirement for
such Business Plan to have been approved by the Supervisory
Board of the Borrower.
(ii) In respect of a Major Permitted Acquisition, the Borrower
shall provide the Agent with a revised Business Plan, approved
by the Supervisory Board of the Borrower, within 60 days of
the date of such Major Permitted Acquisition.
In either case such Business Plan shall demonstrate that all
capital
48
<PAGE> 56
commitments relating to the relevant Permitted Acquisition or
Major Permitted Acquisition are fully funded and that the
Borrower will at all times be in compliance with the financial
covenants set out in clause 15.
(d) Where a Permitted Acquisition or a Major Permitted Acquisition
is made by a Group Member during a Quarterly Period, the
Consolidated EBITDA attributable to the acquisition or
investment for that part of the relevant Quarterly Period
prior to the acquisition may (at the option of the Borrower)
also be included for the purposes of determining Consolidated
EBITDA of the Group. If the Consolidated EBITDA attributable
to the acquisition or investment is negative, it must be
included.
If the Consolidated EBITDA attributable to an acquisition is
to be included the Borrower shall determine the Consolidated
EBITDA attributable to any such acquisition or investment by
reference to the accounts used for the purpose of the
acquisition or investment (which may be yearly, half-yearly,
management or completion accounts or other accounts). The
Borrower shall make available to any Lender, if it so requests
(through the Agent), a copy of such accounts. If the
Consolidated EBITDA attributable to an acquisition or
investment is not included, the Borrower will confirm to the
Agent whether the Consolidated EBITDA attributable to that
acquisition or investment was positive or negative.
14 NEGATIVE UNDERTAKINGS
14.1 OBLIGORS' UNDERTAKINGS
The Parent, in respect of itself and the other Group Members, and each
Obligor in respect of itself only, undertakes with each of the Finance
Parties that it will procure that the undertakings contained in clauses
14.2 to 14.13 are complied with throughout the Facility Period.
14.2 NEGATIVE PLEDGE
No Encumbrance will exist over the Equipment except Permitted
Encumbrances.
14.3 SENIOR DEBT AND GUARANTEES
It will not incur or permit to be outstanding:
(a) any Borrowed Money of any member of the Group (other than
Borrowed Money outstanding under this Agreement, Permitted
Senior Debt or Permitted Indebtedness) or guarantee any such
Borrowed Money provided however, that if no Default or Event
of Default shall have occurred and be continuing at any time,
or would occur as a consequence of the incurrence of any such
Borrowed Money, it may incur Borrowed Money if immediately
thereafter the ratio of Total Debt (including the relevant
Borrowed Money) to Annualised Consolidated EBITDA
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<PAGE> 57
calculated by reference to the two most recent Quarterly
Periods (in respect of which Quarterly Management Accounts
have been delivered to the Agent under this Agreement)
adjusted as if such Borrowed Money had been incurred and the
proceeds thereof had been applied at the beginning of such two
Quarterly Periods, would be greater than zero and less than or
equal to 5.0:1;
(b) any Borrowed Money from a Restricted Person other than
Subordinated Debt;
(c) (in respect of the Borrower Group only) any Borrowed Money
from the Parent other than pursuant to a Parent Subordinated
Loan Agreement; or
(d) any other Borrowed Money unless otherwise permitted pursuant
to the terms of this Agreement.
14.4 DISPOSALS
There will be no disposal of a material part of the assets of any
member of the Group other than a Permitted Disposal.
14.5 LOANS AND GUARANTEES
Save for normal trade credit given in the ordinary course of trading,
it (the "LENDING OBLIGOR") will not make any loans to, grant any credit
to or give any guarantee to or for the benefit of, or enter into any
transaction having the effect of lending money to any person who is not
an Obligor other than a Group Member who is not an Obligor (a
"BORROWING GROUP MEMBER") and provided that the aggregate amount of all
such Indebtedness does not exceed euro 20,000,000 and the right of the
relevant Lending Obligor to receive any payment in respect thereof is
not subordinated and ranks at least pari passu with all unsecured and
unsubordinated claims against the Borrowing Group Member.
14.6 EQUITY YIELD
It will not make any Restricted Payment to the Parent, any of its
shareholders or any Restricted Person if any amount has not been paid
in accordance with this Agreement, or any covenant in clause 15 has
been breached and not remedied or waived.
14.7 SHAREHOLDERS' MEETINGS
It will not alter or convene any meeting with a view to the alteration
of any provision of its respective Memorandum or Articles of
Association if such alteration would or would be likely to have (in the
reasonable opinion of the Agent) a Material Adverse Effect, and unless
the Agent is provided with a reasonable opportunity to review and
prevent such an alteration prior to it being made.
14.8 NEW SHARE ISSUES
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It will not, and will procure that none of its Subsidiaries will
(without the prior written consent of the Agent, acting on the
instructions of the Majority Lenders), issue any shares (other than to
an Obligor) or otherwise acquire any additional capital (other than
from an Obligor) unless such shares or capital will not entitle the
holder or owner thereof to receive any interest, dividend, other
distribution, capital or any other amount until after the Facility
Period provided that the Parent shall be entitled to issue ordinary
shares fully paid (i) pursuant to an initial or any future public
offering of fully paid ordinary shares of the Parent; (ii) pursuant to
a private equity placement; (iii) pursuant to the exercise of any share
options or warrants existing at the date hereof or subsequently issued
subject always to clause 6.3(a), or (iv) in consideration for the
purchase price in relation to a Permitted Acquisition or a Major
Permitted Acquisition, and in each of the cases set out in (i) to (iv)
above, no other provision of any Finance Document would be breached as
a result.
14.9 AMALGAMATION AND MERGER
It will not merge or consolidate with any other company or person and,
in the case of the Parent, it will procure that no other Group Member
merges or consolidates with any other company or person save for
mergers between any Group Members with any or all of the other Group
Members or, as the case may be, any other company or person (in which
case, for the avoidance of doubt, such merger or amalgamation shall
comply in all respects with clause 13.23) ("ORIGINAL ENTITIES") into
one or more entities (each a "MERGED ENTITY") provided that:
(i) reasonable details of the proposed merger in order to
demonstrate satisfaction with paragraphs (ii) to (iv) below,
including a formal legal opinion in form satisfactory to the
Agent which confirms paragraph (ii) below, are provided to the
Agent at least 10 days before the merger or amalgamation is to
be entered into;
(ii) such Merged Entity is a Group Member and is liable for the
obligations of the relevant Original Entities (including the
obligations under this Agreement and the other Finance
Documents) which remain unaffected thereby and entitled to the
benefit of all the rights of such Original Entities;
(iii) if the Agent reasonably determines necessary, such Merged
Entity has entered into a Deed of Guarantor Accession and/or
Security Documents which provide a guarantee and/or security
over the same assets of at least an equivalent nature and
ranking to the security provided by the relevant Original
Entities pursuant to any Guarantee or Security Documents
entered into by them and the Lenders consent to such
arrangements (such consent not to be unreasonably withheld);
(iv) substantially all the property and other assets of the
relevant Original Entities are vested in the Merged Entity and
that the Merged Entity has assumed all the rights and
obligations of the relevant Original Entities under the
Finance Documents and Project Agreements and all material
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Necessary Authorisations;
14.10 CHANGE IN BUSINESS
It will not, and will procure that none of its Subsidiaries will,
engage in any line of business other than Permitted Business in the
Benelux region, or in the United States of America, France, Germany or
the United Kingdom further to the use of certain international links
into those countries directly or indirectly from the System.
14.11 ACQUISITIONS AND JOINT-VENTURES
The Parent will not, and will procure that no Group Member will,
acquire or make any investment in any companies, joint ventures or
partnerships or acquire any businesses (or interests therein) other
than Permitted Acquisitions or Major Permitted Acquisitions.
14.12 SWAPS AND HEDGING
It will not and will, in the case of the Parent, procure that no Group
Member enters into any interest rate or currency swaps or other hedging
arrangements other than non-speculative arrangements directly relating
to the risk management of Borrowed Money permitted to subsist by the
terms of this Agreement and entered into in the ordinary course of the
business for the genuine hedging of the relevant underlying
transaction.
15 OPERATIONAL AND FINANCIAL COVENANTS
15.1 OPERATIONAL AND FINANCIAL COVENANTS
Each Obligor undertakes with each of the Finance Parties that it will
ensure that on each Quarter Date falling within the Facility Period the
undertakings contained in clauses 15.2 and 15.3 are complied with.
15.2 OPERATIONAL COVENANTS
(a) Minimum average revenue
At all times during the periods set out in column (1) below the average
revenues per month received by the Group from Subscribers (excluding
for these purposes any Subscribers in respect of any Permitted
Acquisition which are not categorised as Business Subscribers) arising
out of the use or operation of the System (calculated on each Quarter
Day by reference to the Six Month Period ending on such day) must be
not less than the amount set out against such period in column (2)
below per such Subscriber per month:
(1) (2)
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<PAGE> 60
<TABLE>
<CAPTION>
Period NLG
------ ---
<S> <C>
1 January - 30 June 1999 529
1 April - 30 September 1999 559
1 July - 31 December 1999 616
1 October 1999 - 31 March 2000 691
1 January - 30 June 2000 766
1 April - 30 September 2000 827
1 July - 31 December 2000 877
1 October 2000 - 31 March 2001 900
1 January - 30 June 2001 925
1 April - 30 September 2001 963
1 July - 31 December 2001 1000
1 October 2001 - 31 March 2002 1038
1 January - 30 June 2002 1075
1 April - 30 September 2002 1120
1 July - 31 December 2002 1155
1 October 2002 - 31 March 2003 1188
1 January - 30 June 2003 1223
1 April - 30 September 2003 1258
1 July - 31 December 2003 1293
1 October 2003 - 31 March 2004 1328
1 January - 30 June 2004 1363
1 April - 30 September 2004 1398
1 July - 31 December 2004 1433
1 October 2004 - 31 March 2005 1468
</TABLE>
(b) Total revenue
This covenant shall only apply until Annualised Consolidated EBITDA
(calculated by reference to the Quarterly Period ending on such Quarter
Days) was not less than zero on two most recent previous consecutive
Quarter Days in relation to which Quarterly Management Accounts have
been delivered to the Agent under this Agreement.
(i) Until and including the Quarterly Period ending on 30 September
2001:
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<PAGE> 61
subject to the foregoing, at all times during the periods set out in
column (1) below the total revenues (calculated on each Quarter Day by
reference to the Twelve Month Period ending on such day),
(x) within any three consecutive periods set out in column (1)
must be equal to or exceed the amount set out against the
relevant period in column (3) below in respect of at least two
out of the three relevant periods; and
(y) must be not less than the amount set out against such period
in column (2) below:
<TABLE>
<CAPTION>
(1) (2) (3)
Period NLG ('000) NLG ('000)
------ ---------- ----------
<S> <C> <C>
1 July 1998 - 30 June 1999 51,663 55,552
1 October 1998 - 30 September 1999 58,494 62,897
1 January - 31 December 1999 63,683 68,476
1 April 1999 - 31 March 2000 76,930 82,720
1 July 1999 - 30 June 2000 104,560 112,430
1 October 1999 - 30 September 2000 149,006 155,215
1 January - 31 December 2000 205,653 214,222
1 April 2000 - 31 March 2001 260,294 271,140
1 July 2000 - 30 June 2001 311,552 324,533
and
</TABLE>
(ii) For the Quarterly Period commencing on 1 October 2001 and
thereafter:
subject to the foregoing, at all times during the periods set out in
column (1) below the total revenues (calculated on each Quarter Day by
reference to the Six Month Period ending on such day) must be not less
than the amount set out against such period in column (2) below:
<TABLE>
<CAPTION>
(1) (2)
Period NLG ('000)
------ ----------
<S> <C> <C>
1 October 2001 - 31 March 2002 228,877
1 January - 30 June 2002 244,305
1 April - 30 September 2002 256,626
1 July - 31 December 2002 278,425
</TABLE>
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<PAGE> 62
<TABLE>
<CAPTION>
<S> <C> <C>
1 October 2002 - 31 March 2003 294,853
1 January - 30 June 2003 312,646
1 April - 30 September 2003 324,268
1 July - 31 December 2003 350,673
1 October 2003 - 31 March 2004 363,160
1 January - 30 June 2004 383,913
1 April - 30 September 2004 405,586
1 July - 31 December 2004 428,216
1 October 2004 - 31 March 2005 451,840
</TABLE>
15.3 POST ANNUALISED CONSOLIDATED EBITDA POSITION
If Annualised Consolidated EBITDA (calculated by reference to the
Quarterly Period ending on such Quarter Days) was not less than zero on
two consecutive Quarter Days in respect of which Quarterly Management
Accounts have been delivered to the Agent under this Agreement:
(a) Maximum Senior Debt to Annualised Consolidated EBITDA
the ratio of Senior Debt of the Borrower Group and the Parent
to Annualised Consolidated EBITDA of the Borrower Group and
the Parent (calculated by reference to the Quarterly Period
ending on such Quarter Day) shall not exceed the number set
out in column (2) below against the period set out in column
(1) below in which such Quarterly Period falls:
<TABLE>
<CAPTION>
(1) (2)
Period Ratio
------ -----
<S> <C> <C>
1 January - 31 March 2002 11.00:1
1 April - 30 June 2002 7.50:1
1 July - 30 September 2002 5.25:1
1 October - 31 December 2002 3.75:1
1 January - 31 March 2003 3.25:1
1 April - 30 June 2003 3.00:1
1 July - 30 September 2003 2.75:1
1 October - 31 December 2004 2.60:1
</TABLE>
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<PAGE> 63
<TABLE>
<CAPTION>
<S> <C> <C>
1 January - 31 March 2004 2.25:1
1 April - 30 June 2004 2.00:1
1 July - 30 September 2004 2.00:1
1 October - 31 December 2004 2.00:1
1 January - 31 March 2005 2.00:1
and
</TABLE>
(b) Debt Service Cover
in respect of the Borrower Group and the Parent the ratio of
Consolidated EBITDA for the Six Month Period ending on such
Quarter Day to Total Debt Interest Charges during such Six
Month Period shall not be less than the number set out in
column (2) below against the period in column (1) below in
which such Quarterly Period falls:
<TABLE>
<CAPTION>
(1) (2)
Period Ratio
------ -----
<S> <C> <C>
1 October 2001 - 31 March 2002 0.25:1
1 January - 30 June 2002 0.45:1
1 April - 30 September 2002 0.65:1
1 July - 31 December 2002 0.90:1
1 October 2002 - 31 March 2003 1.07:1
1 January - 30 June 2003 1.15:1
1 April - 30 September 2003 1.20:1
1 July - 31 December 2003 1.25:1
1 October 2003 - 31 March 2004 1.40:1
1 January - 30 June 2004 1.70:1
1 April - 30 September 2004 2.00:1
1 July - 31 December 2004 2.25:1
1 October 2004 - 31 March 2005 2.50:1
</TABLE>
15.4 AUDITORS CERTIFICATE
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<PAGE> 64
If at any time the Majority Lenders (acting reasonably and following
consultation with the Borrower) do not consider that any figure set out
in any Compliance Certificate issued by any Authorised Officer is
correct, they shall be entitled within 30 days of the date of the
delivery of such Compliance Certificate to the Agent pursuant to clause
12.1 to call for a certificate from the Borrower's auditors as to such
figure. For such purposes the Borrower's auditors shall act as
independent experts and not as arbiters and every such certificate
shall be addressed to the Agent (on behalf of the Lenders) and be at
the expense of the Borrower. If the Majority Lenders call for such a
certificate all calculations under this Agreement by reference to the
relevant figure shall (i) until the Borrower's auditors deliver the
relevant certificate under this clause 15.4 be made by reference to the
figure set out in the relevant Compliance Certificate delivered to the
Agent under this Agreement and (ii) following the delivery by the
Borrower's auditors of a certificate under this clause 15.4 be made by
reference to such certificate and the Borrower undertakes forthwith to
pay all additional amounts which would have been payable under clause
6.2 by reference to such Compliance Certificate.
16 DEFAULT
16.1 EVENTS OF DEFAULT
Each of the matters listed in clauses 16.2 to 16.15 is an Event of
Default.
16.2 THE FINANCE DOCUMENTS
(a) The Borrower fails to pay any amount payable under clause 5
when due except where the failure is due solely to technical
or administrative delays in the transmission of funds outside
the control of the Borrower.
(b) Any Obligor fails to pay any other amount payable by it under
the Finance Documents in the manner stipulated in them and
such failure is not cured within 5 Banking Days of receiving
notice from the Agent of such failure to pay except where the
failure is due solely to technical or administrative delays in
the transmission of funds outside the control of the relevant
Obligor. The period of 5 Banking Days referred to in this
clause 16.2(b) shall not apply at a time when an Event of
Default has occurred and is continuing and if any Obligor
agrees to a shorter period in equivalent provision in any
other agreement relating to Borrowed Money to which it is a
party then such shorter period will apply to this clause
16.2(b) mutatis mutandis.
(c) Any representation or warranty made by an Obligor in
connection with the Finance Documents, a Drawdown Notice or
any related document is incorrect or misleading in a material
respect and, in the event that the act or circumstance which
led to such representation or warranty being incorrect or
misleading is capable of remedy, such action as the Agent may
require shall not have been taken within 30 days of the Agent
notifying the relevant Obligor of such act or circumstance and
such required action.
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<PAGE> 65
(d) Any Obligor breaches any other provision of the Finance
Documents and, in respect of any such breach which is capable
of remedy, such action as the Agent may reasonably require
shall not have been taken within 30 days of the Agent
notifying the relevant Obligor of such default and of such
required action.
(e) Any material provision of the Finance Documents becomes
unlawful, ineffective or unenforceable for any reason
whatsoever.
16.3 CROSS-DEFAULT
(a) Any Borrowed Money of any Obligor is not paid when due or
within any applicable grace period expressly contained in the
agreement relating to such Borrowed Money, or any Borrowed
Money of any Group Member becomes (whether by declaration or
automatically in accordance with the relevant agreement or
instrument constituting the same) due and payable prior to the
date when it would otherwise have become due or any creditor
of any Group Member becomes entitled to declare any Borrowed
Money of any Group Member so due and payable or to require
cash collaterisation or security for any such borrowed Money
or any facility or commitment available to any Group Member
relating to Borrowed Money is withdrawn, suspended or
cancelled by reason of any default (however described) of the
company concerned and the amount, or aggregate amount at any
one time, of all Borrowed Money in relation to which any of
the foregoing events shall have occurred and be continuing is
equal to or greater than $250,000 or its equivalent in the
currency in which the same is denominated and payable or such
other (a) lower amount as agreed to by any Obligor with any
debt provider, or (b) higher amount as agreed to by any
Obligor with any provider of Senior Debt of $100,000,000 or
more; or
(b) Any Group Member fails to make payment in relation to a
Derivatives Contract of any sum equal to or greater than
$250,000 (or its equivalent) in aggregate at any one time (or
its equivalent in the relevant currency of payment) on its due
date or the counterparty to a Derivatives Contract becomes
entitled to terminate that Derivatives Contract early and the
Net Derivatives Liability of the Group Members, in the
aggregate, under all its Derivatives Contracts in relation to
which any of the foregoing events shall have occurred at the
relevant time is equal to or greater than $250,000 (or its
equivalent in the relevant currency) or such other (a) lower
amount as agreed to by any Obligor with any debt provider, or
(b) higher amount as agreed to by any Obligor with any
provider of Senior Debt of $100,000,000 or more.
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<PAGE> 66
16.4 FINANCIAL POSITION
(a) Any Obligor or Group Member becomes insolvent or unable to pay
its debts when due or within any applicable grace period
expressly contained in the agreement relating to such debt.
(b) Any Obligor ceases to carry on business, stops payment of its
debts or any class of them or enters into any compromise or
arrangement in respect of its debts or any class of them; or
any step is taken to do any of those things.
(c) The auditors of the Group qualify their audit report on the
audited consolidated financial statements of the Group except
where the qualification is of a technical nature and the
remedy for the matter giving rise to the qualification would
have no effect on the results of the Group for the period to
which such accounts relate or on the financial position of the
Group as at the end of such period.
(d) A material part of the assets of the Group taken as a whole is
nationalised, expropriated or compulsorily acquired.
16.5 INSOLVENCY PROCEDURES
(a) Any Obligor is dissolved or enters into liquidation,
administration, administrative receivership, receivership, a
voluntary arrangement, a scheme of arrangement with creditors,
any analogous or similar procedure in any jurisdiction other
than England or any other form of procedure relating to
insolvency, reorganisation or dissolution in any jurisdiction;
or a petition is presented or other step is taken by any
person with a view to any of those things.
(b) However, there will not be an Event of Default under clause
16.5(a) in respect of any Obligor (other than the Borrower) if
the Borrower can establish, to the reasonable satisfaction of
the Agent (acting on the instructions of the Majority
Lenders), that such procedure is:
(i) instituted by the Obligor concerned for the purpose
of a fully solvent reorganisation; or
(ii) a court process instituted by a creditor and is an
abuse of process of the court
provided that, in either case, the obligations of the relevant
Obligor under, and the security created by, the Finance
Documents to which such Obligor is a party will not be
materially adversely affected.
16.6 LEGAL PROCESS
(a) Any judgment or order against an Obligor in respect of
indebtedness exceeding $50,000 or its equivalent, or any other
Group Member in
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respect of indebtedness exceeding $250,000 or its equivalent,
is not stayed or complied with within fourteen days.
(b) Any execution, distress, sequestration or other legal process
which is not frivolous or vexatious is commenced against any
of the assets of an Obligor in respect of indebtedness
exceeding $50,000 or its equivalent, or any other Group Member
in respect of indebtedness exceeding $250,000 or its
equivalent, and is not discharged within fourteen days.
(c) Any formal steps are taken to enforce an Encumbrance over any
assets of an Obligor in respect of indebtedness exceeding
$50,000 or its equivalent, or any other Group Member in
respect of indebtedness exceeding $250,000 or its equivalent.
16.7 COMPOSITIONS
Any formal steps are taken, or negotiations commenced, by an Obligor or
any Group Member or by any of their respective creditors with a view to
proposing any kind of composition, compromise or arrangement involving
such company and any of its creditors other than for the purpose of a
fully solvent reorganisation of the Group.
16.8 LITIGATION
Any litigation, alternative dispute resolution, arbitration or
administrative proceeding is taking place, pending or to the best of
its knowledge threatened against or affecting any Obligor or Group
Member, which if determined against it, would be reasonably likely, in
the opinion of the Agent, to have a Material Adverse Effect.
16.9 MATERIAL ADVERSE CHANGE
An event or series of events occurs or circumstances arise which, in
the opinion of the Agent, would or is reasonably likely to have a
Material Adverse Effect.
16.10 ABANDONMENT OF THE PROJECT
All or a material part of the development or operation of the Project
is abandoned or suspended for a continuous period exceeding 30 days.
16.11 PROJECT AGREEMENTS
(a) Any Project Agreement is terminated, suspended, revoked or
cancelled or otherwise ceases to be in full force and effect
(unless services of a similar nature to those provided
pursuant to such Project Agreement (if still required to
enable the Group to complete the Project or carry on the
Permitted Business) are at all times provided to the Group on
terms no less beneficial to the relevant member of the Group).
(b) Any amendment, alteration or variation is made to any term of
any Project Agreement or any Project Agreement is restated or
replaced by
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<PAGE> 68
any successor agreement which (in the reasonable opinion of
the Agent) would or is reasonably likely to have a Material
Adverse Effect.
(c) Any party breaches any term of or repudiates any of its
obligations under any of the Project Agreements where such
breach or repudiation (in the opinion of the Agent) would or
is reasonably likely to have a Material Adverse Effect.
16.12 ENVIRONMENTAL MATTERS
As a result of any Environmental Law, any Finance Party becomes subject
to a material, in the reasonable opinion of the Agent, obligation
(actual or contingent, in the case of any contingent obligation, being
one which, at the relevant time, would be likely to arise) as a result
of it entering into or performing its obligations under any of the
Finance Documents.
16.13 TELECOMMUNICATIONS LAWS
Any Obligor or Group Member fails to comply in any material respect
with any material term or condition of any Telecommunications Law.
16.14 LICENCES
Any Licence is terminated, suspended, revoked or cancelled or otherwise
ceases to be in full force and effect unless a replacement licence on
terms no less beneficial to the relevant member of the Group becomes
effective no later than the time of such termination, suspension,
revocation, cancellation or cessation to be in full force and effect.
16.15 RESTRICTED PERSONS
(a) Any Restricted Person breaches any provision under a
Subordinated Loan Agreement and, in respect of any such breach
which is capable of remedy, such action as the Agent may
reasonably require shall not have been taken within 21 days of
the Agent notifying the relevant Restricted Person of such
default and of such required action.
(b) Any representation or warranty made by or in respect of any
Restricted Person in or pursuant to any Subordinated Loan
Agreement is incorrect or misleading in any material respect
and, in the event that the act or circumstance which led to
such representation or warranty being incorrect or misleading
is capable of remedy, such action as the Agent may require
shall not have been taken within 21 days of the Agent
notifying such Restricted Person of such act or circumstance
and such required action.
(c) Any material provision of any Subordinated Loan Agreement
becomes unlawful, ineffective or unenforceable for any reason
whatsoever.
(d) Any Restricted Person is dissolved or enters into liquidation,
administration, administrative receivership, receivership, a
voluntary arrangement, a scheme of arrangement with creditors,
any analogous or
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similar procedure in any jurisdiction other than England or
any other form of procedure relating to insolvency,
reorganisation or dissolution in any jurisdiction; or a
petition is presented or other step is taken by any person
with a view to any of those things.
However, there will not be an Event of Default under this
clause 16.15(d) in respect of any Restricted Person if the
Borrower can establish, to the reasonable satisfaction of the
Agent (acting on the instructions of the Majority Lenders),
that such procedure is:
(i) instituted by the Restricted Person concerned for the
purpose of a fully solvent reorganisation; or
(ii) a court process instituted by a creditor and is an
abuse of process of the court
provided that, in either case, the obligations of the relevant
Restricted Person under, and the subordination created by, the
relevant Subordinated Loan Agreement will not be adversely
materially affected.
16.16 CONSEQUENCES OF EVENT OF DEFAULT
If an Event of Default has occurred and is continuing, the Agent if so
requested by the Majority Lenders may at any time after the happening
of an Event of Default (and while the same is continuing), by giving
notice to the Borrower:
(a) terminate the Facility (thereby reducing the Total Commitments
to zero); and/or
(b) demand repayment of all or any part of the Loan and payment of
any other amounts accrued under this Agreement; and/or
(c) declare that all or any part of the Loan is repayable, and any
other amounts accrued under this Agreement are payable, on
demand by the Agent at any time (in which event future
Interest Periods will be selected by the Agent); and/or
(d) declare that the Security Documents (or any of them) have
become enforceable whereupon the same shall be enforceable.
17 PAYMENTS
17.1 PAYMENTS BY THE OBLIGORS
Each payment to be made by an Obligor under the Finance Documents will
be made to the Agent as follows:
(a) it will be paid on the due date. If that date is not a Banking
Day, it will be paid on the next Banking Day. However, if that
would take the payment into the next calendar month, it will
be paid on the preceding Banking Day.
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<PAGE> 70
(b) It will be paid in full, without any set-off or deduction and
in accordance with clause 18.
(c) The Loan will be repaid, and interest and other amounts
attributable to the Loan including fees will be paid, in
euros. Costs and expenses will be paid in the currency in
which they were incurred.
17.2 PAYMENTS IN THE WRONG CURRENCY
If a payment is received from any of the Obligors in the wrong
currency, it will not discharge any part of the obligation in respect
of which it was made. The Agent is irrevocably authorised to convert
the amount received into the correct currency and to apply the net
proceeds in reduction of the relevant Obligor's liability. However, the
Agent is under no obligation to do so, either at all or at any
particular time, and has no responsibility for any loss suffered by any
Obligor as a result of the Agent's action or inaction save in the case
of negligence or wilful misconduct on the part of the Agent.
17.3 PARTIAL PAYMENTS
If a payment received from any Obligor under the Finance Documents is
insufficient to pay in full all amounts then payable by the relevant
Obligor under the Finance Documents, the amount received will be
applied in or towards payment of the following in the following order:
(a) first, in or towards payment, on a pro-rata basis, of any
unpaid costs and expenses of the Agent and/or the Security
Agent under the Finance Documents;
(b) secondly, in or towards payment to the Finance Parties, on a
pro-rata basis, of any amount owing to the Finance Parties
under clause 25.12;
(c) thirdly, in or towards payment to the Finance Parties, on a
pro-rata basis, of any accrued commitment commission payable
under clause 9.2 which shall have become due but remains
unpaid;
(d) fourthly, in or towards payment to the Finance Parties, on a
pro-rata basis, of any accrued interest which shall have
become due but remains unpaid but so that any amount payable
by virtue of clause 18.1 shall be excluded;
(e) fifthly, in or towards payment to the Finance Parties, on a
pro-rata basis, of any principal which shall have become due
but remains unpaid;
(f) sixthly, in or towards payment to any relevant Finance
Parties, on a pro-rata basis, of any amount payable to any
such Finance Parties by virtue of clause 18.1 which remains
unpaid; and
(g) seventhly, in or towards payment of any other sum which shall
have become due but remains unpaid (and, if more than one such
sum so remains unpaid, on a pro-rata basis).
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Each reference in clauses 17.3(a) to (c) (inclusive) to a category of
unpaid sums shall include interest thereon payable in accordance with
this Agreement including, without limitation, default interest under
clause 8.
The order of application set out in this clauses 17.3(d) to 17.3(g)
shall be varied by the Agent if the Majority Lenders so direct, without
any reference to, or consent or approval from, the Obligors.
This clause overrides any appropriation of such a payment by an
Obligor.
17.4 PRO-RATA PAYMENTS
(a) If at any time any Finance Party (the "RECOVERING BANK")
receives or recovers any amount owing to it by any Obligor
under the Finance Documents by direct payment, set-off or in
any manner other than by payment through the Agent pursuant to
clause 17.1 or 17.3 (not being a payment received from a
sub-participant in such Lender's Contribution to the Facility
or any other payment of an amount due to the Recovering Bank
for its sole account pursuant to clauses 6.3, 18.1, 19.1,
22.1, 23.1 or 23.5), the Recovering Bank shall, within two
Banking Days of such receipt or recovery (a "RELEVANT
RECEIPT") notify the Agent of the amount of the Relevant
Receipt. If the Relevant Receipt exceeds the amount which the
Recovering Bank would have received if the Relevant Receipt
had been received by the Agent and distributed pursuant to
clause 17.1 or 17.3, as the case may be, then:
(i) within two Banking Days of demand by the Agent, the
Recovering Bank shall pay to the Agent an amount
equal (or equivalent) to the excess;
(ii) the Agent shall treat the excess amount so paid by
the Recovering Bank as if it were a payment made by
the Borrower and shall distribute the same to the
Finance Parties (other than the Recovering Bank) in
accordance with clause 17.3; and
(iii) as between the relevant Obligor and the Recovering
Bank the excess amount so re-distributed shall be
treated as not having been paid but the obligations
of the relevant Obligor to the other Finance Parties
shall, to the extent of the amount so re-distributed
to them, be treated as discharged.
(b) If any part of the Relevant Receipt subsequently has to be
wholly or partly refunded by the Recovering Bank (whether to a
liquidator or otherwise) each Finance Party to which any part
of such Relevant Receipt was so re-distributed shall on
request from the Recovering Bank repay to the Recovering Bank
such Finance Party's pro-rata share of the amount which has to
be refunded by the Recovering Bank.
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<PAGE> 72
(c) Each Finance Party shall on request supply to the Agent such
information as the Agent may from time to time request for the
purpose of this clause 17.4.
(d) Notwithstanding the foregoing provisions of this clause 17.4
no Recovering Bank shall be obliged to share any Relevant
Receipt which it receives or recovers pursuant to legal
proceedings taken by it to recover any sums owing to it under
the Finance Documents with any other party which has a legal
right to, but does not, either join in such proceedings or
commence and diligently pursue separate proceedings to enforce
its rights in the same or another court (unless the
proceedings instituted by the Recovering Bank are instituted
by it in breach of clause 26.4).
17.5 NO RELEASE
For the avoidance of doubt it is hereby declared that failure by any
Recovering Bank to comply with the provisions of clause 17.4 shall not
release any other Recovering Bank from any of its obligations or
liabilities under clause 17.4.
17.6 NO CHARGE
The provisions of this clause 17 shall not, and shall not be construed
so as to, constitute a charge by a Finance Party over all or any part
of a sum received or recovered by it in the circumstances mentioned in
clause 17.4.
17.7 RECONVENTIONING
After consultation between the Agent, the Borrower and the Lenders and
notwithstanding clause 25.11 the Agent (acting reasonably) shall be
entitled to make such amendments to the provisions of this Agreement as
it may determine to be necessary to conform them to market practices
(whether as to the settlement or rounding of obligations, the
calculation of interest or otherwise howsoever) then applicable to
instruments denominated in euro.
Any amendment so made to this Agreement by the Agent shall be promptly
notified to the other Finance Parties and the Obligors by the Agent and
shall be binding on all the Finance Parties and the Obligors.
18 TAXES
18.1 GROSSING-UP
If any Obligor is required to make a withholding in respect of Taxes
from any payment for the account of any Finance Party under the Finance
Documents (or if the Agent is required to make any such withholding
from a payment to another Finance Party), the amount payable by such
Obligor will be increased to the extent necessary to ensure that, after
such withholding has been made, the Finance Party receives (and is able
to retain) a net sum equal to the amount which it would have received
if no such withholding had been required to be made.
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18.2 QUALIFYING PERSON
The relevant Obligor will not have to pay any increased amount under
clause 18.1 if the relevant Finance Party is not a Qualifying Person if
and to the extent that it exceeds the amount which it would have had to
pay if the relevant Finance Party had been a Qualifying Person.
18.3 CLAW-BACK OF TAX BENEFIT
This clause 18.3 applies if any Finance Party has received an increased
payment from any Obligor under clause 18.1 and subsequently receives a
credit against, or remission for, Taxes payable by it. Such Finance
Party will, in its discretion, establish the amount (if any) which, as
a result of such receipt, it is able to repay to the relevant Obligor
without putting itself in a worse position than if no withholding had
been required; and will pay it to the relevant Obligor as soon as
reasonably practicable. The Finance Party shall not have any obligation
to rearrange its tax affairs or disclose any information about them. At
the date of this Agreement each Lender represents that it is a
Qualifying Person.
19 INDEMNITY
19.1 GENERAL INDEMNITIES
(a) The Borrower will, on demand, indemnify each Finance Party
against any loss which it may suffer as a result of:
(i) any failure by any Obligor to pay any amount under
the Finance Documents when it is due or within any
applicable grace period;
(ii) any prepayment of all or part of the Loan otherwise
than on an Interest Payment Date and in accordance
with clause 6;
(iii) any Advance not being made for any reason (other than
a default by a Finance Party) after a Drawdown Notice
has been given;
(iv) the occurrence of any Event of Default;
(v) any payment made by any Lender to the Agent pursuant
to clause 25.12; or
(vi) any other breach of the Finance Documents by an
Obligor; or
(vii) the application of any Euro Zone Additional Cost.
(b) In this clause 19.1, "LOSS" means a loss or expense of any
kind certified as such by the relevant Finance Party,
including losses arising as a result of funding the Loan or
re-employing deposits which are no longer required to do so
but excluding loss of Margin.
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19.2 ENVIRONMENTAL INDEMNITY
The Borrower agrees to indemnify on demand each Finance Party, and
their respective officers, employees, agents and delegates (together
the "INDEMNIFIED PARTIES") in respect of which each Finance Party,
holds this indemnity on trust, without prejudice to any of their other
rights under this Agreement or any other Finance Document, against any
loss, liability, action, claim, demand, cost, expense, fine or other
outgoing whatsoever whether in contract, tort, delict or otherwise and
whether arising at common law, in equity or by statute which the
relevant Indemnified Party shall certify as sustained or incurred by it
at any time as a consequence of, or relating to, or arising directly or
indirectly out of, any Environmental Claims made or asserted against
such Indemnified Party which would not have arisen if this Agreement or
any other Finance Document had not been executed and which was not
caused by the negligence or wilful default of the relevant Indemnified
Party provided that the relevant Indemnified Party notifies the
Borrower promptly on being notified of such Environmental Claim.
20 SET-OFF
20.1 SET-OFF
Each Finance Party may whilst a Default subsists set off any credit
balance to which any Obligor is entitled or any other Indebtedness of
such Finance Party to such Obligor against any sum then payable by such
Obligor to such Finance Party under the Documents.
20.2 PURCHASE OF CURRENCIES
Each Obligor irrevocably authorises each Finance Party to purchase such
other currencies as may be reasonably necessary to effect the set-off.
20.3 NOTIFICATION
Each Finance Party will notify the Agent of any exercise of this power
of set-off and the Agent shall inform the other Finance Parties and the
relevant Obligor.
21 CALCULATIONS AND CERTIFICATES
21.1 CALCULATIONS
All interest, commission and other payments of an annual nature under
the Finance Documents will accrue from day to day. They will be
calculated on the basis of actual days elapsed and a 360 day year.
21.2 CERTIFICATES
Any certificate or determination by a Finance Party as to any rate of
interest, exchange rate, or amount payable under the Finance Documents
is conclusive and binding on the Obligors, unless there is a manifest
error, and (in the case of a certificate of or determination by the
Agent) on the other Finance Parties.
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22 MARKET DISRUPTION
22.1 PROBLEMS WITH EURIBOR; UNAVAILABILITY OF FUNDS
(a) This clause 22.1 applies if, at any time before the start of
an Interest Period or any other period for which EURIBOR needs
to be established:
(i) the Agent determines, in its reasonable discretion,
that adequate and fair means do not exist for
ascertaining the rate at which banks are offered
funds in the interbank market of the relevant
Participating Member States during that period or
that EURIBOR for that period will not accurately
reflect the cost of funding the Loan for that period;
or
(ii) the Agent shall have received notification from
Lenders with Contributions aggregating not less than
50 per cent. of the Loan or Commitments aggregating
not less than 50 per cent. of the Total Commitments
that deposits in euros are not available to such
Lenders in the interbank market of the relevant
Participating Member States in the ordinary course of
business in sufficient amounts to fund their
Contributions for such Interest Period or that
EURIBOR does not accurately reflect the cost to such
Lenders of obtaining such deposits,
the Agent shall forthwith give notice (a "DETERMINATION
NOTICE") to the Borrower and to each of the Lenders. A
Determination Notice shall contain reasonable particulars of
the relevant circumstances giving rise to its issue. After the
giving of any Determination Notice the undrawn amount of the
Total Commitments shall not be borrowed until notice to the
contrary is given to the Borrower by the Agent (the giving of
such notice not to be unreasonably withheld or delayed).
(b) During the period of 10 days after the Determination Notice
has been given by the Agent under clause 22.1(a) the relevant
Lender shall (having consulted in good faith with the Borrower
certify a reasonable alternative basis the "SUBSTITUTE BASIS")
for making available or, as the case may be, maintaining its
Contribution. The Substitute Basis may (without limitation)
include alternative interest periods, alternative currencies
or alternative rates of interest but shall include a margin
above the cost of funds (including Additional Cost, if any) to
such Lender equivalent to the applicable Margin. Each
Substitute Basis so certified shall be binding upon the
Borrower and shall take effect in accordance with its terms
upon the Borrower from the date specified in the Determination
Notice until such time as the Agent notifies the Borrower that
none of the circumstances specified in clause 22.1 continues
to exist whereupon the normal interest rate fixing provisions
of this Agreement shall apply (the giving of such notice not
to be unreasonably withheld or delayed).
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23 CHANGES IN REGULATION
23.1 CIRCUMSTANCES WHEN THIS CLAUSE APPLIES
This clause 23 applies if a new Regulation is introduced or there is a
change to an existing Regulation or to its interpretation and, in any
such case, its effect is, in relation to the Facility or the Finance
Documents:
(a) to reduce the amount payable to any Finance Party;
(b) to subject any Finance Party or its Holding Company to any
additional or increased Taxation or other cost;
(c) to cause any Finance Party or its Holding Company to incur any
loss (including a loss of potential future profits) or to make
any payment; or
(d) to reduce in any other way the effective return of any Finance
Party or its Holding Company.
23.2 OBLIGATION TO COMPENSATE THE LENDER
In the circumstances described in clause 23.1, such Finance Party will
notify the Borrower through the Agent as soon as practicable. The
Borrower will, on demand, pay to the Agent for the account of such
Finance Party the amount which such Finance Party certifies is required
to compensate it or its Holding Company for the matters specified in
clause 23.1. Such a demand may be made even after such Finance Party
has been repaid. The certificate must set out the basis of the
computation of the amount and the paragraph of clause 23.1 to which
such claim relates, but need not include any matters which such Finance
Party or its Holding Company regards as confidential.
23.3 EXCEPTIONS
No Finance Party will be entitled to receive any compensation under
clause 23.2 to the extent that the amount otherwise payable under that
clause:
(a) has been taken into account in calculating the Additional Cost
or is the subject of additional payment under clause 18.1; or
(b) arises as a consequence of (or of any Regulation
implementing):
(i) the proposals for international convergence of
capital measurement and capital standards published
by the Basle Committee on Banking Regulations and
Supervisory Practices in July 1988; or
(ii) the Own Funds Directive (89/299/EEC of 17th April
1989) or the Solvency Ratio Directive (89/647/EEC of
18th December 1989),
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in each case, unless it results from any change in, or in the
interpretation or application of, any of the same occurring
after the date of this Agreement; or
(c) arises as a consequence of any change in the Taxation of its
overall net income, profits or gains imposed in the
jurisdiction in which its lending office under this Agreement
is located; or
(d) if it ceases to be a Qualifying Person.
23.4 MITIGATION
Without being under any legal obligation to do so, or to provide any
information to the Borrower, a Finance Party will use reasonable
endeavours to mitigate any loss which would give rise to a claim under
clauses 18.1, 22 or 23 as may be open to it, including, without
limitation, relocating its lending office, or transferring its rights,
benefits and obligations under this Agreement to a Transferee
acceptable to the Borrower and willing to participate in the Facility
unless, to do so might (in the reasonable opinion of such Lender) be
prejudicial to such Lender or be in conflict with such Lender's general
banking policies or involve such Lender in expense or increased
administrative burden.
23.5 ILLEGALITY
If it becomes contrary to any Regulation for a Lender to perform any of
its Duties under this Agreement, such Lender's Commitment will
forthwith be reduced to zero and the Borrower will repay the
Contribution of such Lender either forthwith, if such unlawfulness has
immediate or retrospective effect, or on a future specified date not
being later than the latest date permitted by such Regulation, on
demand by such Lender, together with all other amounts owing to such
Lender under the Finance Documents.
24 TRANSFER
24.1 NO TRANSFERS BY THE OBLIGORS
None of the Obligors may transfer any of its Rights or Duties under the
Finance Documents.
24.2 TRANSFERS BY THE LENDER: TRANSFER AGREEMENTS
Each Lender (a "TRANSFEROR LENDER") may (subject to clause 24.8)
transfer, all or any part of its Rights and Duties under the Finance
Documents to NTFC Capital Corporation, Export Development Corporation
of Canada or to another financial institution with reasonable
experience of lending to the emerging broadband telecommunications
services sector with a credit rating of at least Baa2 with Moody's
Investors Services Inc. (a "TRANSFEREE") after consultation with the
Borrower but without the consent of any party. Any such transfer shall
be effected upon not less than 5 Banking Days' prior notice by delivery
to the Agent of a duly completed Transfer Certificate duly executed by
the Transferor
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Lender and the Transferee. On the Effective Date (as specified and
defined in a Transfer Certificate so executed and delivered), to the
extent that the Commitment and Contribution of the Transferor Lender
are expressed in a Transfer Certificate to be the subject of the
transfer in favour of the Transferee effected pursuant to this clause
24.2, by virtue of the counter-signature of the Transfer Certificate by
the Agent (for itself and the other parties to this Agreement):
(a) to the extent that in such Transfer Certificate the Transferor
Lender seeks to transfer such obligations and rights hereunder
the existing parties to this Agreement and the Security Deed
and the Transferor Lender shall be released from their
respective obligations towards one another, other than the
obligations outstanding from the Obligors to the Transferor
Lender under this Agreement and the Security Deed ("DISCHARGED
OBLIGATIONS") and their respective rights against one another,
other than the rights outstanding from the Obligors under this
Agreement and the Security Deed ("DISCHARGED RIGHTS") shall be
cancelled and the rights of the Transferor Lender against the
Borrower shall be assigned to the Transferee party pursuant to
the relevant Transfer Certificate the ("ASSIGNED RIGHTS");
(b) the Transferee party to the relevant Transfer Certificate and
the existing parties to this Agreement and the Security Deed
(other than such Transferor Lender) shall assume obligations
towards each other which differ from the discharged
obligations only insofar as they are owed to or assumed by
such Transferee instead of to or by such Transferor Lender as
a result of such transfer; and
(c) the Transferee party to the relevant Transfer Certificate and
the existing parties to this Agreement and the Security Deed
(other than such Transferor Lender) shall acquire rights
against each other which differ from the discharged rights and
the assigned rights only insofar as they are exercisable by or
against such Transferee instead of by or against such
Transferor Lender as a result of such transfer;
and, on such Effective Date, the Transferee shall (unless the Agent
waives such fee) pay to the Agent for its own account a fee of pound
sterling 1,000. The Agent shall promptly notify the other Lenders and
the Borrower of the receipt by it of any Transfer Certificate and shall
promptly deliver a copy of such Transfer Certificate to the Borrower.
24.3 RELIANCE ON TRANSFER CERTIFICATE
The Agent, the Security Agent and the Obligors shall be fully entitled
to rely on any Transfer Certificate delivered to the Agent in
accordance with the foregoing provisions of this clause 24 which is
complete and regular on its face as regards its contents and
purportedly signed on behalf of the relevant Transferor Lender and the
Transferee and none of the Security Agent, the Agent or the Obligors
shall have any liability or responsibility to any party as a
consequence of placing
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reliance on and acting in accordance with any such Transfer Certificate
if it proves to be the case that the same was not authentic or duly
authorised.
24.4 AUTHORISATION OF AGENT
Each party to this Agreement irrevocably authorises the Agent to
counter-sign each Transfer Certificate on its behalf for the purposes
of clause 24.2 without any further consent of, or consultation with,
such party.
24.5 CONSTRUCTION OF CERTAIN REFERENCES
If any Lender transfers all or any part of its rights, benefits and
obligations as provided in clause 24.2 all relevant references in this
Agreement to such Lender shall thereafter be construed as a reference
to such Lender and/or its Transferee to the extent of their respective
interests.
24.6 LENDING OFFICES
Each Lender shall lend through its office at the address specified in
schedule 1 or, as the case may be, in any relevant Transfer Certificate
or through any other office of such Lender selected from time to time
by such Lender through which such Lender wishes to lend for the
purposes of this Agreement. If the office through which a Lender is
lending is changed pursuant to this clause 24.6, such Lender shall
notify the Agent promptly of such change.
24.7 DISCLOSURE OF INFORMATION
Save as permitted pursuant to the terms of the Finance Documents any
information furnished pursuant to any Finance Document to the Finance
Parties shall be kept confidential by the recipient, save that the same
may be disclosed to the recipient's legal advisers, auditors, accounts
and other professional advisers reasonably requiring it and the
provisions of this clause 24.7 shall not apply:
(a) to any information already known to the recipient otherwise
than as a result of a breach of a duty of confidentiality to
any person;
(b) to any information subsequently received by the recipient
otherwise than as a result of a breach of a duty of
confidentiality to any person which it would otherwise be free
to disclose;
(c) to any information which is or becomes public knowledge
otherwise than as a result of a breach by any person of this
clause 24.7 or of any confidentiality undertaking entered into
pursuant to clause 24.8;
(d) to any extent that the recipient is required to disclose the
same pursuant to any law or order of any court or order or
request of any governmental agency with whose instructions the
recipient habitually complies provided that the Parent is
given notice thereof.
24.8 CONFIDENTIALITY UNDERTAKING
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Any Finance Party may disclose to a prospective Transferee or to any
other person who may propose entering into contractual relations with
such Finance Party in relation to any Finance Document any information
referred to in clause 24.7 subject to the prospective Transferee or
other person first entering into a confidentiality undertaking with the
Borrower in substantially the same terms as clause 24.7 and this clause
24.8.
24.9 LIMITATION ON CERTAIN OBLIGATIONS
If, at the time any transfer or change in lending office by any Lender
becomes effective, circumstances exist which would oblige any Obligor
to pay to the Transferee (or, in the case of change in lending office,
the relevant Lender) under clauses 18.1 or 23 any sum in excess of the
sum (if any) which it could have been obliged to pay to the Lender
under the relevant clause in the absence of that transfer or change of
lending office, such Obligor shall not be obliged to pay that excess.
24.10 RESTRICTIONS ON TRANSFERS
(a) Any transfer by a Lender may only be made under this clause 24
in respect of a Commitment and/or Contribution of euro
5,000,000 or more.
(b) Where a Lender transfers part of its rights, benefits and
obligations pursuant to clause 24.2, that Lender must transfer
equal fractions of its Commitment and Contribution.
(c) The Transfer Certificate relating to any such transfer shall
be completed accordingly.
24.11 SUB-PARTICIPATION
Subject to clause 24.8, a Lender may enter into sub-participation
arrangements in relation to all or any of its Rights and Duties under
this Agreement with any person without restriction and without the
consent of any other party to this Agreement provided that such Lender,
other than in matters requiring the consent of all of the Lenders,
retains the right to vote as a Lender.
25 AGENT, SECURITY AGENT AND REFERENCE BANKS
25.1 APPOINTMENT OF AGENT
Each Lender irrevocably appoints the Agent as its agent for the
purposes of this Agreement and irrevocably authorises the Agent
(whether or not by or through employees or agents) to take such action
on such Lender's behalf and to exercise such rights, remedies, powers
and discretions as are specifically delegated to the Agent by this
Agreement together with such powers and discretions as are reasonably
incidental thereto (but subject to any restrictions or limitations
specified in this Agreement). Neither the Agent nor the Security Agent
shall, however, have any duties, obligations or liabilities (whether
fiduciary or
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otherwise) to the other Finance Parties beyond those expressly stated
in this Agreement.
Notwithstanding that the Agent and the Security Agent may from time to
time be the same entity, the Agent and the Security Agent have entered
into this Agreement in their separate capacities as agent for the
Lenders under and pursuant to this Agreement and as Security Agent for
the Beneficiaries (as defined in the Security Trust Deed) to hold the
security created or to be created by the Security Documents on the
terms set out in the Security Trust Deed. However, where this Agreement
provides for the Agent to communicate with or provide instructions to
the Security Agent, while the Agent and the Security Agent are the same
entity, it will not be necessary for there to be any such formal
communications or instructions notwithstanding that this Agreement
provides in certain cases for the same to be in writing.
25.2 AGENT'S ACTIONS
Any action taken by the Agent under or in relation to this Agreement
with requisite authority, or on the basis of appropriate instructions,
received from the Majority Lenders (or as otherwise duly authorised)
shall be binding on all the Lenders.
25.3 AGENT'S DUTIES
The Agent shall:
(a) promptly notify each Lender of the contents of each notice,
certificate or other document received by the Agent from the
Borrower under or pursuant to clause 12;
(b) consult with the Lenders as to whether and, if so, how a
discretion vested in the Agent is, either in any particular
instance or generally, to be exercised; and
(c) (subject to the other provisions of this clause 25) take such
action or, as the case may be, refrain from taking such action
with respect to the exercise of any of its rights, remedies,
powers and discretions as agent as the Majority Lenders may
reasonably direct.
25.4 AGENT'S RIGHTS
The Agent may:
(a) in the exercise of any right, remedy, power or discretion in
relation to any matter, or in any context, not expressly
provided for by this Agreement, act or, as the case may be,
refrain from acting in accordance with the instructions of the
Majority Lenders, and shall be fully protected in so doing;
(b) unless and until it shall have received directions from the
Majority Lenders, take such action, or refrain from taking
such action, in respect of
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a Default of which the Agent has actual knowledge as it shall
deem advisable in the best interests of the Banks (but shall
not be obliged to do so);
(c) refrain from acting in accordance with any instructions of the
Majority Lenders to institute any legal proceedings arising
out of or in connection with this Agreement until it has been
indemnified and/or secured to its satisfaction against any and
all costs, expenses or liabilities (including legal fees)
which it would or might incur as a result;
(d) deem and treat (i) each Lender as the person entitled to the
benefit of the Contribution of such Lender for all purposes of
this Agreement unless and until a Transfer Certificate shall
have been filed with the Agent and shall have become
effective, and (ii) the office set opposite the name of each
Lender in schedule 1 or, as the case may be, in any relevant
Transfer Certificate as such Lender's lending office unless
and until a written notice of change of lending office shall
have been received by the Agent; and the Agent may act upon
any such notice unless and until the same is superseded by a
further such notice;
(e) rely as to matters of fact which might reasonably be expected
to be within the knowledge of any Obligor upon a certificate
signed by any Authorised Signatory of the relevant Obligor;
and
(f) refrain from doing anything which would, or might in its
opinion, be contrary to any law or regulation of any
jurisdiction and may do anything which is in its opinion
necessary or desirable to comply with any such law or
regulation.
25.5 NO LIABILITY OF SECURITY AGENT AND AGENT
None of the Security Agent, the Agent or any of their respective
employees and agents shall:
(a) be obliged to request any certificate or opinion under clause
12 to make any enquiry as to the use of the proceeds of the
Facility unless so required in writing by any Lender, in which
case the Agent shall promptly make the appropriate request of
the relevant Obligor; or
(b) be obliged to make any enquiry as to any breach or default by
any Obligor in the performance or observance of any of the
provisions of any Finance Document or as to the existence of a
Default unless the Agent has actual knowledge thereof or has
been notified in writing thereof by a Lender, in which case
the Agent shall promptly notify the Lenders of the relevant
event or circumstance; or
(c) be obliged to enquire whether or not any representation or
warranty made by any Obligor pursuant to any Finance Document
is true; or
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(d) be obliged to do anything (including, without limitation,
disclosing any document or information) which would, or might
in its opinion, be contrary to any law or regulation or be a
breach of any duty of confidentiality or otherwise be
actionable or render it liable to any person; or
(e) be obliged to account to any Finance Party for any sum or the
profit element of any sum received by it for its own account;
or
(f) be obliged to institute any legal proceedings arising out of
or in connection with, or otherwise take steps to enforce, any
Finance Document other than on the instructions of the
Majority Lenders; or
(g) be liable to any Finance Party for any action taken or omitted
under or in connection with any Finance Document or the
Facility unless caused by its gross negligence or wilful
misconduct.
For the purposes of this clause 25 neither the Agent nor the Security
Agent shall be treated as having actual knowledge of any matter of
which the corporate finance or any other division outside the agency or
loan administration department of the person for the time being acting
as the Agent or Security Agent may become aware in the context of
corporate finance, advisory or lending activities from time to time
undertaken by the Agent or Security Agent for the Borrower or any of
its Subsidiaries or affiliates or associated companies or any other
person which may be a trade competitor of the Group or any member of it
or may otherwise have commercial interests similar to those of the
Group or any member of it.
25.6 NON-RELIANCE ON SECURITY AGENT OR AGENT
Each Finance Party acknowledges, by virtue of its execution of this
Agreement or, as the case may be, a Transfer Certificate, that it has
not relied on any statement, opinion, forecast or other representation
made by the Security Agent or the Agent to induce it to enter into this
Agreement or any other Finance Document and that it has made and will
continue to make, without reliance on the Agent or the Arranger and
based on such documents as it considers appropriate, its own appraisal
of the creditworthiness of the Borrower and the Group and its own
independent investigation of the financial condition, prospects and
affairs of the Borrower and the Group in connection with the making and
continuation of the Facility under this Agreement and the other Finance
Documents. Neither the Security Agent nor the Agent shall at any time
be deemed to have had or have any duty or responsibility, either
historically, initially or on a continuing basis, to provide any
Finance Party with any credit or other information with respect to the
Borrower or any other Group Member whether coming into its possession
before the making of any Drawing or at any time or times thereafter,
other than as provided in clauses 25.3(a) and 25.5(a).
25.7 NO RESPONSIBILITY ON SECURITY AGENT OR AGENT FOR CERTAIN MATTERS
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Neither the Security Agent nor the Agent shall have any responsibility
or liability to any Finance Party:
(a) on account of the failure of any Group Member to perform any
of its obligations under any of the Finance Documents; or
(b) for the financial condition of any Group Member; or
(c) for the completeness, adequacy or accuracy of any statements,
representations or warranties in any of the Finance Documents
or any document delivered under any of such documents; or
(d) for the execution, effectiveness, adequacy, genuineness,
validity, enforceability or admissibility in evidence of the
Finance Documents or of any certificate, report or other
document executed or delivered under any of the Finance
Documents; or
(e) (save as otherwise provided in this clause 25) otherwise in
connection with the Finance Documents or their negotiation or
for acting or, as the case may be, refraining from acting) in
accordance with the instructions of the Majority Lenders.
25.8 RELIANCE ON DOCUMENTS AND PROFESSIONAL ADVICE
The Security Agent and the Agent shall be entitled to rely on any
communication, instrument or document believed by it to be genuine and
correct and to have been signed or sent by the proper person and shall
be entitled to rely as to legal or other professional matters on
opinions and statements of any legal or other professional advisers
selected or approved by it (including those in the Agent's employment).
25.9 OTHER DEALINGS
The Security Agent and the Agent may, without any liability to account
to the other Finance Parties, accept deposits from, lend money to, and
generally engage in any kind of banking or other business with, be the
owner or holder of any shares or other securities of, and provide
advisory or other services to, the Borrower or any of its Subsidiaries,
affiliates or associated companies or any of the Finance Parties as if
it were not the Security Agent or the Agent, as the case may be.
25.10 RIGHTS OF AGENT AND SECURITY AGENT AS LENDER; NO PARTNERSHIP
With respect to its own Commitment and Contribution (if any) the Agent
and the Security Agent shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though it
were not performing the duties and functions delegated to it under this
Agreement and the term "LENDERS" shall, unless the context clearly
otherwise indicates, include the Agent and the Security Agent in its
individual capacity as a Lender. This Agreement
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shall not and shall not be construed so as to constitute a partnership
between the parties or any of them.
25.11 AMENDMENTS AND WAIVERS
(a) Majority Lender matters
Subject to clause 25.11(b) and (c) the Agent may, with the
consent of the Majority Lenders (or if and to the extent
expressly authorised by the other provisions of this
Agreement) and, if so instructed by the Majority Lenders,
shall: (i) agree amendments or modifications to this Agreement
with the Obligors and/or vary or waive breaches of, or
defaults under, or otherwise excuse performance of, any
provision of this Agreement by any Obligor; and/or (ii)
authorise the Security Agent (on behalf of the Finance
Parties) to agree amendments or modifications to the Security
Documents with the Borrower (on behalf of all Obligors) and/or
vary or waive breaches of, or defaults under, or otherwise
excuse performance of, any provision of any of the Security
Documents by any Obligor.
Any such action so authorised and effected by the Agent shall
be documented in such manner as the Agent shall (with the
approval of the Majority Lenders) determine, shall be promptly
notified to the Lenders by the Agent and without prejudice to
the generality of clause 25.2) shall be binding on all the
Lenders.
(b) All Lender matters; security
Except with the prior written consent of all the Lenders, the
Agent shall not have authority on behalf of the Lenders to
authorise the Security Agent to agree amendments or
modifications to the Security Documents with the Obligors (or
the Borrower on their behalf) and/or vary or waive breaches
of, or defaults under, or otherwise excuse performance of, any
provision of any of the Security Documents by any Obligor if
the effect of such would be to: (i) release any Obligor from
the security constituted by any Security Document, (ii)
release any of the charged assets from the security
constituted by any Security Document other than any such
release as part of a disposal made pursuant to the terms of
this Agreement, (iii) release any Obligor from any of its
guarantee or other assurance obligations under any of the
Security Documents or (iv) agree with the Borrower or any
other Obligor any amendment of, or action in relation to, any
of the Security Documents which would have the effect of (x)
extending the due date or reducing the amount of any payment
under any Security Document or (y) changing the currency in
which any amount is payable under any Security Document.
(c) All Lender matters; general
Except with the prior written consent of all the Lenders, the
Agent shall not have authority on behalf of the Lenders to
agree with the Borrower any amendment or modification to this
Agreement or to vary or waive
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breaches of or defaults under or otherwise excuse performance
of any provision of this Agreement by the Borrower, if the
effect of such would be to: (i) reduce the Margin, (ii)
postpone the due date or reduce the amount of any payment of
principal, interest, commitment commission or other amount
payable by the Borrower under this Agreement, (iii) change the
currency in which any amount is payable by the Borrower under
this Agreement, (iv) increase any Lender's Commitment, (v)
extend any period during which a Drawdown Notice may be
delivered, (vi) change the definition of "Majority Lenders" in
clause 1.1, (vii) change any provision of this Agreement which
expressly requires the approval or consent of all the Lenders
such that the relevant approval or consent may be given
otherwise than with the sanction of all the Lenders, (viii)
change the order of distribution under clause 17.3, (ix)
change clause 17.4 or (x) change this clause 25.11.
25.12 REIMBURSEMENT AND INDEMNITY BY LENDERS
Each Lender shall reimburse the Agent (rateably in accordance with (i)
at any time prior to the first Drawdown Date, its Commitment and (ii)
at any time thereafter, the aggregate of its Available Commitment and
its Contribution), to the extent that the Agent is not reimbursed by
the Borrower, for the amount expressed to be payable by the Borrower
under clause 9.3. Each Lender shall on demand indemnify the Agent and
the Security Agent (rateably in accordance with (i) at any time prior
to the first Drawdown Date, its Commitment and (ii) at any time
thereafter, the aggregate of its Available Commitment and its
Contribution) against all liabilities, damages, costs and claims
whatsoever incurred by the Agent in connection with any of the Finance
Documents or the performance of its duties under the Finance Documents
or any action taken or omitted by the Agent or the Security Agent under
any of the Finance Documents, unless such liabilities, damages,
reasonable costs or claims arise from the Security Agent or the Agent's
own gross negligence or wilful misconduct. The Borrower shall
counter-indemnify the Lenders against all payments by them under this
clause 25.12.
25.13 RETIREMENT OF AGENT
(a) The Agent may retire from its appointment as Agent under this
Agreement having given to the Borrower and each of the Lenders
not less than 30 days' notice of its intention to do so,
provided that no such retirement shall take effect unless
there has been appointed by the Lenders as a successor agent:
(i) a Lender nominated by the Majority Lenders with the
approval of the Borrower (not to be unreasonably
withheld or delayed) or, failing such a nomination or
approval,
(ii) any reputable and experienced bank or financial
institution with offices in London nominated by the
Agent with the approval of the Borrower (not to be
unreasonably withheld or delayed), which is a
Qualifying Person.
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Any corporation into which the Agent may be merged or
converted or any corporation with which the Agent may be
consolidated or any corporation resulting from any merger,
conversion, amalgamation, consolidation or other
reorganisation to which the Agent shall be a party shall, to
the extent permitted by applicable law, be the successor Agent
under this Agreement without the execution or filing of any
document or any further act on the part of any of the parties
to this Agreement save that notice of any such merger,
conversion, amalgamation, consolidation or other
reorganisation shall forthwith be given to the Borrower and
the Lenders.
(b) Upon any such successor as aforesaid being appointed, the
retiring Agent shall be discharged from any further obligation
under this Agreement (but shall continue to have the benefit
of this clause 25 in respect of any action it has taken or
refrained from taking prior to such discharge) and its
successor and each of the other parties to this Agreement
shall have the same rights and obligations among themselves as
they would have had if such successor had been a party to this
Agreement in place of the retiring Agent. The retiring Agent
shall (at its sole expense) provide its successor with copies
of such of its records as its successor reasonably requires to
carry out its functions as such.
25.14 CHANGE OF REFERENCE BANKS
If (a) the whole of the Contributions (if any) of any Reference Bank
are prepaid, (b) the Commitment (if any) of any Reference Bank is
reduced to zero in accordance with clause 23.5, (c) a Reference Bank
transfers the whole of its rights and obligations (if any) as a Lender
under this Agreement or (d) a Reference Bank ceases to provide
quotations to the Agent upon request for the purposes of determining
EURIBOR (where such quotations are required having regard to the
definition of "EURIBOR" in clause 1.1) the Agent may, acting on the
instructions of the Majority Lenders, terminate the appointment of such
Reference Bank and after consultation with the Borrower appoint another
Lender to replace such Reference Bank.
25.15 PROMPT DISTRIBUTION OF PROCEEDS
Moneys received by the Security Agent (whether from a Receiver or
otherwise) pursuant to the exercise of (or otherwise by virtue of the
existence of) any rights and powers under or pursuant to any of the
Security Documents and be paid to the Agent for distribution in
accordance with the terms of the Security Deed shall be distributed by
the Agent as soon as is practicable after the relevant moneys are
received by, or otherwise become available to, the Agent save that
(without prejudice to any other provision contained in any of the
Security Documents) the Agent (acting on the instructions of the
Majority Lenders) may credit any moneys received by it to a suspense
account for so long and in such manner as the Agent may from time to
time determine with a view to preserving the rights of the Finance
Parties or any of them to prove for the whole of their respective
claims against any Obligor or any other person liable.
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26 DECISIONS OF LENDERS AND AGENT
26.1 OBLIGATIONS SEVERAL
The obligations of each Lender under this Agreement are several; the
failure of any Lender to perform such obligations shall not relieve any
other Finance Party or the Borrower of any of their respective
obligations or liabilities under this Agreement nor shall any Finance
Party be responsible for the obligations of any other Finance Party
under this Agreement (except to the extent that any person has
obligations in different Finance Party capacities).
26.2 INTERESTS SEVERAL
Notwithstanding any other term of this Agreement (but without prejudice
to the provisions of this Agreement relating to or requiring action by
the Majority Lenders) the interests of the Finance Parties are several
and the amount due to each of the Finance Parties is a separate and
independent debt. Without prejudice to any other provision of this
Agreement (including any requirement for action to be approved or
instigated by, or with the consent or approval of, the Majority Lenders
and, without limitation, clause 26.4), each of the Finance Parties
shall have the right to protect and enforce its rights arising out of
this Agreement and it shall not be necessary for any other Finance
Party to be joined as an additional party in any proceedings for this
purpose.
26.3 MAJORITY LENDERS
(a) If, within 10 Banking Days of the Agent despatching to each
Lender a notice requesting instructions (or confirmation of
instructions) from the Lenders or the agreement of the Lenders
to any amendment, modification, waiver, variation or excuse of
performance for the purposes of, or in relation to, any of the
Documents, the Agent has not received a reply specifically
giving or confirming or refusing to give or confirm the
relevant instructions or, as the case may be, approving or
refusing to approve the proposed amendment, modification,
waiver, variation or excuse of performance, then (irrespective
of whether such Lender responds at a later date) the Agent
shall treat any Lender which has not so responded as having
indicated a desire to be bound by the wishes of a simple
majority of those Lenders (measured in terms of the relevant
Contributions of those Lenders) which have so responded.
(b) For the purposes of clause 26.3, any Lender which notifies the
Agent of a wish or intention to abstain on any particular
issue shall be treated as if it had not responded.
(c) Clause 26.3 shall not apply in relation to those matters
referred to in, or the subject of, clause 25.11(b) and (c).
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26.4 LENDERS ACTING TOGETHER
If the Agent makes a declaration under clause 16.23 the Agent shall, in
the names of all the Lenders, take such action on behalf of the Lenders
and conduct such negotiations with the Borrower and any other members
of the Group and generally administer the Loan in accordance with the
wishes of the Majority Lenders. All the Lenders shall be bound by the
provisions of this clause 26.4 and no Lender shall be entitled to take
action independently against the Borrower or any other Group Member
without the consent of the Majority Lenders.
27 NOTICES AND OTHER MATTERS
27.1 ADDRESS FOR NOTICE
Every notice, request, demand or other communication under this
Agreement shall:
(a) be in writing delivered personally or by first-class prepaid
letter (airmail if available) or telefax;
(b) be deemed to have been received, subject as otherwise provided
in this Agreement, in the case of a letter, when delivered
personally or 5 days after it has been put into the post and,
in the case of a telefax, when a transmission report which
confirms that the transmission has been successfully completed
has been printed by the sender's fax machine (unless the time
of despatch of any telefax is after close of business in which
case it shall be deemed to have been received at the opening
of business on the next business day); and
(c) be sent:
(A) to each Obligor at:
Paalbergweg 36
1105 BV
Amsterdam Zuidoost
The Netherlands
Telefax: + 31 20 501 1018
Attention: Raj Raithatha and Jan van Berne
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(B) to the Agent and the Security Agent at:
c/o Nortel plc
Customer Finance Department
Westacott Way
Berks
England SL6 3QH
Telefax: +44 (0) 1628 432 884
Attention: Richard Banbury
(C) to each Lender at its address or telefax number
specified in part A of schedule 1 or in any relevant
Transfer Certificate,
or to such other address or telefax number as is notified by
an Obligor, or a Finance Party, as the case may be, to the
Agent and the Security Agent.
27.2 NOTICE TO AGENT
Every notice, request, demand or other communication under this
Agreement to be given by any Obligor to any other party shall be given
to the Agent for onward transmission as appropriate and to be given to
the Obligors shall (except as otherwise provided in this Agreement) be
given by the Agent.
27.3 NO IMPLIED WAIVER, REMEDIES CUMULATIVE
No failure or delay on the part of the Finance Parties or any of them
to exercise any power, right or remedy any Finance Document shall
operate as a waiver thereof, nor shall any single or partial exercise
by the Finance Parties or any of them of any power, right or remedy
preclude any other or further exercise thereof or the exercise of any
other power, right or remedy. The remedies provided in this Agreement
and each of the Security Documents are cumulative and are not exclusive
of any remedies provided by law.
27.4 COUNTERPARTS
This Agreement may be executed in counterparts.
28 GOVERNING LAW AND JURISDICTION
28.1 LAW
This Agreement shall be governed by English law.
28.2 SUBMISSION TO JURISDICTION
The parties to this Agreement agree for the benefit of the Finance
Parties that:
(a) if any party has any claim against any other arising out of or
in connection with this Agreement such claim shall (subject to
clause 28.2(c)) be
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referred to the High Court of Justice in England, to the
jurisdiction of which each of the parties irrevocably submits;
(b) the jurisdiction of the High Court of Justice in England over
any such claim against any Finance Party shall be an exclusive
jurisdiction and no courts outside England shall have
jurisdiction to hear or determine any such claim; and
(c) nothing in this clause 28.2 shall limit the right of the
Finance Parties to refer any such claim against any Obligor to
any other court of competent jurisdiction outside England, to
the jurisdiction of which each Obligor hereby irrevocably
agrees to submit, nor shall the taking of proceedings by any
Finance Party before the courts in one or more jurisdictions
preclude the taking of proceedings in any other jurisdiction
whether concurrently or not.
28.3 AGENT FOR SERVICE OF PROCESS
Each Obligor irrevocably designates, appoints and empowers Clifford
Chance Secretaries Limited at present of 200 Aldersgate Street, London
EC1A 4JJ to receive for it and on its behalf service of process issued
out of the High Court of Justice in England in relation to any claim
arising out of or in connection with this Agreement.
28.4 INCONVENIENT FORUM
Each Obligor irrevocably waives any objection it may have now or
hereafter to the laying of venue of any action or proceeding in any
court or jurisdiction referred to in clause 28.2 and any claim it may
have now or hereafter that any action or proceeding brought in such
courts or jurisdiction has been brought in an inconvenient forum.
IN WITNESS whereof the parties to this Agreement have caused this Agreement to
be duly executed on the date first above written.
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SCHEDULE 1
Part A - Initial administrative details of the Lenders
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Party Address Fax Number Attention
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Nortel Networks c/o Nortel plc +44 (0)1628 432884 Richard Banbury
International Finance & Customer Finance
Holding B.V. Department
Westacott Way
Maidenhead
Berks
England
SL6 3QH
- ---------------------------------------------------------------------------------
</TABLE>
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SCHEDULE 1
Part B - Original Guarantors
<TABLE>
<CAPTION>
NAME COUNTRY OF INCORPORATION ADDRESS
<S> <C> <C>
VersaTel Telecom The Netherlands Paalbergweg 36,
Netherlands B.V. 1105 BV
Amsterdam Zuidoost,
The Netherlands
VersaTel Telecom Belgium Belgium Noorderlaan 133
N.V. North Trade Centre
2030 Antwerp
Belgium
</TABLE>
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SCHEDULE 2
Form of Drawdown Notice
To: [Agent]
Attention: - Dated: -
EURO 45,378,022 LOAN AGREEMENT DATED - (THE "AGREEMENT")
1 We wish to draw down an Advance in the amount of - on - 1999 with
payment to be made in accordance with our irrevocable instructions to
you contained in clause 4.2 of the Agreement.
2 We attach purchase orders and an acceptance certificate, and the
supplemental agreement to the relevant Asset Charge duly executed in
relation, inter alia, to the relevant Equipment, and
3 We confirm that:
(a) so far as we are aware, no event or circumstance has occurred
and is continuing which constitutes a Default,
(b) the representations and warranties contained in clause 11 of
the Agreement [which are deemed to be repeated pursuant to
clause 11.21 of the Agreement] are true and correct as at the
date of this notice as if made with respect to the facts and
circumstances existing at the date of this notice; and
(c) there is no Material Adverse Effect.
4 Words defined in the Agreement have the same meanings in this notice.
Yours faithfully
VersaTel Telecom Europe B.V.
...........................................
Director
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SCHEDULE 3
Part A - Documents and evidence required as conditions precedent to first
Advance
(a) A copy, certified as a true, complete and up-to-date copy by an
Authorised Officer of the Borrower, of the constitutive documents of
each Obligor in a form acceptable to the Agent.
(b) A copy, certified as a true copy by an Authorised Officer of the
Borrower, of resolutions of the Board of Directors and Shareholders of
the Borrower evidencing approval of this Agreement and the Security
Documents to which it is a party and authorising its appropriate
officers to execute and deliver this Agreement, such Security Documents
and to give all notices and take all other action required by the
Borrower under this Agreement and each such Security Document.
(c) A copy, certified as a true copy by an Authorised Officer of the
Borrower or a director or the secretary of the relevant Obligor of
resolutions of the Supervisory Board or the Board of Directors and
(where relevant) the Shareholders of each Obligor evidencing approval
of this Agreement and the Security Documents to which they are a party
and authorising their respective appropriate officers to execute and
deliver such Security Documents and to give all notices and take all
other action required by such Obligor thereunder.
(d) Specimen signatures, authenticated by an Authorised Officer of the
Borrower or a director or the secretary of the relevant Obligor of the
persons authorised in the resolutions referred to in paragraphs (b) and
(c) above, together with originals of the powers of attorney granted by
the Borrower and any Obligor in connection with the Finance Documents.
(e) Legal Opinions
(i) An opinion of Norton Rose, dated not more than five Banking
Days prior to the first Drawdown Date.
(ii) An opinion of Trenite van Doorne, legal advisers to the
Lenders in The Netherlands, dated not more than five Banking
Days prior to the first Drawdown Date.
(iii) An opinion of Huysmans & Partners, legal advisers to the
Lenders on Belgium, dated not more than five Banking Days
prior to the first Drawdown Date.
(f) A copy, certified as a true copy by an Authorised Officer of the
Borrower of a letter from each agent for receipt of service of process
referred to in this Agreement and the Security Deed accepting its
appointment.
(g) The Asset Charges, the Parent Subordinated Loan Agreement and the
Security Deed duly executed by the Obligor as party thereto together
with all documents,
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deeds, notices and certificates required to be delivered pursuant to
the terms thereof.
(h) The Accounts for the financial year ended on 31 December 1998 and the
Quarterly Management Accounts, for the Quarterly Period ended on 31
March 1999.
(i) Copies, certified by an Authorised Officer of the Borrower to be true,
complete and up to date copies of:
(i) the Licences; and
(ii) the Project Agreements; and
(iii) the Notes.
(j) Evidence that a minimum amount of NLG40,000,000 has been subscribed in
cash for equity share capital in the Borrower issued fully paid or lent
to the Borrower pursuant to a Parent Subordinated Loan Agreement (in
each case) by the Parent.
(k) Evidence satisfactory to the Agent that the Group has a satisfactory
level of insurances.
(l) The agreed form Quarterly Management Accounts.
(m) The agreed form Business Plan and Annual Budget.
(n) An agreement to provide a software licence from Nortel Networks and a
letter from Nortel Networks acknowledging the directions in clause
6.3(g).
(o) A structure chart of the Group.
(p) The Supply Agreement, together with all amendments considered necessary
by the Agent.
(q) An opinion from Shearman & Sterling concerning the Notes.
(r) Satisfactory legal due diligence is completed.
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Part B - Documents and evidence required as conditions precedent to Advance
in respect of Reunion Equipment
(a) Confirmation that any additional licence required for the use of the
Reunion Equipment in any country in which such Reunion Equipment is to
be installed has been awarded to the Borrower and is in a form
reasonably satisfactory to the Agent.
(b) Any other conditions precedent as set out in the Supply Agreement which
will cause the amendment of 28 September 1998 to be effective.
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SCHEDULE 4
Calculation of UK Additional Cost
1 The Additional Cost for any period shall be calculated by the Agent in
respect of each period for which it falls to be calculated in
accordance with the following formula:
Y100F
----- = per cent. per annum
100
F = The amount of Sterling per pound sterling 1,000,000 of the fee base
of an authorised institution payable to the Financial Services
Authority per annum (disregarding any minimum fee payable under the
Fees Regulations)
Y = The fraction of foreign currency liabilities taken into account under
the Fees Regulations in calculating the fee base (disregarding any
offset for claims on non-resident offices)
2 For the purposes of calculating the Additional Cost:
(a) the formula is applied on the first day of each period for
which it falls to be calculated (and the result shall apply
for the duration of such period);
(b) each amount is rounded up to the nearest four decimal places;
and
(c) if the formula produces a negative percentage, the percentage
shall be taken as zero.
3 If alternative or additional financial requirements are imposed by the
Lender of England, the Financial Services Authority or any other United
Kingdom governmental authority or agency which in the Agent's opinion
(after consultation with the Lenders) make the formula no longer
appropriate, the Agent shall be entitled by notice to the Borrower to
stipulate such other formula as shall be suitable to apply in
substitution for the formula. Any such other formula so stipulated
shall take effect in accordance with the terms of such notice.
4 In this schedule 4:
"AUTHORISED" and "INSTITUTION" have the meanings given to those terms
in the Banking Act 1987;
"BANK OF ENGLAND ACT" means the Bank of England Act 1998;
"FEE BASE" has the meaning given to that term in the Fees Regulations;
and
"FEES REGULATIONS" means the Banking Supervision (Fees) Regulations
1998 or the applicable Transfer regulations made under the Bank of
England Act as are in force on the date of application of the formula.
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SCHEDULE 5
Form of Transfer Certificate
NB 1 Lenders are advised not to employ Transfer Certificates or
otherwise to transfer interests in the Agreement without
first ensuring that the transaction complies with all
applicable laws and regulations, including the Financial
Services Act 1986 and regulations made thereunder.
2 It is expected that Lenders will enter into separate
arrangements dealing with the monies to be paid to the
Transferor Lender by the Transferee in consideration of the
transfer (e.g. principal, accrued interest, fees and any
mismatched funding adjustment). Unless the Effective Date is
a rollover date, mismatches of parties' funding may arise.
The Certificate does not deal with these issues, nor does it
deal with any interim risk participation the Transferor
Lender may grant to the Transferee pending the Effective
Date.
To: - on its own behalf, as agent for the Lenders and on behalf of the
Security Agent, the Borrower and each other party to the Agreement
mentioned below and the Security Trust Deed.
Attention: - [Date]
Transfer Certificate
This Transfer Certificate relates to a euro 45,378,022 Facility Agreement (the
"AGREEMENT") dated - May 1999 between, among others, VersaTel Telecom Europe
B.V. as Borrower (1), the Parent and certain Subsidiaries as Guarantors (2),
Northern Telecom International Finance B.V. as Agent and Security Agent (3) and
the banks and financial institutions whose respective names and addresses are
set out in schedule 1 thereto as Lenders (4). Terms defined in the Agreement
shall have the same meaning in this Transfer Certificate.
1 [Transferor Lender] (the "TRANSFEROR LENDER") (a) confirms the accuracy
of the summary of its participation in the Agreement set out in the
schedule below; and (b) requests [Transfer] (the "Transfer") to accept
by way of transfer the portion of such participation specified in the
schedule hereto by counter-signing and delivering this Transfer
Certificate to the Agent at its address for the service of notices
specified in the Agreement.
2 The Transferee hereby requests the Agent on behalf of itself, the other
Finance Parties, the Obligors and all other parties to the Agreement
and the Priorities Agreement) to accept this Transfer Certificate as
being delivered to the Agent pursuant to and for the purposes of the
Agreement and the Security Deed so as
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to take effect in accordance with the terms thereof on [date of
transfer] (the "EFFECTIVE DATE") or on such later date as may be
determined in accordance with the terms thereof.
3 The Agent (on behalf of itself and the other parties to the Agreement
and the Security Deed) confirms the transfer effected by this Transfer
Certificate pursuant to and for the purposes of the Agreement and the
Security Deed so as to take effect in accordance with the terms
thereof.
4 The Transferee confirms:
(a) that it has received a copy of each of the Documents and all
other documentation and information required by it in
connection with the transactions contemplated by this Transfer
Certificate;
(b) that it has not relied upon any statement, opinion, forecast
or other representation or warranty made by the Transferor
Lender, the Security Agent or the Agent to induce it to enter
into this Transfer Certificate;
(c) that it has made and will continue to make, without reliance
on the Transferor Lender or any other Finance Party, and based
on such documents as it considers appropriate, its own
appraisal of the creditworthiness of the Borrower and the
Group and its own independent investigation of the financial
condition, prospects and affairs of the Borrower and the Group
in connection with the making and continuation of the Facility
under the Agreement and the other Finance Documents;
(d) that neither the Transferor Lender nor any other Finance Party
shall at any time be deemed to have had or have a duty or
responsibility, either historically, initially or on a
continuing basis, to provide the Transferee with any credit or
other information with respect to the Borrower or any other
member of the Group whether coming into its possession before
the making of any Drawing or at any time or times thereafter,
other than (in the case of the Agent) as provided in clauses
24.3(a) and 24.5(a) of the Agreement;
(e) that it has made and will continue to make its own assessment
of the legality, validity, enforceability and sufficiency of
the Finance Documents and this Transfer Certificate and has
not relied and will not rely on the Transferor Lender, the
Security Agent or the Agent or any statements made by any of
them in that respect;
(f) that, accordingly, none of the Transferor Lender, the Security
Agent and the Agent shall make any representations or
warranties in respect of, or shall have any liability or
responsibility to the Transferee in respect of, any of the
foregoing matters or any other matter referred to in clause
24.7 of the Agreement;
(g) that it is [not] a Qualifying Person; and
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(h) that it has signed and agrees to be bound by and comply with
an appropriate confidentiality undertaking issued by the
Transferor Lender.
5 Execution of this Transfer Certificate by the Transferee constitutes
its representation to the Transferor Lender and all other parties to
the Agreement and the Security Deed that it has power to become party
to the Agreement and the Security Deed as a Lender on the terms herein
and therein set out and has taken all necessary steps to authorise
execution and delivery of this Transfer Certificate.
6 The Transferee hereby undertakes to the Transferor Lender, the Finance
Parties, the Obligors and each of the other parties to the Agreement
and the Security Deed that it will perform in accordance with its terms
all those obligations which by the terms of the Agreement and the
Security Deed will be assumed by it after acceptance of this Transfer
Certificate by the Agent.
7 Without limiting the above paragraphs, nothing in this Transferee
Certificate obliges the Transferor Lender to:
(a) accept any re-transfer from the Transferee of any of the
rights, benefits and/or obligations hereby transferred; or
(b) support any losses incurred by the Transfer by reason of any
non-performance by the Borrower or any other party to the
Finance Documents or any document relating thereto of any of
its obligations under the same.
8 This Transfer Certificate and the rights and obligations of the parties
hereunder shall be governed by and construed in accordance with English
law.
Note: This Transfer Certificate is not a security, bond, note, debenture,
investment or similar instrument.
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The Schedule
Commitment Portion Transferred
(pound sterling) (pound sterling)
- ---------------- -------------------
Contribution Next Interest Payment Date Portion Transferred
(pound sterling) -------------------------- (pound sterling)
- ---------------- -------------------
ADMINISTRATIVE DETAILS OF TRANSFEREE
Lending Office:
Account for payments:
Telephone:
Telefax:
Attention:
[Transferor Lender] [Transferee]
By: ..................... By: ...................
Date: Date:
The Agent
By:
...................
on its own behalf
and on behalf of the other Finance Parties, the Obligors and all other parties
to the Agreement and the Security Deed.
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SCHEDULE 6
Compliance Certificate to be delivered by an Authorised Officer of the Borrower
[Agent]
Attention: - [Date]
Dear Sirs
VERSATEL TELECOM EUROPE B.V. EURO 45,378,022 CREDIT FACILITIES
LOAN AGREEMENT DATED, MAY 1999 (AS FROM TIME TO TIME AMENDED, VARIED, EXTENDED,
RESTATED, REFINANCED OR REPLACED THE "LOAN AGREEMENT")
We refer to the Loan Agreement and deliver this Certificate in respect of the
Quarterly Period ended [Quarter Day] pursuant to clause 12.1 thereof. Terms
defined in the Loan Agreement shall have the same meaning when used in this
Certificate.
We confirm that:
1 Consolidated EBITDA for the Quarterly Period ending on [Quarter Day]
was [ ] [insert calculation details].
2 Annualised Consolidated EBITDA calculated by reference to the Quarterly
Period ending on [Quarter Day] was [ ] [insert calculation details]
3 As at the end of [Quarter Day] Senior Debt was [ ] [insert
calculation details].
4 As at the end of [Quarter Day] Total Debt was [ ] [insert
calculation details].
5 As at the end of [Quarter Day] Total Relevant Assets were [-].
6 Net Worth as at [Quarter Day] was [ ] [insert calculation details].
Based on the above, we confirm that on [Quarter Day]:
1 The ratio of Senior Debt to Annualised Consolidated EBITDA was [-]
[insert calculation details].
2 The ratio of Total Debt to Net Worth was [-] [insert calculation
details].
3 Free Cash Flow was [-].
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4 The ratio of Consolidated EBITDA to Total Debt Interest Charges was [-]
[insert calculation details].
5 Average revenues per month per Subscriber (other than Subscribers in
respect of any Permitted Acquisition which are not categorised as
Business Subscribers) for such Quarterly Period ending on [Quarter
Day]) was [-].
6 Total revenues received from Subscribers (other than Subscribers in
respect of any Permitted Acquisition which are not categorised as
Business Subscribers) by reference to the Twelve Month Period ending on
[Quarter Day] was [-].
7 Capital expenditure of the System per Subscriber (other than
Subscribers in respect of any Permitted Acquisition which are not
categorised as Business Subscribers) was [-].
Accordingly, we confirm that [save as disclosed in this certificate] on [Quarter
Day] the Borrower was in compliance with those covenants contained in clause 15
inclusive of the Loan Agreement which were applicable as at [Quarter Day].
We confirm that the representations and warranties contained in clause 11 of the
Loan Agreement to be repeated in accordance with clause 11.21 of the Loan
Agreement, are true and correct as at the date hereof as if made with respect to
the facts and circumstances existing at such date.
For and on behalf of
VersaTel Telecom Europe B.V.
....................................
Authorised Officer
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SCHEDULE 7
Project Agreements
1 The Licences
2 The Supply Agreement
3 Interconnect Agreement between the Parent and PTT Telecom B. V. dated
29 May 1997
4 Interconnect Agreement between VersaTel Belgium and Belgacom N.V./S.A.
dated 2 November 1998
5 Shareholders Agreements dated 27 December 1996 relating to the Parent
and between Telecom Founders B. V., Nesbic C.V., Cromwilld Limited, the
Parent, Robert Gary Mesch and Open Skies International, Inc.
6 Interconnect Agreement dated 25 March 1997 between Telfort BV and
VersaTel Telecom International N.V. (formerly Versatel Telecom B.V.).
7 Interconnect Agreement dated 3 December 1997 between Facilicom
International L.L.C. and VersaTel Telecom International B.V. (formerly
Versatel Telecom B.V.).
8 Interconnect Agreement dated 7 May 1996 between Global One
Communications BV and VersaTel Telecom International N.V. (formerly
Versatel Telecom B.V.).
9 Interconnect Agreement dated 6 October 1997 between CasTel N.V. and
VersaTel Telecom International N.V. (formerly Versatel Telecom B.V.).
10 Interconnect Agreement dated 17 November 1998 between InterXion Telecom
BV and VersaTel Telecom International N.V. (formerly Versatel Telecom
B.V.).
11 Interconnect Agreement dated 26 June 1996 between BT (Worldwide) Ltd.
and VersaTel Telecom International N.V. (formerly Versatel Telecom
B.V.).
12 Interconnect Agreement dated 4 February 1999 between WORLDxCHANGE BV
and VersaTel Telecom International N.V. (formerly Versatel Telecom
B.V.).
13 Any interconnect agreements from time to time entered into with any
telecommunications operation by a Group Member
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SCHEDULE 8
Licences
1 Licence in the name of the Parent dated 17 December 1998 from
Onafhankelijke Post en Telecommunicatie Autoriteit, relating to telecom
services
2 Licence in the name of the Parent dated 17 December 1998 from
Onafhankelijke Post en Telecommunicatie Autoriteit, relating to the
telecom network
3 Licence in the name of VersaTel Belgium dated 21 December 1998 from
Belgisch Instituut voor post diensten en telecommunicatie.
4 Licence in the name of VersaTel Belgium B.V. dated 22 June 1998 (came
into force on 21 December 1998).
5 Licence in the name of VersaTel International N.V. (formerly Versatel
Telecom B.V.) dated 3 December 1998 (came into force on 7 January
1999).
Please note that the licence for VersaTel Belgium (referred to in paragraph 4 of
the schedule) is based on a royal decree dated 22 June 1998 and came into force
on 21 December 1998.
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SCHEDULE 9
Part A - Deed of Guarantor Accession
To: - as Security Agent
From: [PROPOSED GUARANTOR] and VERSATEL TELECOM EUROPE B.V.
Date: [ ]
VERSATEL TELECOM EUROPE B.V. euro 45,378,022 Term Loan Agreement dated -, 1999
as from time to time amended, varied, extended, restated, refinanced or replaced
(the "FACILITY AGREEMENT")
We refer to clause 10.16 of the Facility Agreement. Words and expressions
defined in the Facility Agreement have the same meanings when used in this Deed.
We, [name of company] of [address] agree to become an Acceding Guarantor and to
be bound by the terms of the Facility Agreement as an Acceding Guarantor in
accordance with clause 10.17 of the Facility Agreement and the Security Deed as
a Guarantor in accordance with clause 10.5 of the Security Deed.
[LOCAL LAW LIMITATIONS ON AMOUNTS GUARANTEED BY ACCEDING GUARANTOR (IF ANY)]
Our address for notices for the purposes of clause 27.1 of the Facility
Agreement is:
[
]
This Deed is intended to be executed as a deed and is governed by English law.
[PROPOSED GUARANTOR] VERSATEL TELECOM EUROPE B.V.
[Appropriate execution clause] [Appropriate execution clause]
By: By:
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By:
- - [Security Agent]
[Appropriate execution clause]
By
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SCHEDULE 9
Part B - Documents and Evidence to be delivered by an Acceding Guarantor
(a) a Deed of Guarantor Accession, a Charging Entity's Deed of Accession
(as defined in the Security Deed) and, if relevant an Asset Charge,
duly executed under seal by the Acceding Guarantor and the Borrower;
(b) a copy of the constitutional documents of each of the Acceding
Guarantor;
(c) a copy of a resolution of the board of directors of each of the
Acceding Guarantor approving the terms of, and the transactions
contemplated by, the Deed of Guarantor Accession, the Charging Entity's
Deed of Accession and the relevant Asset Charge, authorising its
Authorised Officers to execute and deliver the Deed of Guarantor
Accession, the Charging Entity's Deed of Accession and the relevant
Asset Charge, and give all notices and take all other action required
by it under the Finance Documents;
(d) a certificate of a director of the Acceding Guarantor certifying that
the amounts to be guaranteed by the Acceding Guarantor would not cause
any guaranteeing limit binding on it to be exceeded;
(e) a copy of any other authorisation or other document, opinion or
assurance which is necessary for the execution, delivery and validity
and enforceability of the Deed of Guarantor Accession, the Charging
Entity's Deed of Accession and the relevant Asset Charge;
(f) a specimen of the signature of each person authorised by a resolution
referred to in paragraph (c) above;
(g) a legal opinion of English legal advisers, acceptable to the Agent,
addressed to the Security Agent on behalf of the Beneficiaries (as
defined in the Security Deed)
(h) if the Acceding Guarantor is incorporated in a jurisdiction outside
England, a legal opinion of legal advisers, acceptable to the Agent, in
the jurisdiction of incorporation of the Acceding Guarantor (as
appropriate), addressed to the Security Agent on behalf of the
Beneficiaries (as defined in the Security Deed);
(i) a certificate of an Authorised Officer of the Acceding Guarantor
certifying that each copy document specified in part B of this schedule
9 and relating to it is correct, complete and in full force and effect
as at a date no earlier than the date of the Deed of Guarantor
Accession, the Charging Entity's Deed of Accession and the relevant
Asset Charge;
(j) a certificate of an Authorised Officer of the Borrower confirming that
its constitutional documents have not been amended (or, if they have,
enclosing a copy of the amended constitutional documents) and that all
authorisations and resolutions authorising its appropriate officers to
execute and deliver the Deed of
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Guarantor Accession, the Charging Entity's Deed of Accession and the
relevant Asset Charge remain in full force and effect; and
such other documents as the Agent may reasonably require after taking the advice
of the legal advisers referred to in paragraphs (g) and (i) above.
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EXECUTED by the parties:
BORROWER
SIGNED for and on behalf of )
VERSATEL TELECOM EUROPE B.V. )
GUARANTORS
SIGNED for and on behalf of )
VERSATEL TELECOM )
NETHERLANDS B.V. )
SIGNED for and on behalf of )
VERSATEL TELECOM BELGIUM )
N.V. )
SIGNED for and on behalf of )
VERSATEL TELECOM )
INTERNATIONAL N.V. )
LENDERS AND FINANCIAL INSTITUTIONS
SIGNED for and on behalf of )
NORTEL NETWORKS )
INTERNATIONAL FINANCE & )
HOLDING B.V. )
AGENT
SIGNED for and on behalf of )
NORTEL NETWORKS )
INTERNATIONAL FINANCE & )
HOLDING B.V. )
SECURITY AGENT
SIGNED for and on behalf of )
NORTEL NETWORKS )
INTERNATIONAL FINANCE & )
HOLDING B.V. )
104
<PAGE> 1
EXHIBIT 21.1
LIST OF 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.
7-Klapper Beheer B.V.
ITinera Services N.V.
Svianed B.V.
<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
June 22nd, 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
June 22nd, 1999
